The average size of funds closing in the first half of 2015 grew by over 50 percent compared with the same period last year, according to PEI’s Research and Analytics division.
Between January and June this year, nine funds closed on an average of $1.5 billion per fund, while the average for the same period last year was $977.7 million. The growth in average size per fund was helped by two mega funds closing during the period.
Lexington Partners closed its twelfth dedicated secondaries fund, Lexington Capital Partners VIII, on $10.1 billion in April, exceeding its target by more than $2 billion. Landmark Partners also closed its Landmark Real Estate Partners VII fund above target at $1.6 billion in May.
The number of actual funds closing halved to nine from 19 compared with the first half of 2014, suggesting fewer participants are raising larger pools of capital.
“While the market is undoubtedly growing very rapidly in terms of actual deals getting done, the number of new entrants isn’t growing at the same rate, so funds are getting bigger to absorb that extra capital requirement,” said Andrew Hawkins, global head of secondaries at ICG.
In total, less capital was raised during the first half of this year, with $13.2 billion raised compared with $18.6 billion for the same period in 2014.
“One of the problems private equity as a whole has had is when fund sizes grew very rapidly, people lost the plot and returns went down because the GPs got out of their comfort zone,” Hawkins said. “There is a danger that if funds grow too big, they’ll lose their laser focus.”