U.S. PE Funds Beat Public Markets in 2011, Distributed Record $93.6B to LPs

(Reuters) – U.S. private equity investments outperformed the stock market in 2011 and distributions to investors reached a record as fund managers seized on an opportunity to sell long-held assets, market research firm Cambridge Associates LLC said on Monday.

The Cambridge Associates LLC U.S. Private Equity Index returned 10.9% in 2011, compared to 8.4% for the Dow Jones Industrial Average and 2.1% for the S&P 500, according to data provided by Cambridge.

It was also a good year for private equity investors who wanted money back. Known as limited partners, these investors received $93.6 billion from their fund managers, the largest annual amount in the history of the index and a 30% increase over distributions in 2010, Cambridge said.

“The record distributions likely reflect the long-awaited completion of realization events delayed largely due to the recession and buoyed by active M&A and IPO environments in 2011,” Andrea Auerbach, head of private investment research at Cambridge Associates, said in a statement.

M&A activity was off to a strong start in the first half of 2011, allowing private equity firms to shed assets. The euro zone crisis later curtailed activity, but global M&A still totaled $2.6 trillion for the entire 2011, a 7 percent increase from comparable 2010 levels, according to data from Thomson Reuters (publisher of peHUB).

Technology proved a resilient economic sector within U.S. private equity. Software led the pack in 2011 within the private equity index with an annual return of 17.9%, followed by information technology at 17.2% and media at 15.9%, Cambridge said.

The private equity index also beat out the performance of large public companies in the S&P 500 on a three, five and 10-year annualized basis, although it underperformed on a quarterly basis in the fourth quarter of 2011, Cambridge said.

The Cambridge Associates LLC U.S. Venture Capital Index returned 13.2% in 2011, also beating public markets.

Cambridge calculates its indexes based on performance results submitted by more than 4,500 private partnerships and their over 62,000 portfolio company investments.

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