PE Key Trends Blog

Palico Forecast: A Record Year for Expiring Commitments Will Help Fundraising and Dealmaking

Feb 4, 2013 5:04:52 PM / by Robert Ientile posted in bloomberg report, dealmaking, dry powder, fundraisings, Palico data, palico forecast, Private Equity Market, V2

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Reports emerged last week that one of the best-known General Partners in the world invested only 29 percent from one of its European funds before its five-year investment period expired in January. The GP apparently struck a deal to release half of the un-invested commitments to investors, winning a one-year investment extension on the remainder.

Dry Powder

This means a relatively colossal 36 percent of the fund will no longer be earmarked for investment. That’s likely to significantly replenish the coffers of its Limited Partners: roughly two-thirds of the world’s LPs have been at or above private equity target allocations since the financial crisis.

The GP’s fund - an annex to a much larger European fund - is an extreme example of committed capital expiring. Historically, only about 5 percent of private equity fund capital is released without being invested. Still, the big chunk of committed capital this GP is returning to investors is very likely a sign of things to come.

Based on a range of data sources, including un-invested “dry powder” reported by Palico members, we estimate that GPs will release 10 percent or more of total capital committed to funds with investment periods expiring this year. This would mark the first time in private equity’s brief history that the expired unspent capital figure hit a double-digit percentage of committed capital.

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Moving Away from Plain Vanilla Strategies; Pledge Funds Grow in Popularity

Oct 18, 2012 3:23:36 PM / by Robert Ientile posted in comodity specialist, energy fund, joint-venture, Palico data, pledge, Private Equity Market, Private Equity Strategies, specialties, V2

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Specialization is changing the profile of private equity. In the past two weeks, one major general partner set up a joint venture with a European financial services specialist, another purchased a commodity specialist, while yet another let it be known that it would be raising a multi-billion dollar energy fund, after shelving a fundraising project for a generalist buyout fund last spring. It's no accident that the latter's greatest recent successes have been energy investments.

Palico data shows that some $15 billion was raised for industry-focused strategies in the first six months of 2012 - a record first half for such funds. For the first nine months of the year, five out the ten largest closings were achieved by funds with specialist strategies.

Those figures make it easier to understand why 33 percent of GPs in a recent poll said they plan to adopt more narrowly focused sector strategies going forward.

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