LPs sweetened by bumper payouts
An attractive exit market helped boost distributions to record levels in 2013, with $568 billion returned to global private equity and venture capital investors, according to researcher Preqin.
Venture capital exits grew to $72 billion last year and there were almost $65 billion of exits in the first half of 2014 alone. Private equity exits were $322 billion in 2013, versus $289 billion in 2012. “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,” said Christopher Elvin, head of private equity products at Preqin, in a statement.
The record distributions should help GPs seeking re-ups this year and next, especially since distributions outstripped capital calls by 46 percent in 2013—an unprecedented margin.
Consultants key to winning LP hearts
For GPs on the road, the quickest route to fundraising success may take them via the offices of a third-party investment consultant.
Half of institutional investors mainly use consultants to guide their private equity commitments—more than rely on their own internal investment teams, according to researcher Preqin. Its survey also found that private equity is enjoying a spurt of popularity among global institutional investors, with returns overwhelmingly said to be meeting or exceeding expectations. Europe is seen as presenting the best near-term opportunities, and a majority of respondents said they had made new private equity commitments in the region this year.
There was also good news for venture capital funds, one of the most popular destinations for investors’ private equity allocations over the next 12 months.
Pension assets reach $15 trillion
Asset growth among the world’s largest pension funds slowed from 10 percent in 2012 to 6 percent last year, according to Towers Watson research that put leading funds’ assets at $15 trillion.
In the last five years, the expansion rate of European fund assets has significantly outstripped those of Asia and the United States, and European pension managers now account for almost a third of global pension assets. Significant contributors to this rise have been Norway’s Government Pension Fund and the Netherlands’ ABP—two of the three largest pension funds in the world. Asset allocation among the world’s top 20 funds is 40 percent to fixed income, 43 percent to equity and 17 percent to alternatives and cash.
Towers Watson estimates that the top 300 pension funds—which include sovereign vehicles such as Norway’s Government Pension Fund—account for almost half of all pension fund assets.