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Private equity fundraising regains momentum in Q3

Fundraising in the private equity market picked up steam during the third quarter, with the total capital raised increasing to $121 billion, from $96 billion in the second quarter, according to the latest data from Preqin Ltd.

The number of private equity funds that reached a final close during the third quarter, however, was down to 214, from 304 in the second quarter, Preqin noted. The fundraising was dominated by funds focused on North America, with 126 funds raising $82 billion, a sizable increase from $42 billion by 144 funds in the second quarter. Asia-focused funds secured $25 billion and Europe-focused funds drew $10 billion during the third quarter.

During the quarter, 55% of the capital was raised by the 10 largest funds that closed during the period. Carlyle Group LP's U.S. fund, Carlyle Partners VII, was the largest vehicle that held a final close during the quarter, drawing a total of $18.5 billion. Despite the third-quarter jump, the fundraising total for full-year 2018 is not expected to match the total for 2017.

Preqin Head of Private Equity Christopher Elvin said the rising concentration of fundraising activity among a small chunk of large fund managers could be a response to investor uncertainty, as investors seek out fund managers with whom they have an existing relationship.

Private equity dry powder continued its upward trend during the third quarter, at $1.14 trillion as of September. As of October, the number of private equity funds stands at 3,922 with an aggregate target of $956 billion.

In the private debt sector, fundraising slowed during the third quarter with only $24 billion in capital raised by 31 funds, down from $42 billion raised by 36 funds in the second quarter.

The slowdown was mainly tied to North America-focused funds, with only 16 funds raising $13 billion, compared with 19 funds drawing more than $30 billion in capital in the second quarter. Eight Europe-focused funds secured $10 billion during the third quarter.

Preqin Head of Private Debt Tom Carr said the third-quarter slowdown is not surprising after exceptionally strong fundraising during the second quarter, adding that the private debt market "could still potentially set a new full-year fundraising record" in 2018.

As of the end of September, private debt dry powder had reached a record $281 billion, and there are 396 private debt funds looking to raise $175 billion at the start of the fourth quarter.