Private Equity Ends 2013 With Record 'Dry Powder'

By Editorial 27 December, 2013

According to a report published by London-based research and consultancy firm Preqin on December 19, 2013, the 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.

Current total private equity dry powder stands at USD1.074 trillion as of December 17, 2013, compared to a previous high of USD1.067 trillion witnessed at the end of 2008, the report says. Aggregate global private equity dry powder has seen a 14 percent increase over the past year alone.

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 USD264.4bn in 2011, USD263.8bn in 2012 and USD265.8bn in 2013 year to date, provoking concerns over private equity firms' ability to deploy all the capital they have raised from investors.

Preqin also found that capital available for investment in purely buyout opportunities currently stands at USD397bn, notably lower than the USD483bn high seen in December 2008.

Over 9 percent 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: "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."

Tags: Investment | Private Equity | Expats |


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