Global private equity market is way down, but it may have hit bottom


For the private equity industry, 2009 is looking a lot like 2003. After yet another tough quarter, the amount of new funds raised plummeted, reaching levels not seen in six years, according to documents London-based private equity research firm Preqin has provided to DailyFinance. Fewer funds are closing, and many of those that are closing are doing so short of their initial targets. There are indicators, however, that the situation could turn around by the end of 2009 or early in 2010.

Private equity funds raised only $38 billion in the third quarter of 2009. This is the lowest worldwide total since the fourth quarter of 2003. From the second quarter of 2008's level of $84 billion, this is a decline of 45 percent, and it is a mere 18 percent of the record $208 billion that global private equity funds raised in the second quarter of 2007. "Historical data shows that the summer months of Q3 often represent a relatively slow quarter for fundraising in any given year," says Tim Friedman, Preqin's head of communications. "For the rate of fundraising to drop by nearly 70 percent over the course of a year is a dramatic fall," he continues, "and demonstrates just how challenging it has become to raise new funds in the current climate."