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Secondaries fundraising falls in Q1

While fewer secondaries funds were being raised in the first quarter, the number of mezzanine and debt funds seeking capital has increased hugely in the past year, according to data released by PEI's Research and Analytics division.

Fundraising in the secondaries market shrunk in the first quarter compared to a year ago, while other private equity strategies – in particular mezzanine and debt funds –  are seeing higher levels of fundraising, according to data released by PEI’s Research and Analytics division in its first-quarter review.

Of all private equity capital being raised in the first quarter of this year, a mere 3.3 percent was being sought for dedicated secondaries funds, a drop from 5.1 percent in the same period last year. In dollar terms, the total capital targeted for secondaries fell by almost a third to $24.17 billion from $33.19 billion.

Some of the funds seeking fresh money include Coller International Partners VII, which launched in September and is targeting $5.5 billion, and Partners Group, which is targeting €2.5 billion in its latest secondaries vehicle. Lexington Capital Partners’ Fund VIII, which closed at its hard-cap of $10.1 billion in April, was the third-biggest fund in market during the first quarter.

Not surprisingly, buyout/corporate private equity fundraising remained the most popular investment strategy within private equity, accounting for 36 percent or $261.59 billion of the total, but mezzanine and debt funds gained the most in popularity. The amount being sought through mezzanine/debt funds almost doubled to $124.81 billion and accounted for almost a fifth of the total targeted. Firms including Oaktree Capital Management, Blackstone and Bain Capital have all launched funds that are seeking to take advantage of this opportunity.

“The number of debt funds seeking capital has increased hugely in the past year,” noted PEI’s Research & Analytics team in its quarterly review. “Debt or credit vehicles are now chasing $125 billion from LPs, up from $68 billion at this stage in 2014.”