Private equity fundraising activity slowed considerably in the fourth quarter of 2006 but still broke records for the full year according to Thomson Financial and the National Venture Capital Association.

During the quarter, 37 venture capital funds raised a total of US$2.83 billion and 39 Buyout and Mezzanine funds raised US$17.83 billion. Despite this slower pace, venture capital saw the highest fundraising year since 2001 with 200 funds raising US$28.5 billion, they reported. Buyout and Mezzanine funds recorded the highest year ever with 138 funds raising US$102.9 billion.

“The deceleration of fundraising in private equity this quarter was expected and welcomed for a number of reasons,” said Mark Heesen, president of the NVCA. “On the venture side, we are coming to the end of the current fundraising cycle as most firms are now turning their attention to investing the funds raised in the last three years. Additionally, the venture industry is extremely wary of bringing too much liquidity into the asset class. We want to keep fund sizes reasonable so dollars can be deployed smartly. The discipline exercised this year by the venture firms has been commendable. We hope the same holds true on the buyout side.”

The US$2.83 billion raised in the fourth quarter by venture capital firms was the lowest amount raised by the fewest number of funds for the past three years, they noted. For the full year 2006, 163 follow-on funds raised US$27.0 billion with 37 first-time funds raising US$1.5 billion.

Following their venture capital counterparts in a slowdown, 39 buyout/mezzanine funds raised US$17.83 billion in the fourth quarter but when the final 2006 numbers were totaled, buyouts fundraising hit an all-time high of US$102.9 billion with 138 funds, the firms said.

“Despite the decrease in private equity fundraising for the quarter, it was a banner year for private equity fundraising as a whole,” said Alex Tan, global private equity research manager of Thomson Financial. “This sets the stage for an intriguing and exciting private equity environment for 2007.”