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The Asset Class That Raised Record Funds This Year

Investors have flocked to VC mega funds even as emerging managers have struggled to raise capital, according to PitchBook data.

U.S. venture capital funds have raked in record assets this year, despite a global pandemic that was expected to drag down fundraising.

On Friday, two Andreessen Horowitz funds closed with a combined $4.5 billion in commitments, bringing the year-to-date fundraising total for the asset class to almost $70 billion, according to PitchBook.

“US venture capital funds have raised a combined $69.1 billion in 2020, edging past a 2018 record and defying the odds amid a pandemic-rattled economy,” PitchBook said in a blog post Friday.

The record fundraising in U.S. venture capital contrasts with slower asset gathering in other alternative asset classes, including the larger private equity industry. As of the third quarter, private equity funds had raised about $400 billion globally — trailing behind the $481 billion raised over the same period in 2019, according to Preqin data.

Other private capital managers, including hard-hit real estate funds, have also struggled to raise money this year, according to Preqin.

However, while U.S. venture capital fundraising has hit a new high in terms of total assets, the number of fund closes have plummeted this year. PitchBook reported that just 287 funds have closed so far in 2020, less than half the number that closed during the previous record year of 2018.

This sharp decline in the number of funds illustrates just how much investors have gravitated toward large, well-known managers during the pandemic, when it has been essentially impossible to meet new managers in person. 

[II Deep Dive: Venture Capital Funds on Track for Record Fundraising Year]

As of September, mega funds — or funds larger than $500 million — had accounted for 15.3 percent of the total funds raised in 2020, according to the third-quarter fundraising report from PitchBook and the National Venture Capital Association.

“The news reinforces the dominant theme of fundraising in 2020: Big investors have gotten bigger while smaller firms have struggled,” PitchBook said in Friday’s blog.

The two Andreessen Horowitz funds that elevated the industry fundraising total to a new record included a $3.2 billion growth fund, the largest fund ever raised by A16z, and a $1.3 billion early-stage vehicle.

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