No Surprises: Buyout Fundraising Falls in 2008

U.S. buyout firms raised $233 billion for new funds in 2008, according to data released today by our sister publication Buyouts Magazine. This represents nearly a 22% decline from 2007 totals, and could be even steeper once fund size cuts from firms like TPG Capital are taken into account.

It is the buyout market’s first year-over-year fundraising drop since 2002/2003.

What’s particularly striking here is that the industry looked poised for a fund-raising increase as of the end of Q3. Sure it didn’t make much intuitive sense, but general partners were actually besting 2007’s pace before being stifled in Q4.

Expect further declines in 2009, despite new fund-raising efforts from brand-name firms like KKR and Hellman & Friedman (not to mention subsequent closes for Blackstone and Carlyle). Also expect strong fundraising from niche sectors like distressed debt, mezzanine and secondaries.