July 1, 2010 / 3:40 PM / 9 years ago

Buyout firms struggle to raise funds - survey

* Significant drop in funds on road - Preqin

* Time taken to raise funds doubled from 2004

By Megan Davies

NEW YORK, July 1 (Reuters) - Private equity fund-raising is at its lowest level since 2003, as buyout firms have increasingly dropped or postponed plans to raise fresh capital, a survey said on Thursday.

London-based private equity research firm Preqin said that $41.3 billion was collected by the industry globally in the second quarter of 2010, the lowest total in seven years.

There has been an increase in the number of funds being abandoned or put on hold, Preqin said. There are currently 1,522 funds on the road seeking $560 billion worldwide, it said, representing a significant drop from the 1,623 funds seeking $889 billion in the first quarter of 2009.

Private equity firms raise capital from investors such as pension and endowment funds. They typically spend several years investing that capital by buying companies, with the aim of selling or floating those assets and generating an outsized return.

Since the credit crisis squeezed investors’ purse strings, the time it has taken to raise funds has lengthened and the amount firms have been able to raise has shrunk.

Pension and endowment investors, who took a large hit on their equity portfolios, have been unwilling to commit fresh capital. Buyout firms also have had less need for capital as fewer deals were done.

Preqin’s survey said that it is taking longer for firms to raise funds. For funds which finished fund-raising in 2010, the average time taken was 19.8 months, double the average time taken in 2004, it said.

Still, Preqin expects improvement as the year progresses. It said in a survey of 100 investors it conducted in June, 65 percent indicated they would be making a commitment in the second half of this year.

Among firms which have been raising funds recently is Blackstone Group LP (BX.N), which just passed the target date it had for finishing raising its sixth global buyout fund. [nN29133339] (Editing by Gerald E. McCormick)

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