Through the end of July, $309 billion has been committed to private equity funds this year, according to Palico estimates. At the current pace, $531 billion will be raised by PE funds in 2016, a post-financial crisis record, and a sum exceeded only by the $557 billion collected in 2008.
|Diminishing Distributions are Unlikely to Dent Fundraising|
Four quarters in a row of declining distributions from realized private equity investments have had no noticeable impact on the strong fundraising environment. Cash distributed to limited partners from exited investments fell to $101 billion in the second quarter of 2016, after peaking at a record $133 billion in the same period last year. Distributions are likely to fall further over the next half-decade, as slow fundraising and investment in the years following the financial crisis translate into fewer exits. Yet in Palico’s Summer 2016 Global Private Equity Compass, a survey of 106 investors and 179 fund managers (all members of Palico’s marketplace), a striking 70 percent of investors note that they are planning on increasing their allocation to private equity relative to other asset classes.
|Expect New Fundraising Highs|
Rising investor allocations to PE and the circumstances fostering that expansion – slow economies and a sustained period of low global interest rates – make further fundraising highs likely in coming quarters and years. Over the next five to seven years we expect new fundraising records to roughly double the value of PE assets under management to more than $8 trillion from today’s $4.3 trillion. With an activist approach to value creation, many investors believe PE offers the promise of 10 percent-plus returns even in a low interest rate environment and even in years when public equity markets perform poorly. That explains PE’s popularity and rising investor allocations.
|Making Sense of Private Equity’s Diversity|
As investors allocate rising amounts to PE, investment diversity and fund choice is expanding. In an increasingly complex private equity universe, Palico’s online marketplace helps investors find the best funds and helps managers connect with the right investors. By bringing the world of private equity to desktops and smart devices, Palico makes the process of discovery and engagement easier.