Preqin’s latest research has shown that institutional investors are enjoying good returns from their private equity portfolios with capital distributions in 2013 reaching $568 billion.
Strong public equity markets, good credit conditions and general positive exit activity have provided the opportunity for private equity fund managers to return the greatest ever amount of capital back to their investors last year.
Distributions in 2013 also surpassed capital calls, money drawn from investors’ commitments to make investments in companies, by a record margin, following a number of years post-crisis when capital calls have generally far outstripped capital returned to investors.
Other Key Findings:
- $568bn of distributions were returned to investors in 2013, compared to $381bn of distributions in 2012.
- Distributed capital in 2013 outstripped capital calls by 46%, the highest ever difference on record.
- Global private equity assets under management now stand at $3.7tn as of December 2013, up 14% on the amount of assets at the end of 2012.
- Distributions in 2013 represented 15% of total industry assets under management, slightly below the highs of 17% seen in 2004 and 2005.
- Private equity funds are producing 18.0% returns on average for the one-year period to December 2013. Over a ten-year period, private equity funds are producing median net IRRs of 20.0%.
- In 2013, private equity firms realized 1,456 buyout investments worldwide, valued at an aggregate $322bn. This is notably up on 2012, when 1,360 exits were made valued at an aggregate $289bn.
- For exits made by venture capital firms, 2013 saw these fund managers realize 880 investments at a value of $72bn, compared to 2012 when 847 exits were made at a value of $64bn.
Christopher Elvin, head of private equity products, said: "Institutional investors in private equity are likely to be pleased with their portfolios at present, following a record year of distributions and the asset class producing strong returns on average. The public equity market and general exit environment have created good conditions for private equity firms to sell assets, particularly companies bought at a discount in the period after the financial crash.
"Preqin has witnessed positive momentum in the fundraising market carry over into 2014, and with investor sentiment generally positive towards their private equity portfolios, it is likely many of these investors will be returning a proportion of those distributions back into re-ups or new investments."