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Q3 Fundraising Drops 41% to $44.8 Billion

Third quarter has officially ended so it’s time to tally up the damage.

As expected, global fundraising slowed in Q3 with 97 PE funds reaching a final close. These funds raised an aggregate of $44.8 billion, according to Preqin (the numbers may increase by 10% to 20% as more data becomes available, Preqin said). The totals are roughly half of the $82.8 billion raised by 175 funds in second quarter earlier this year. What’s more, the amount raised is off 41% from the $77.1 billion collected by 150 funds in third quarter 2010.

“Private equity fundraising was extremely challenging in the third quarter of 2011, with September a particularly slow month for fundraising; just $8.9bn was raised by the 33 funds to close that month,” said Helen Kenyon, a Preqin senior manager, in a statement.

Buyout funds collected the most capital in Q3. In fact, nineteen funds raised $14.4 billion, Preqin said. Berkshire Partners was one of the PE firm’s that successfully closed. In July, the Boston-based Berkshire closed its eighth fund with $4.5 billion in commitments. However, the biggest pool came from Lone Star Funds which raised $4.63 billion for its seventh buyout fund (more than its $4 billion target), Preqin said.

Times may be tough but it’s still a crowded fundraising market. There are currently 1,728 funds on the road seeking $706 billion, Preqin said. This is up from the 1,676 funds that were out marketing in second quarter. The 1,728 funds are “more than has been seen at any point in the past couple of years,” Kenyon said.

Who is out looking for money right now? KKR is targeting between $8 billion to $10 billion for its latest mega fund, while Cerberus Capital Management is looking to raise $3.75 billion with its fifth fund. Lightyear Capital is currently trying to raise $800 million, according to Buyouts.

Fundraising may be crowded but there is one sign of hope. Marketing isn’t taking as long, Preqin said. Funds that closed in third quarter spent 17 months marketing. This compares to the 20.4 months funds needed to close in 2010. However, this is still more time than firms were taking earlier this year. Funds that closed in first quarter only spent 16 months fundraising, Preqin said in April.