The weight of fund-raising activity in the private equity, debt, infrastructure and property space has been hurt significantly by the pandemic, mirroring the pullback in IPOs, mergers and acquisitions.

More evidence has come through that capital-raising has been hit hard by COVID-19. In the market for private capital, fund-raising fell sharply in the second quarter of this year, according to Preqin, a firm tracking the alternative investments sector. 

Some 225 funds closed in the quarter, raising a combined $116 billion. This is compared with 425 funds that secured $150 billion in the equivalent quarter of last year.

Buyout-backed deal-making also declined, with 888 deals made for a total value of $61 billion – around half the level of activity seen in Q2 2019. 

Over recent years wealth management organisations such as family offices and private banks have been notably more voluble about investing into relatively illiquid asset classes such as private credit, private equity and forms of real estate, attracted by the higher yields paid to compensate for low liquidity.

The pandemic has disrupted economies and markets in several ways. For example, the volume and value of liquidity events such as initial public offerings and merger deals have fallen this year, according to Mergermarket earlier this week.

The volume of dry powder – aka spare capital – has risen in private capital markets, reaching an estimated $1.48 trillion, increasing the pressure on managers to find lucrative opportunities for this money, Preqin said. 

“The second quarter is when COVID-19 really took effect in North America and Europe, and so is likely to be the most depressed quarter in terms of fundraising and deal-making activity. It’s notable that the venture capital deals market, where a far greater proportion of activity is in China, has already ticked back up from declines in Q1. If other regions follow a similar trend, then we could see signs of recovery in Q3, as and when countries re-open their economies,” Christopher Beales, private equity spokesperson for Preqin, said. 

Venture capital-backed deals were much more stable: 3,280 deals were recorded in Q2 ticking up from 3,099 the previous quarter. The $60 billion in total deal value rose from $57 billion in Q2 2019.

Looking ahead, there are 3,754 private equity funds in the market globally, seeking a total of $884 billion.