- As of March 1, AI Insight by iCapital covers 272 private placements currently raising capital, with an aggregate target raise of $50.9 billion and an aggregate reported raise of $34.6 billion or 68% of target.1
- The average size of funds currently raising capital is $187 million. Funds range in size from $3.5 million for a specified industrial 1031 exchange to a recently increased $15 billion AUM diversified private equity and debt fund.1
- Real estate-related funds, including 1031s, Opportunity Zone Funds, and non-1031 real estate LLCs, LPs, and private REITs represent 71% of the total number of funds and 48% of aggregate target. The percentage of target continues to trend down as larger private equity and hedge funds have been added along with the slowdown in real estate. Additionally, private equity’s share of the target raise is likely much higher because, despite the closing of the large private equity fund, there are 13 funds that do not report a target or capital raise, as they are seeking instead to raise a percentage of a larger, institutional fund rather than a specific dollar amount.1
- In terms of coverage by general objective, income has been and remains the largest component at 55% of funds, while growth and growth and income follow at 24% and 19%, respectively.1
- 60% of private placements we cover use the 506(b) exemption, 33% use 506(c), and 7% have not yet filed their Form D with the SEC.1
- Twelve private placements closed to new investors in February and 31 have closed year-to-date, having been on the platform for an average of 378 days. The 26 funds that reported a raise at close raised 90% of target, on average.1
- According to Pitchbook, overall private capital fundraising was down 20% in 2023 from 2022, with much dispersion in activity ranging from 47% less capital closed on for venture capital and 41% less for real estate, to 65% more for secondaries funds. Fewer funds closed overall, down 48% from 2022. However, Pitchbook noted that capital raise numbers for private markets is on a lag as funds are finalizing closings, and that most likely the end result will show that last year was roughly the same as 2022 – down from the peak in 2021 and more in-line with pre-pandemic fund flows. Another trend noted was the “denominator effect” is no longer an issue limiting investment in private market funds, which bodes well for fundraising going forward. Strong public market returns, and private market write-downs have balanced out private market weightings in portfolios.2
- Preqin reported that fundraising concentration to the largest managers has increased over the last decade but has leveled out overall other than less mature categories. The Gini co-efficient, which measures the dispersion of managers and funds raised over time with 0 being perfect equality and 1 being perfect inequality, has increased from 0.67 in 2004 to 0.81 in 2023. The report suggests that the more mature markets such as private equity have reached equilibrium with this concentration, while less mature markets such as private debt and real estate may continue to see increases in concentration. In these markets, the large, institutional early movers will represent a disproportionate amount of the market while it is maturing.3
- According to Pitchbook, private equity exhibited a 0.77 correlation to the S&P 500 from 2000 to year-end 2023. Interestingly, secondaries provided the lowest correlation at 0.23, along with the lowest correlation to other traditional asset classes. This was lower than the correlation of real estate or private debt strategies, which were reported at 0.30 and 0.43.4
- iCapital recently published an Investment & Market Strategy report, Trading Places: Mapping the Impact of Alts in a Traditional Portfolio, highlighting the benefits of adding alternatives to an investment portfolio. Historical analysis shows that adding a 20% allocation to a diversified set of alternatives, including private equity, private debt, real estate and hedge funds, lifted returns by 100 basis points over the last 16 years while reducing volatility. The analysis showed improvements in returns in 98.6% of modeled scenarios, with the portfolio including alternatives outperforming most strongly during weaker markets. This makes sense given the lower correlations and strengthens the case for an allocation going forward.
- iCapital also recently published a new Market Pulse: Signs Point to an Improving Equity Exit Environment. While private equity deal activity has been sluggish the last two years, increasing hold periods to well above long- term averages, recent activity and valuations suggest that a turnaround is upon us. Exit activity was down again in Q4 2023, but the rate of decline eased from prior quarters and the trend is positive. Another positive signal from this report is the volume of US leveraged finance activity, which skyrocketed in January and was more than 2.5 times the amount of activity last January. This means companies are positioning for increased activity. Additionally, the public markets have repriced, up 39% from their lows, and public market valuations are higher, often a leading indicator for private market valuations.
1. AI Insight by iCapital, as of Feb. 29, 2024. The data in this report is based upon the private placements on the AI Insight by iCapital platform, which does not reflect the entire universe of private placements available in the market. For informational purposes only.
2. Pitchbook, Global Private Market Fundraising Report, March 5, 2024.
3. Preqin, The Concentration of Private Capital, Feb. 5, 2024.
4. PitchBook, Q1 2024 Quantitative Perspectives: U.S. Market Insights, Feb. 9, 2024.
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