Looking back on last year’s investment activity, institutional investors continued to pile into private equity.
Globally, commitments to private equity funds jumped 27 per cent, or US$41 billion, in the third quarter, although there were only 201 final closes for the period, down seven per cent from the quarter prior, according to a report from Callan.
The report predicted a lower overall fund count by the end of 2019, but with fundraising ultimately surpassing the year before, suggesting higher concentration of investments within larger funds. It noted investors have demonstrated an effort to remain diversified among private equity strategies, with no single subset of the strategy taking clear precedent.
U.S. funds dominated the market, with 64 per cent of global commitments flowing into American vehicles, 21 per cent into Europe, 13 per cent into Asia and the remaining two per cent parcelled out among the rest of the world.
Buyout investments, meanwhile, have been sluggish, with year-to-date dollar volume as of the third quarter 32 per cent lower than 2018. “The fact that fundraising continues to boom while capital deployment is slowing is a dynamic that investors should watch as portfolio uncalled commitment backlogs may begin to rise more than in recent years,” the report said.
Venture capital rounds of financing fell (seven per cent) from the second to third quarter of 2019, but were up year-to-date (40 per cent).
As for returns, private equity lagged public markets somewhat, providing a 3.7 per cent return for the second quarter.