Back to School: Private equity dry powder jumps 11 pct to $839 bln: Preqin

  • PE returned $443 bln to investors in 2015
  • 76 VC funds collected $11.9 bln in Q3
  • 36 buyout funds closed on $36 bln in Q3

Private equity dry powder hit a record level in third quarter, while fundraising was “lackluster,” according to Preqin.

The PE industry had $839 billion of total cash available at the end of third quarter, the data provider said, up 11 percent from $757 billion at the end of 2015. Private equity also returned a record $443 billion in distributions to investors in 2015. That’s up 4.5 percent from $424 billion in 2014, Preqin said.

With so much money available, high valuations have become a concern, Preqin said in its Q3 2016 quarterly update. Some high-profile LPs have “downgraded the projected performance of their private equity commitments,” the firm said.

“The consequences of this ‘wall of capital,’” coupled with high asset pricing, are being seen in the difficulty many managers are reporting in finding attractive investment opportunities,” Christopher Elvin, head of PE products at Preqin, said in a statement.

“Ultimately, it may be that these factors result in the net capital flow to investors in the coming year being lower than has been seen in recent years.”

Several high-profile GPs have warned limited partners to expect falling returns in coming years. Andrea Auerbach, global head of PE research at Cambridge Associates, said in a recent speech she was “nervous” in the current market environment.

One hundred seventy funds reached final closes in Q3, securing $62 billion. That’s the lowest amount of capital raised since Q3 2013, Preqin said.

Venture capital emerged as the most popular fund type of the third quarter. Seventy-six VC pools — more than any other fund sort — closed in Q3, securing an aggregate $11.9 billion. Of the 170 pools, 36 buyout funds collected $36 billion in Q3, while 27 growth pools closed at $7.1 billion. Thoma Bravo’s 12th flagship fund snagged the biggest U.S. PE fund close of the quarter, $7.6 billion.

A record number of funds are currently seeking capital, Preqin said. The beginning of Q4 saw 1,807 pools hoping to raise $495 billion, the data provider said. That’s up from 1,720 funds targeting $447 billion in third quarter. Nearly half, or 894, of the funds are targeting North America while Asia ranked as the second most targeted region with 354 pools.

China Reform Fund Management, a VC pool, is seeking 200 billion yuan ($30 billion) and is the biggest fund in the market right now, Preqin said. KKR’s 12th flagship fund is the largest buyout fund in the market. KKR Americas Fund XII is approaching its $12 billion hard cap, Buyouts has reported.

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