Private equity deals have to pick up substantially soon, just looking at the amount of money flowing into funds.
A survey from industry watcher Preqin showed that 59 per cent of investors in private equity plan to keep their existing investment level in buyout funds, while another 27 per cent plan to increase allocations. About half expect to make a commitment to a fund this year. On top of that, funds that have money they haven't invested are seeking – and getting – extensions to their investment periods, meaning that capital remains in play.
Increasingly, money is headed again for funds that target the biggest buyouts.
About half of investors favour small to mid-market funds, but mega funds are now viewed by roughly a fifth of private equity investors as having the best return prospects, Preqin said.
Put it all together – more commitments to private equity, more interest in big funds and a willingness to leave existing commitments in place – and private equity fund managers are going to have a lot of cash to put to work. Add that to cheap debt and rising equity markets, and that suggests the busy beginning of 2013 for private equity -- with deals for computer maker Dell and ketchup producer Heinz -- has legs.
Why all the interest in private equity? Almost all investors, 85 per cent, said private equity met or exceeded their return expectations, Preqin found.
That said, fundraisers at buyout funds will need to get familiar with some different airports. Most of the interest in private equity these days is coming from Asia and other parts of the world outside North America and Europe, because banks and insurers in those regions that had looked to private equity are facing restrictions on investing in such assets, Preqin said.
(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)
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