Preqin data indicates that current dry powder, capital committed to private equity funds but still yet to be invested, is at a record level, exceeding the previous record high seen before the onset of the global financial crisis in 2008.
While fundraising throughout 2013 has seen notable growth, and there has been an increase in the number and value of exits, deal volume has stayed relatively flat for three consecutive years. The aggregate value of buyout investments globally totaled US$264.4 billion in 2011, US$263.8 billion in 2012 and US$265.8 billion in 2013 YTD, provoking concerns of private equity firms’ ability to deploy all the capital they have raised from investors.
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Other Key Facts:
- Current total private equity dry powder stands at US$1,074 billion as of 17 December 2013, compared to a previous high of US$1,067 billion witnessed at the end of 2008.
- Aggregate global private equity dry powder has seen a 14% increase over the past year alone.
- Capital available for investment in purely buyout opportunities stands at US$397 billion, notably lower than the US$483 billion high seen in December 2008.
- Distressed private equity and growth dry powder levels have seen significant gains, with the former increasing from US$56 billion to US$74 billion and the latter from US$46 billion to US$76 billion between December 2008 and December 2013.
- Over 9% of current dry powder is attributed to funds with vintages prior to 2008. Based on an industry average five-year investment period, this capital should theoretically have already been invested, and may expire unless investors grant these funds investment period extensions.
Ignatius Fogarty, head of Private Equity Products, Preqin, said: "A successful fundraising market, yet relatively stagnant deal activity, has left the private equity industry with record levels of dry powder as of the end of 2013, with a 14% growth in aggregate levels over the previous year alone. At this record level of dry powder and deflated deal market, investors are concerned that fund managers will still face challenges investing this growing capital base successfully going forward. As many economies go through periods of stabilization, and experience continued growth, 2014 may present more opportunities for private equity firms to deploy their capital, and we may see an reduction in the level of dry powder."
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