E&Y: Infrastructure funds raise $28.2bn in 2008(3)

Fundraising is down $8.1bn from $36.3bn raised in 2007. This downward trend could change in 2009 as 85 infrastructure funds are fundraising this year, according to a study by the accounting firm.

Private equity infrastructure funds raised $28.2 billion in 2008, according to a study conducted by accounting firm Ernst & Young.

This is an almost 23 percent decrease from $36.3 billion raised in 2007.

The study says that infrastructure funds raised $2.8 billion in the first quarter of the year and 85 infrastructure funds are currently fundraising. 

By contrast, in 2008, global private equity firms raised $448.7 billion, a 0.8 percent decrease from 2007. The study included buyout, real estate, infrastructure, mezzanine, distressed and turnaround private equity strategies. 

However, most of the capital was actually raised and committed in previous years, the study said. In both years, funds headquartered in the US raised roughly 70 percent of the total.

In the first quarter of 2009, 41 private equity funds raised $39.2 billion. This was the poorest quarterly performance since the fourth quarter of 2004, the study said. Of the $39.2 billion, US-focused funds raised $16.5 billion, Europe-focused funds raised $21.3 billion and $1.4 billion were raised by funds focused on the rest of the world.   

Worldwide, 409 funds closed last year, an 18 percent decrease compared to 499 funds in 2007. However, the average size of funds closed increased 22 percent from $907 million in 2007 to $1.1 billion in 2008. 

The study identified infrastructure, renewable energy and cleantech as growth sectors because they are expected to benefit from federal stimulus programs.

While the credit crisis is beginning to ease, a key issue for the asset class is whether banks will have adequate capital to finance new deals, or recapitalise portfolio companies acquired at the peak of the M&A bubble, Ernst & Young said. 

Ernst & Young also predicts the industry is about to witness an unprecedented wave of consolidation in which up 50 percent of private equity funds may disappear.