European fundraising activities decelerated in the third quarter of 2023, experiencing a 5% drop in year-to-date figures, according to August, a private asset investment platform based in Luxembourg and Belgium with approximately €250m in managed assets. The firm, which compiled the data from Pitchbook, noted that the growth in the second quarter did not counterbalance the fundraising climate’s challenges, which were influenced by investor reservations and decreased liquidity for older funds.
PE fundraising in Benelux
João Vale de Almeida, investment director at August and the lead author of the quarterly report, noted that despite an impressive headline figure of €27.6bn raised in Q3 2023 in the Benelux region--a 646% increase from Q2 2023--the numbers are heavily influenced by the establishment of a large fund by CVC in Luxembourg. Excluding this outlier, the quarter-on-quarter figure actually saw a decline of 57%. However, year-to-date figures for the region are still positive, showing a 345% increase from the previous year, and even without the CVC fund, a 33% year-over-year growth.
The fundraising efforts in Benelux were highlighted by substantial contributions from Waterland Private Equity Fund IX and the Triton IV Continuation Fund, with both raising significant sums. The emergence of continuation funds alongside secondary investors is one of the key trends noted, reflecting a strategic move by fund managers to provide liquidity and maintain control over prime assets.
PE fundraising trends
Across Europe, a trend towards concentration in fundraising has been observed, with the top five funds accounting for 38% of total fundraising in the year, compared to 19% in the same period last year. This shift indicates a challenging environment for smaller investors to access private equity investments, due to the increasing minimum amounts required by large funds, stated August.
Another significant trend is the resurgence of credit funds, prompted by rising yields in Europe after a prolonged period of low interest rates. Four out of the ten largest funds raised in 2023 are credit-focused, marking a departure from the previous year.
Secondary funds are also becoming a prominent feature in the private equity market, noted August, exemplified by Glendower Capital’s fifth secondary opportunities fund raising €5.2bn. These funds are attractive as they provide liquidity options and opportunities for investors to buy into the private equity market at potentially favourable terms, amid market pressures such as the ‘denominator effect’.
According to de Almeida , the current market conditions are deemed attractive for investments in secondary funds, due to the benefits of immediate liquidity and inherent diversification, which reduces the risk of capital loss. The report suggests that the secondary market could be an ideal entry point for new PE investors, given the faster liquidity turnover and the ability to invest during various market cycles.