Private Equity Spending Power Reaches $1.074 TrillionKiel Porter
The amount of capital the private-equity industry has to spend on deals globally reached a record $1.074 trillion in 2013, according to data provider Preqin Ltd.
The capital for investment, known as “dry powder,” surpassed the previous high of $1.067 trillion in 2008, the London-based company said in a statement today. The rise is attributed to improved fundraising and a weaker environment for mergers and acquisitions.
“A successful fundraising market, yet relatively stagnant deal activity, has left the private-equity industry with record levels of dry powder,” Ignatius Fogarty, head of private equity products at Preqin, said in the statement. “Investors are concerned that fund managers will still face challenges investing this growing capital base successfully”.
Private-equity firms typically pool money from pension plans and endowments for a 10-year period, buying companies in the first five years and selling them in the next five years. The buyout firms get to keep 20 percent of the profit from investments.
Capital available for investment increased by about 14 percent in 2013 from the year-earlier period, Preqin said.