Private Equity Distributions Hit Record High in 2013

Strong equity markets and exit activity have resulted in a “positive momentum” in private equity fundraising, Preqin has said.

Investors have enjoyed record high payout of $568 billion from private equity investments in 2013, according to Preqin data.

The volume of capital returned could be credited to strong public equity markets, favorable credit conditions, and positive exit activity, the firm argued.

These circumstances created an opportune setting to sell private equity assets, “particularly companies bought at a discount in the period after the financial crash,” said Christopher Elvin, Preqin’s head of private equity products.

Distributions in 2013 trumped $381 billion paid out in 2012, according to Preqin, representing 15% of $3.7 trillion in total private equity assets under management—just below 17% recorded in 2004 and 2005. 

“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.

The figure also exceeded drawdowns by a record margin of 46%, the firm found, reversing a post-crisis trend of capital calls surpassing distributions.

“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,” Elvin said.

According to the data, private equity funds returned an average of 18% for the year ending December 2013, and median net internal rate of returns of 20% over the past 10 years.

The firm said realized buyout investments also jumped in 2013—to 1,456 exits worldwide from 1,360 in 2012—valued at an aggregate $322 billion. Venture capital exits climbed slightly as well, with managers realizing 880 investments at a value of $72 billion, compared to 847 exits at $64 billion.

“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,” Elvin said.

Related Content: Private Equity’s Most Consistent Performers, Cambridge Associates: The Problem of Too Much ‘Dry Powder’ in Private Investments