Following a record year of fundraising in 2016, private equity firms closed funds valued at $45 billion in January 2017. The number marks a 78% increase from the $25 billion raised in 2016. Infrastructure funds in particular saw a substantial uptick in interest from investors looking for stability in long-term returns and a method to deploy large amounts of capital.
The presidential election of Donald Trump and the new administration’s emphasis on prioritizing infrastructure development has likely contributed to the enhanced interest that has accounted for half of January’s total value of closed funds. Moreover, the largest alternative asset managers have identified plans to add additional funds in infrastructure. Projections estimate 2017 to be a record fundraising year for the sector.
A strong market for fundraising in infrastructure funds mirrors the fundraising market as a whole in recent years. PE firms have raised more than $2 trillion in the last three years. The unprecedented fundraising levels compounded with stagnation in the market for new acquisitions has resulted in an industry stockpile of more than $530 billion in dry powder. This number represents a 17% increase from last year as PE firms look to get innovative.
Specifically, industry leaders have stated maintaining discipline and core competencies in posturing particular competitive advantages is of critical importance in a deal. Looking for situational opportunities to add value through operational improvement follows the increasing trend of implementing digital technologies to create cost-effective operations by way of talent management and automation in gathering data.
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