Despite tightening credit markets, private equity firms continue to find limited partners eager to invest in their latest funds, according to Dow Jones Private Equity Analyst. The October issue reports that U.S. private equity firms raised $199.4 billion in 295 funds during the first three quarters of 2007, a 29% increase over the $154.1 billion raised in 232 funds during the same period in 2006. With another 405 private equity funds still in the market to raise an additional $165.2 billion in capital, this year's fund-raising is on pace to best the record $254.3 billion raised in all of 2006.

Of the funds raised in the first nine months of 2007, leveraged buyout (LBO) and corporate finance funds accounted for $155 billion, or 78% of the total. Within this area, distressed-focused funds continued to attract ever- more capital, raising $29.6 billion to date-miles ahead of the previous annual record of $19 billion that was raised in 2006.

"Many limited partners recognize that private equity is a long-term investment," said Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst. "They know that consistently committing capital to the asset class over time-and not just when market conditions are good-is the best way to generate a strong return."

According to the October issue, venture capital funds continue to lag behind their buyout counterparts, with 102 funds and just $19 billion raised in the first nine months. That's down more than 11% from the $21.3 billion raised in 89 venture funds during the same period in 2006. The drop-off was due in some part to fewer venture firms raising 'mega' funds of $1 billion or more, but also reflects the failure for many venture capitalists to consistently exit companies and generate returns for their investors.

The newsletter also found that European private equity fund-raising mirrored the strong U.S. market through the first nine months of the year. In Europe, overall fundraising increased 6% over the same period in 2006 with $73.1 billion raised in 116 funds, which is on pace to best its record annual total of $100.8 billion set last year. However, European buyout firms saw a bit of decline during this time, as they only raised $49.6 billion in 45 funds. That is down 14% from the $57.7 billion raised in 44 funds during the same period in 2006.