Private equity industry reaches $3tn in assets

Assets under management held by private equity funds worldwide reached $3tn for the first time, marking sustained growth of the industry despite challenging wider economic conditions, according to data published by Prequin.

Research conducted by Preqin for the 2012 Private Equity Performance Monitor publication, showed that industry assets under management increased by 9% from December 2010 to December 2011, including unrealized portfolio values and dry-powder the funds have available to invest.

“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,” said Bronwyn Williams, manager of performance data.

He added that examining the 10-year performance of the asset class it is clear that private equity can generate superior returns.

“However, our analysis also highlights the wide gulf between the performance of top and bottom quartile funds. Consequently the key issue for investors remains identifying, researching and selecting the best potential fund managers for their portfolios,” Williams said.

According to the same research, the strongest period of growth of the private equity industry occurred between 2004 and 2007, when assets expanded by 136%, driven by the emergence of mega buyout funds.

Private equity annualized horizon returns over 10 years to December 2011 was at 11.9%, above that of the S&P 500 and MSCI Europe indices, but below the MSCI Emerging Markets index, which had a 13.9% return across the period.

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