What bubble?

State of the market analogies have been tossed around repeatedly in the past six months – the bubble has burst, the music has stopped, the party is over.

But while such clichés may seem applicable to the shifting credit and economic conditions undoubtedly affecting some segments of the private equity market, a look at global fundraising activities provides a very different narrative.

More than $615 billion (€911 billion) is in the process of being raised, according to Probitas Partners’ 2008 Private Equity Deskbook. And despite what some predicted, the bulk of funds being marketed are not distressed debt and equity or turnaround/restructuring vehicles.

Nearly 40 percent of that $615 billion figure, or roughly $245 billion, correlates to a segment of the market that had been practically pronounced dead by mainstream pundits: the mega buyout funds, or vehicles raising at least $3 billion. Among those currently corralling commitments are Welsh Carson Anderson and Stowe’s 11th fund, which is seeking $5 billion; Madison Dearborn Capital Partners’ sixth vehicle, targeting $10 billion; and CVC Europe’s fifth fund, which is seeking €11 billion.

Kohlberg Kravis Roberts' two vehicles in the market combine to target almost $30 billion for investment around the world.

There are also some jaw-droppingly large funds in the market with specialised strategies: First Reserve Corporation is again aiming for a record-setting energy fund with its 12th vehicle, targeting $12 billion; Alinda Capital Partners is raising $5 billion for infrastructure; Goldman Sachs is marketing a $20 billion mezzanine fund; Avenue Capital Group is seeking $4 billion for a special situations fund, on top of fundraising for similar European and Asian vehicles; TA Associates and Advent are targeting $2 billion for their 10th venture fund; and CVC is eyeing $4 billion for its third Asia Pacific fund.

Of course there are no guarantees investors will buy the pitch for mega funds, which looked so compelling when debt was cheap and freely available. But private equity is not just about mega funds.

The middle market, too, boasts impressive statistics. Some 48 European mid-market funds are on the road, or expected to be within the next year, with the goal of raising more than $24 billion, while across the pond, roughly 140 US mid-market funds are knocking on limited partners’ doors, hoping to raise a total of $71 billion.

It will be years, of course, before anyone can judge whether the way in which all this capital is deployed will produce pleasing results for limited partners. But what’s clear is general partners are far from leaving the party, as buyout legend Henry Kravis indicated last summer.

Fielding a question after a speech to the Canadian Venture Capital Association, Kravis reportedly said: “Will there be a bubble? I don’t even know what that means.”