Alternative investment research firm Prequin recently released “The 2014 Prequin Global Private Equity Report.” This report offers a comprehensive overview of the current state of the private equity market and the major players, as well as a close look at various sectors and the possibilities for Private equity deals and exits in 2014.
In the overview of the report, Prequin points out that 2013 has witnessed the highest aggregate amount of capital raised by private equity firms since 2008, with 873 funds raising an aggregate $454 billion. The report also highlights the fact that 2013 finally saw a reversal of negative sentiment regarding the global economy that was perceived to have been hampering the commitment of funds to private equity.
Private equity fund performance in 2013
The Prequin report points out that private equity funds performed reasonably well long term as well as in 2013, and that PE investors were generally satisfied. “In our December 2013 survey, 77% of investors indicated that they were satisfied with the performance of their private equity portfolios, and a further 13% of investors stated that their returns had exceeded their expectations.”
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
The average size of PE funds also increased in 2013, with investors looking to place their money with an experienced fund manager with a successful track record. In fact, as the report notes, first-time managers only accounted for 7% of the PE capital raised in 2013.
More capital raised means more deals likely
Prequin argues continued growth in the number of PE deals is likely in 2014. “With the improvements seen in private equity fundraising levels, which have led to new injections of capital into the industry, there are positive signs for the number of completed deals in the private equity industry, with fund managers seeking to deploy the capital raised in 2013.”
Declining interest in emerging markets funds
The report also highlights declining investor interest in emerging market-focused PE funds. “Enthusiasm for emerging markets is on the wane and this is reflected in fundraising figures. 2013 saw a decline of 37% in the aggregate capital raised for Asia-focused fundraising compared to 2012 and an almost 50% decrease in the capital raised for other regions outside of North America and Europe.”