An Awesome Start to 2019 – Can the String Continue?

April 15, 2019

The first quarter of 2019 was an awesome start to the year for growth equity funds.  According to data from Private Equity International, growth equity funds saw $24.9 billion in fundraising.  The $24.9 billion is the strongest start to a year in the past ten years.  Prior to 2019, the strongest start was 2011 at $23.05 billion.

Other areas of the private equity universe have not done as well so far in 2019. The first quarter of 2019 for Fund of Funds was tiny at just $0.9 billion, the lowest fundraising total in the over the period shown.

Venture capital fundraising was also weak at just $5.9 billion.  The next weakest year over the past decade was Q1 2010 at $6.1 billion. 

The very weak first quarter for Fund of Funds and venture capital was almost matched by secondaries.  Fundraising for secondaries came in at $1.1 billion, second lowest in the past decade.  The weakest first quarter figure was in Q1 2009 at a dismal $0.6 billion.

Lastly, Other private equity investments, which includes co-investments, distressed, and turnaround investments, came in at $4.2 billion.  Compared to the past decade’s results, this was the third weakest.  The only two weaker first quarter figures were in 2011 and 2009 at $2.5 billion and $3.7 billion, respectively.

Source: Private Equity International

Is this an ominous signal for the rest of 2019?

The strong growth equity fundraising figures combined with the weak venture capital/Fund of Funds/secondaries/Other presents a conflicting story. 

Which one will win out?

If one uses the total fundraising figure and annualizes the first quarter’s results, 2019 is headed for a slightly weaker year than 2018.  This, of course, would mean that no collapsing years similar to 2009/2010 are on the horizon for the remainder of this year. 

Anyone willing to bet that 2019 will come in much weaker than 2018 when the end of the year arrives?  Does growth equity results have you scared off from betting on weakness? 

Oh, the loveliness of private equity fundraising and predicting future returns.

Source: Private Equity International

Conclusion

In looking at the first quarter of 2019, growth equity private equity funds have done quite well.  All other private equity categories haven’t fared as well, which presents us with an interesting question – Which category will be the leading indicator for the rest of 2019?

History belongs to the bold, those that can predict the future before it happens.  Which direction do you have for the remainder of this year?

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