Private Equity "Dry Powder" At Record Levels As Capital Seeks Work To Do - Study

Tom Burroughes

2 January 2014

The amount of capital that has been committed to private equity but which hasn’t been put to work yet – otherwise known as “dry powder” – is at a record level of $1.074 trillion, following a year of vigorous fund-raising but also a period when deal-flow has been relatively flat for three years in a row, new figures show.

The aggregate value of buyout investments globally totalled $264.4 billion in 2011, $263.8 billion in 2012 and $265.8 billion so far in 2013, provoking concerns of private equity firms’ ability to deploy all the capital they have raised from investors, according to , the research firm.

The previous record figure for “dry powder” was $1.067 billion at the end of 2008, a time when the world was in the depths of the credit crunch.

Aggregate global private equity dry powder has seen a 14 per cent increase over the past year alone. Capital available for investment in purely buyout opportunities stands at $397 billion, lower than the $483 billion high seen in December 2008.

Distressed private equity and growth dry powder levels have seen significant gains, with the former increasing from $56 billion to $74 billion and the latter from $46 billion to $76 billion between December 2008 and December 2013.

More than 9 per cent of current dry powder is attributed to funds with vintages prior to 2008. Based on an industry average five-year investment period, this capital should theoretically have already been invested, and may expire unless investors grant these funds investment period extensions, the report said.

“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,” it added.