Q3 fundraising holds up as number of funds dive

Third-quarter fundraising is matching 2018’s figure, but the amount of funds raised has drastically declined.

Fundraising activity in the third quarter of this year is set to match 2018 levels as appetite for the asset class holds steady.

Preliminary figures for the PDI Q3 2019 Fundraising Report show total fundraising in the first nine months of the year reached $112.7 billion, slightly below the $114.9 billion raised in the same period last year.

With some fundraising late in the quarter likely to be added in the coming weeks, it is expected that the final fundraising amount for the third quarter will rise and may exceed 2018’s figure. Beyond the closed-ended fund space PDI has seen significant activity in evergreen vehicles and a growing number of LPs looking to co-invest or using separately managed accounts.

The fundraising totals suggest LP appetite for the asset class remains strong, though still well below the spike in activity in 2017, when Q3 fundraising reached $177 billion. Increasingly, 2017’s figures, which reached $239 billion at year end, appear to be an outlier amid more modest growth in private debt fundraising overall.

The most fundraising activity typically takes place in the fourth quarter and at least an additional $53.5 billion of capital will need to be added in 2019 to beat 2018’s total.

However, a notable difference between 2018 and 2019 is a collapse in the number of funds being raised. So far, just 109 vehicles have closed this year, significantly below the 224 seen in full-year 2018 and even further down on the 270 recorded in 2017. This could be a sign of the industry consolidating with LPs increasingly committing to larger funds offered by well-established managers.

This can be seen among the top 10 fund closes in 2019, ranging in size from $2.75 billion in AG Direct Lending Fund III up to $8.2 billion for Lone Star Fund XI.

The full PDI Q3 2019 Fundraising Report is due to be published next week.