Seeking Haven in Private Equity... How? The average private equity fund appreciated 7.2 percent in the first half of 2014, topping the S&P 500’s return and handily beating other major U.S., European and emerging market indexes. Based on a slightly more limited sampling in the third quarter, private equity funds registered a 2 percent increase from July to September, gaining 9.4 percent in the first 9 months of 2014, again besting virtually all major indexes over the same periods. When global stock market performance is negative, or particularly uneven – the latter is the case in 2014 – private equity tends to outperform listed equity. In the nine months through September, private equity funds distributed an unprecedented $359 billion from realized investments, surpassing the annual record of $344 billion in full-year 2013. Distributions are being driven by 2014’s exceptional volume of private equity-backed initial public offerings and the strongest corporate mergers and acquisitions market in years. Given the relatively sluggish rhythm of private equity acquisitions, distributions have already generated $119 billion in net cash for investors, just $1 billion short of last year’s high and on pace for an all-time peak of $159 billion in 2014. Private equity fundraising is up with a vengeance in the final three months of 2014, with investors committing over $48 billion in October alone. That’s equal to some 14 percent of the $353 billion raised in the first ten months of 2014 and follows a third quarter, summer-induced slowdown when commitments dropped 34 percent to $82 billion. If fundraising continues at October’s clip, it will hit $450 billion in 2014, topping last year’s post-crisis high by 7 percent and beating the trailing five-year annual average of $270 billion by 67 percent. Indicating fundraising is getting considerably easier, the time that funds spend on the road before final close has dropped to an average of 16.4 months in 2014, the lowest level since 2011. Pitchbook notes that a record 88 percent of U.S.-focused funds holding final closes in 2014 are meeting their final fundraising target, up from an average of only 55 percent between 2009 and 2011. Investors are also increasingly looking beyond established groups, with first-time managers closing on 11 percent of capital raised in the third quarter, up from just 6 percent in 2013’s last quarter.
Posted on: Sat, 08 Nov 2014 16:04:34 +0000
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