The global private equity industry closed 2013 with record amounts of “dry powder,” capital already committed to private equity funds but not invested yet.
Preqin data reveal that the global dry powder amount as of December 2013 ($1.074 trillion) exceeded the previous record high of $1.067 billion, which was observed before the 2008 global financial crisis. In 2013 alone, aggregate global private equity dry powder saw a 14% increase.
The reason for the spike is that, while fundraising throughout 2013 increased, the volume of deals stayed relatively flat for the third year in a row, according to Preqin. The aggregate value of buyout investments globally totalled $264.4 billion in 2011, $263.8 billion in 2012 and $265.8 billion in 2013, raising concerns about the ability of private equity firms to use all the capital they have raised from investors.
“At this record level of dry powder and deflated deal market, investors are concerned that fund managers will still face challenges investing this growing capital base successfully going forward,” says Ignatius Fogarty, head of private equity products at Preqin. But because many countries are expected to see growth in 2014, he notes, private equity firms may have more opportunities to deploy their capital, reducing the level of dry powder.
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