U.S. Markets

U.S. private equity fundraising swells as mega funds get bigger

FILE PHOTO: The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid

(Reuters) - U.S. private equity firms raised $191 billion in the first nine months of 2019, nearly as much as in all of 2018, as investors flocked to well-known managers raising large capital pools, according to a report by research firm Pitchbook.

Some of the private equity industry's biggest players completed their fundraising in the third quarter of this year, including Blackstone Group Inc BX.N with a $26 billion buyout fund, and Vista Equity Partners Management LLC with a $16 billion fund.

This increased the amount raised by private equity funds by 38% year-on-year, even as the number of funds that raised capital fell 18% to 131, according to the report released on Thursday.

The strong fundraising showed investors believe concerns about an economic downturn fueled by a trade war between the United States and China will help create bargains that will allow private equity firms to put money to work, Pitchbook said in the report.

The results also showed that investors are being more selective in the managers they allocate capital to in a more precarious environment.

“While a recession would hurt the value of current portfolio companies, it would also create buying opportunities for funds with sufficient cash reserves,” Pitchbook analysts said.

U.S. private equity firms embarked on dealmaking this year at a feverish clip. In the first nine months, 3,883 deals valued at $501.2 billion were completed, according to Pitchbook, maintaining the high level of dealmaking recorded in 2018.

However, U.S. private equity firms sold fewer companies from their portfolios, as potential acquirers balked amid the market jitters. Buyout firms exited 726 companies valued at $220 billion, down 19.5% year-on-year.

“Trade war tensions, as well as domestic and international economic disputes, may explain the overall slump in exit activity that we have seen through the third quarter,” Pitchbook said.

Reporting by Chibuike Oguh in New York; editing by Richard Pullin