The U.S. economy is struggling and parts of Europe are deep in a recession, but that hasn’t stopped the private equity industry from reaching new heights. Total assets under management held by private equity funds worldwide have reached record $3 trillion, according to Preqin.
According to the research firm, the figure is calculated using unrealized portfolio value and the ‘dry powder’ (uncalled capital) available to private equity funds across the whole scope of the asset class.
Additionally, industry assets under management increased by 9% from December 2010 to December 2011, with buyout funds accounting for approximately 40% of the industry’s assets ($804 billion in unrealized portfolio value plus $392 billion in ‘dry powder’), reports Preqin.
Private equity annualized horizon returns over 10 years to December 2011 stand at 11.9%, which is above that of the S&P 500 and MSCI Europe indices, but below the MSCI Emerging Markets index, which is showing a 13.9% return across the period.
And according to Preqin, distressed is best, with distressed private equity funds consistently outperforming the ‘All Private Equity Index’.
Bronwyn Williams, manager of performance data at Preqin, said: “The sustained growth of industry assets highlights the fact that private equity continues to be attractive to institutional investors that are willing to forgo liquidity in return for outperformance. Despite the uncertainty and volatility that has prevailed in recent years, faith remains that private equity fund managers can still deliver these returns.”