Preparing for another downturn, private equity firms are taking advantage of a bullish fundraising environment to raise larger sums of capital at a faster rate, but some limited partners are uneasy about the size and speed of the efforts.

Through early June, the average fund size in 2019 has ballooned to $480 million, up 27.0% from 2018's $378 million, the highest full-year average in a decade, according to data from Preqin. In addition, the pace at which general partners are returning to market to raise subsequent funds has picked up each full calendar year since 2014. At that time, the average space between funds was 52 months. As of June 6, it had dropped to 40.6 months, down from the 42.1-month average recorded in 2018, according to Preqin.

Because funds are coming back to market at a quicker rate, limited partners have less visibility on the performance of the previous fund. Portfolio companies take anywhere between three to five years to mature, said Mounir Guen, CEO of placement agent MVision, and in an ideal market, firms would come back to market every four years. If a fund comes back to the market earlier, it is hard to determine whether the portfolio is performing.

Eric Marchand, principal at fund of funds Unigestion, said his firm has faced situations where "regretfully," it had not backed managers as the firm felt they had come back to market too quickly.

However, all of the fundraising could put private equity firms ahead of the game if predictions of a downturn come to light as prices for assets moderate and potential buying opportunities increase, market participants said. Marchand said a market adjustment is where funds can "actually make the better returns."

But a market correction will also create another taxing dynamic for general partners to manage. One managing director at a large U.S.-headquartered fund of funds said firms will have the extra effort of working with existing portfolio companies to help drive and guide them to success. "It's not always about, can you find a new deal?" the person said. "You also have to manage the new deals that you've done."

The anticipation of a market correction is a driver behind the increased fundraising. One placement agent said there is an element of private equity managers thinking "this is going to turn, so we better get our dry powder while we can."

Many are doing just that. Blackstone Group LP, for example, is currently raising a private equity fund that has already reached $22 billion on its first close and has a reported hard cap of $25 billion. The fund is set to break the asset class' record, surpassing Apollo Global Management LLC's $24.7 billion fund closed in 2017. The current fund has already exceeded the $18 billion final close of Blackstone's last global private equity fund in December 2015.

Advent International Corp. has closed the largest fund so far this year, according to Preqin, reaching its hard cap of $17.5 billion after six months in the market, the firm said in June. Its previous flagship vehicle closed on $13 billion, which was also raised after six months in the market, in March 2016.

Thoma Bravo LLC's recent close has taken the second spot globally. The tech-focused firm closed its latest fund at $12.6 billion in January, up from the $7.6 billion previous vintage closed in September 2016. Cinven comes third, having announced in May that it closed its latest buyout fund at its hard cap of €10 billion in less than four months. Its predecessor fund closed on €7 billion in June 2016.

The success of the fundraising environment is great news for private equity managers in a market where deal valuations are high and deal pipelines remain promising. One fund manager, which has raised billions of capital across its fundraising history and recently closed its latest oversubscribed fund, said in an email that private equity has continued to attract significant capital. This manager has been a beneficiary of such demand. The manager said it had also seen an increase in commitments from its largest limited partners and interest from new limited partners around the world.

Given all the fundraising, limited partners are performing rigorous due diligence on those funds they are backing. James Korczak, a partner on the primary investments team at Adams Street Partners LLC, said there have been some instances where the firm has not reinvested in a general partner because it was uncomfortable with the size of the fund, the scope or the strategy of the fund, and the pace and the type of transactions the manager is completing.

The limited partner, who asked to remain anonymous, said there are some managers who will exercise discipline, but there are others "who will, and who are, probably raising more than they should."