PE Has $1 Trillion in Dry Powder

(Reuters) Private equity firms have more than $1 trillion in firepower for deals despite a slowing fundraising trend in the second half of 2008, research and consultancy group Preqin said on Thursday.

“Fundraising has undoubtedly been affected by the turmoil in the global economy in the latter half of 2008,” said Preqin spokesman Tim Friedman in a statement.

“Although the number and value of funds being raised has fallen significantly, fundraising has far from ground to a halt, with over 300 funds successfully raising over $200bn in commitments in the second half of the year,” he added.

Preqin said 768 funds achieved final close in 2008, raising an aggregate $554 billion in commitments. Of those, 307 closed in the second half with commitments of $207.7 billion.

“Although it is true that some of these commitments would have been agreed before conditions turned especially ugly in the second half of 2008, a significant proportion would have been accounted for by investors still actively investing in private equity,” said Friedman.

The second biggest haul for private equity funds after the $625 billion raised in 2007, the 2008 tally takes total dry powder — the industry term for capital available for deals — to over $1 trillion, almost half of which is earmarked for buy-outs.

Buy-out funds accounted for the greatest proportion of funds raised in 2008, with 170 funds bringing in $216.1 billion in capital.

In second spot was real estate with 166 funds raising $116.8 billion, while distressed private equity accounted for 23 funds and $42.5 billion in committed capital.

Preqin said the number of funds still seeking investment remains at record levels, with a total of 1,684 funds looking to raise a total of $888 billion. (Reporting by Simon Meads; editing David Cowell)