Private Equity’s Capital Avalanche

Investors shoveled a record $453 billion into the industry last year, elevating dry powder above $1 trillion for the first time.

Michele Limina/Bloomberg

Michele Limina/Bloomberg

Last year private equity funds raised more money than ever before, surpassing the fundraising record set on the eve of the financial crisis, according to data firm Preqin.

A total of 921 funds secured a combined $453 billion in investor commitments — a figure that Preqin said could grow by up to 10 percent as more information becomes available.

The previous fundraising record was set in 2007, when 1,044 groups raised $414 billion. Investors have been shoveling increasing amounts of money into the asset class over the last three years, and dry powder — undeployed committed capital — snowballed to $1 trillion-plus for the first time in December.

This record volume of uninvested money “both confirms the strength of the fundraising market and puts enormous pressure on fund managers to deploy capital in the coming months,” said Christopher Elvin, Preqin’s head of private equity products, in a statement.

Mega buyout funds of $4.5 billion or more drove fundraising industrywide, raking in $174 billion in investor commitments last year. Apollo Global Management’s ninth private equity fund — Apollo Investment Fund IX — raised $24.7 billion alone, becoming the largest buyout fund ever.

Elvin said the mega fund trend appeared likely to continue, pointing to SoftBank’s giant technology-focused Vision Fund, which has yet to reach a final close.

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North America-focused funds were the most popular, raising a record $272 billion, while those targeting European investments secured $108 billion, in line with previous levels.

Buyout strategies brought in $289 billion, mostly through the aforementioned mega funds. Meanwhile, venture capital and growth funds’ capital flows dipped, securing $55 billion and $39 billion, respectively.

In total, the private capital industry — including private debt, real estate, infrastructure, and natural resources — brought in a record $754 billion last year, beating 2016’s record of $728 billion.

As of Wednesday, there were 3,484 private capital funds in the market, more than double the number of funds at the start of 2011.