Records are meant to be broken and some are meant to be broken sooner than others, at least when it comes to private equity fund-raising. The July issue of Dow Jones Private Equity Analyst reports U.S. private equity firms raised $137 billion in 199 funds during the first half of 2007, a 42% increase over the $96 billion raised in 147 funds during the first half of 2006 and on pace to best the record total $261 billion raised last year.

Of the funds raised in the first half of 2007, leveraged buyout (LBO) and corporate finance shops once again accounted for the lion's share, raising $108 billion or 78% of the total. Eight 'mega' funds raised $37.4 billion alone.

However, there are signs that LPs are growing cautious about buyout funds, and turning to distressed firms instead. Such firms raised $23.7 billion in the first six months of the year, already an annual best. That's well ahead of the $19 billion record set by distressed debt firms at the end of 2006.

"For the past 18 months, we've seen mega buyout funds dominate the market and they continue to raise large amounts of capital," said Jennifer Rossa, managing editor of Private Equity Analyst. "However, there is growing interest in distressed investing as capital providers are becoming more cautious about investing in buyout funds, especially as creditors begin to tighten their lending practices."

Venture capital funds continued to live in the shadow of LBO funds, with 62 funds raising only $10 billion in the first half, a 37% drop from the $15.8 billion raised by 63 venture funds in the first six months of 2006. The drop- off was due in large part to the fewer venture firms raising funds of $1 billion or larger in the first half of this year.

The July issue of Private Equity Analyst reports that European fund- raising was also on a record-setting pace in the first six months, with upswings in almost every category. Overall, 81 funds raised $52.5 billion, up 17% from the 75 funds and $44.9 billions raised through the mid-point last year. Buyout shops accounted for the bulk of European activity, raising 29 funds and $36 billion.