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Last year was a banner one for private equity fundraising in the US, with a spate of mega-funds helping firms bring in more cash than in any year since the financial crisis. With fewer of those $10 billion-plus vehicles in 2018, overall fundraising figures are down. But in the middle market—defined as vehicles between $100 million and $5 billion—American firms are still thriving.
The funds may be fewer. But they're definitely larger. Through the end of 3Q, investors had raised more than $88 billion for middle-market funds, per PitchBook's 3Q 2018 US PE Middle Market report, on pace for the most of any year in the past decade:
Compared to the first three quarters of last year, the amount of capital raised is up 19.6%, while fund count is down 18.9%. In more concrete terms, that means the average size of a middle market fund in the US has risen from $604.2 million all the way to $890.2 million, an eyebrow-raising increase.
As you might expect, that's been driven by a bump in the number of funds at the top end of the middle market. Vehicles with between $1 billion and $5 billion in commitments are making up a larger portion of all middle-market funds than any year this decade, again per PitchBook data, while funds in the $100 million to $500 million range are rarer than ever:
During 3Q alone, several firms closed new efforts in that $1 billion to $5 billion bucket. Retail specialist Sycamore Partners wrapped up its third flagship fund on $4.75 billion in late July, a couple weeks after Platinum Equity closed its debut small-cap fund on $1.5 billion. In September, meanwhile, Audax Group closed its Fund VI on $3.5 billion.