Private equity distributions reach new highs
Institutional investors received $568 billion in distributions from private equity firms in 2013, the highest annual amount ever recorded, according to data from Preqin.
Strong public equity markets, good credit conditions and positive exit activity have provided ample opportunities for private equity managers, and marks a significant improvement from 2012 when distributions totalled $381 billion. Distributed capital in 2013 outstripped capital calls by 46%, the highest ever difference on record, added Preqin.
Global private equity Assets under Management (AuM) currently stands at $3.7 trillion, an increase of 14% from 2012. Of this, distributions accounted for 15% of total AuM, slightly below the highs of 17% as seen in 2004 and 2005.
As a whole, private equity is displaying solid performance. Preqin said the average private equity fund delivered returns of 18% for the one year period to December 2013. Over a ten-year period, private equity has produced median net internal rate of returns (IRRs) of 20%, continued Preqin.
“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. Investor sentiment (is) generally positive towards their private equity portfolios, and it is likely many of these investors will be returning a proportion of those distributions back into re-ups or new investments,” said Christopher Elvin, head of private equity products at Preqin.