Fund raising for Q1 2020 fell 78.6% compared to year-ago period and declined 72.19% on a quarter-on-quarter basis, according to data compiled by Refinitiv, formerly known as Thomson Reuters. “Fund raising for Q1 stood at $495.43 million, as compared to $1,781.54 million in last quarter (Q4 2019) and $2,315.09 million of Q1 2019, reporting a fall by 72.19% and 78.6% respectively,” the data showed.
“In the current scenario, small and mid-caps, in particular, are focused on managing their liquidity and cash flow rather than external fund raising at this point,” said Udai Dhawan, founding partner & head of India private equity at Affirma Capital, formerly known as Standard Chartered Private Equity.
Substantial bandwidth of PE teams is also getting utilised in helping and working with portfolio companies, he added.
Private equity firms are sitting on a record pile of cash with a total $1.45 trillion in ‘dry powder’, or fund raised, to invest at the end of 2019, according to data from Preqin. That is the highest on record and more than double what it was five years ago, the data showed.
Several funds are sitting on considerable dry powder and the current environment is likely to result in a number of special situation opportunities both in the private and public markets, Dhawan said.
Meanwhile, fund inflow or private equity investments declined by 40% compared to the first quarter of 2019, as it fell from $5,914 million in Q1 2019 to $3,593 million in Q1 2020.
Industry observers believe that 2020 would be one of the most difficult years as allocation for alternative asset classes may see a dramatic decline.
“In 2020, we expect PE/VC fund raising to be under stress as many LPs may need to rebalance their asset allocations in light of the severe dislocation witnessed in public equity markets and bond markets. This could potentially impact their allocations towards alternate asset classes of which emerging markets PE/VC is a subset of,” said Vivek Soni, partner and national leader, private equity services at EY India.