US private equity distributions to limited partners reached $48.6 billion during the fourth quarter of 2012, the largest quarterly distribution on record, according to new research from consultant Cambridge Associates.
Distributions shot up about 123 percent compared to the previous quarter, taking total distributions for the year to $118 billion, also the highest figure in the 27 years since the inception of Cambridge’s US Private Equity Index. While capital calls during the fourth quarter rose about 46 percent to $25.5 billion, total capital calls for 2012 stood at $71.3 billion, down from $94 billion in 2011.
“Many factors drove the record quarterly and annual level of distributions, including an active mergers and acquisitions market,” Cambridge senior consultant Keirsten Lawton said in a statement. “Though volume was up in 2012 from 2011, the average transaction size decreased. Distributions were also helped by friendly credit markets, which enabled recapitalisations, and anticipated tax hikes in the New Year, which motivated owners to sell.”
Cambridge was unavailable for further comment at press time.
In terms of performance, both private equity and venture capital generated positive returns for the fourth quarter and year. US private equity returned 3.5 percent while the venture capital index returned 1.2 percent during Q4. Private equity returned 13.8 for the year, nearly double the 7.2 percent return for venture capital in 2012.
Both private equity and venture capital outperformed the public markets, as the S&P 500 recorded a negative 0.4 percent return and the NASDAQ returned negative 3.1 percent during the fourth quarter.
Buyouts and venture capital continue to outperform the public markets during the three-year, five-year and 15-year investment periods.
The amount of private equity firms’ unspent commitments has dropped since 2009, leveling at about $324.7 billion by the end of 2012, according to Cambridge data released last month. The capital overhang has fallen considerably since 2009, when $451 billion of unclaimed capital sparked fears of too much money chasing too few deals, driving up prices potentially affecting fund performance.