In the third quarter of 2023, there were notable shifts in the global private market fundraising landscape: despite ongoing economic and geopolitical uncertainties, private equity gained market share, while venture capital faced a decline. Additionally, the secondary markets performed surprisingly well, according to Pitchbook’s latest fundraising report on 5 December.
Private debt fundraising in closed-end vehicles slowed in Q3 to $31.7bn, the slowest since Q3 2020. This shift has moved 2023 fundraising slightly behind 2022. To reach the $200bn mark for the fourth consecutive year, the industry needs a strong Q4, Pitchbook analyst Tim Clarke stated in the report.
According to Pitchbook, the Q3 slowdown was partly attributed to large funds staying open for longer durations, raising $45.7bn compared to $17.5bn the previous year. Some extended their timelines to meet ambitious goals, which have also doubled. Others aligned with slower deployment and loan origination rates, linked to sluggish mergers and acquisitions deal flow.
In the first nine months of 2023, secondary market fundraising exceeded the annual totals of every year except 2020, reaching $68.1bn across 39 funds. Compared to 2022’s $57.6bn raised by 113 funds, this underscores the concentration of large players in secondary fundraising in 2023.
Notably, $47.5bn, accounting for 69.8% of the 2023 total, was secured by just four funds in the $5bn-plus category, with three of them closing in Q3: Goldman Sachs Vintage Fund IX, Glendower Capital Secondary Opportunities Fund V and Whitehorse Liquidity Partners V, raising $14.2bn, $5.8bn and $5.3bn, respectively. With these substantial fundraises in 2023, the secondary market’s cash and highly liquid assets has reached an all-time high of $202.7bn.
In Q3 2023, private equity fundraising remained steady, with 129 funds collectively raising an impressive $133.4bn. Despite having the fewest fund closures of the year, it turned out to be the best quarter in terms of total capital raised. When considering the entire year, 2023 is on track to conclude with capital raised either maintaining its level from the previous year or potentially increasing by up to 5%.
In 2023, megafunds, defined as funds with a size of $5bn or more, accounted for a significant 47.2% of all capital raised, highlighting their substantial presence in the fundraising landscape, stated Pitchbook analyst Kyle Walters.
The decline in global venture capital fundraising persisted into the third quarter of the year, resulting in a total of $117.3bn raised across approximately 955 funds by the end of Q3. Looking ahead to the final quarter of 2023, Pitchbook anticipates that fundraising will continue to be slow due to expected ongoing economic conditions. It is estimated that the total annual fundraising figure for 2023 is likely to be approximately $150bn, marking the lowest total since 2015.
Private real estate fundraising showed signs of activity but at a gradual pace throughout the first three quarters of 2023. During this period, a total of $70.1bn was raised by 115 investment vehicles, stated the report. Investors, seeking to navigate the challenging macroeconomic landscape and potential corrections in the real estate market, exhibited a strong preference for experienced fund managers, stated Anikka Villegas of Pitchbook. She added, in fact, experienced managers received a substantial 96.3% of the total commitments, a higher proportion than in any previous full year.
Funds of funds
As of September 2023, funds-of-funds strategies have gathered $23bn in capital across 53 funds. It appears unlikely that they will surpass the annual fundraising record set in 2022 at $48.4bn, which was already a recent low. The last time fundraising totals hovered around the $45bn mark was in 2015, Pitchbook analyst Juliet Clemens noted.