Private capital fundraising had a bombshell year in 2019.
A whopping $888 billion was raised across 1,064 private equity,
venture capital, infrastructure, and real estate funds. This is the most
private capital ever raised on an annual basis, according to a
new PitchBook report. On average, institutional investors increased their
allocations to private markets yet again by lowering their allocation to hedge
funds and/or public equities.
Here are three intriguing takeaways from the report:
— Globally, private equity firms raised more money
than they have in any prior year, closing on nearly half a trillion
dollars. Blackstone’s $26 billion flagship vehicle that closed in 2019 marked
the largest buyout fund ever raised. (Here’s what Blackstone CEO Steve
me about fundraising last year: “It’s harder when you get bigger, but it
still is an out-of-body experience for me.”)
— Venture capital firms also had a big year, albeit
fundraising figures fell slightly from 2018. U.S.-based funds in 2019 had a
monster year for investment realizations and saw exit value more than double
year-over-year, which will eventually turn into distributions to limited
partners. And once those investors receive their cash, they will likely recycle
it into new venture funds.
— Dry powder continues to accumulate. More than
$100 billion in capital remains unspent in funds that are six years or older. As
The New York Times noted, funds typically have five years to deploy
what they get from their limited partners, or they lose the ability to spend
it. They have agreed on alternative arrangements with their investors, which is
a huge headache and creates more capital overhang.
Fundraising should remain robust in 2020, according to PitchBook. However, it’s not out of the question that fears of a looming recession could finally put a meaningful dent in the fundraising totals.
NO PLANS THIS WEEKEND? Well, I’ve got something for you. Frontline PBS released a new documentary on Jeff Bezos, the richest man in the world, exploring how he built an empire unprecedented in the history of American capitalism. The film covers worker safety, consumer “ecstasy,” surveillance concerns, and questions around regulation. As The Atlantic’s Franklin Foer notes in the documentary, “Everything that is admirable about Amazon is also something that we should fear about it.” Watch here.