While the public financial markets are in crisis, U.S. private equity firms not only continue to stockpile capital but have picked up the pace of their fund-raising. Dow Jones Private Equity Analyst, using statistics from the LP Source database, reports that U.S. private equity firms raised $222.6 billion in 264 funds during the first three quarters of 2008, 11% ahead of the $200.4 billion raised by 298 funds in the same time last year. That is in contrast to the halfway point of this year, when fund- raising slightly lagged last year's pace, and is despite a slow-down in buyout fund-raising. The full-year fund-raising record of $313 billion was set in 2007.

"Limited partners have been saying that they intend to invest in private equity at a steady pace through the current downturn," said Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst. "Many of these investors have learned their lesson after the venture bubble burst in 2000. Back then, many LPs stopped investing in private equity, only to miss out on some of the best vintage years the industry has yet produced. This time around, they continue to invest, but they're being very careful about which strategies they invest in."

Distressed & Mezzanine Funds Are News Investor Darlings

Distressed firms, which are calculated in the buyout/corporate finance category, are seeing strong interest from investors with 18 funds raising $37.9 billion thus far this year, up 28% from $29.5 billion raised by 16 funds at this point last year, according to the Dow Jones Private Equity Analyst analysis. Distressed firms raised a record $48.2 billion in 2007.

Oaktree Capital Management set a record for largest individual distressed fund by raising $10.6 billion for OCM Opportunities Fund VII LP earlier in 2008.

The newsletter also reports that mezzanine funds are having a great year, gathering $36.9 billion across 13 funds, compared to $3 billion across nine funds through the third quarter last year. Goldman Sachs Group Inc. makes up the lion's share of this year's total, having collected $20 billion - $7.5 billion in the form of leverage - for GS Mezzanine Partners V LP.

"Were it not for the distressed and mezzanine segments, private equity fund-raising would have been weaker compared to last year," added Ms. Rossa. "Buyout fund-raising continues to lag and fresh concerns about the availability of debt won't help."

The corporate finance and industry-focused buyout segments collectively saw 78 funds raise $103.3 billion, down 12% from the 98 funds that raised $118 billion during the first three quarters last year. Buyout firm TPG Capital helped the overall numbers in the third quarter, disclosing that it had raised an additional $7.8 billion for TPG Partners VI LP, bring its year-to-date total for the fund to $19.8 billion. The firm also collected $6 billion for TPG Financial Partners LP.

Meanwhile, venture capital fund-raising is holding relatively steady, up just 3% to $19.7 billion raised in 103 funds from $19.1 billion raised by 103 funds at the same time last year.