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US PE distributions higher than fundraising – study

Cambridge Associates examined more than a thousand private equity funds in the US and found that PE managers fundraised $18.3bn and distributed $39.1bn to LPs in Q2 2015.

In the second quarter of 2015, US private equity fund managers drew commitments of $18.3 billion from investors, while distributing $39.1 billion, according to a report by Cambridge Associates.

Fundraising in Q2 2015 in the US was up 20.2 percent from the first quarter, but down 25 percent from the second quarter of 2014. Distributions were up 39.3 percent from the first quarter, but down 12 percent from the second quarter of 2014, the report said. The biggest vintages for distributions were 2006 and 2007, at $19.5 billion combined.

“Distributions have outpaced contributions in each of the last five years,” Cambridge co-head of US private equity research Keirsten Lawton said. “This, of course, is what limited partners are looking for in the long run and it is good to see private equity living up to expectations.”

Higher distributions reflect strong returns from private equity investments. The Cambridge Associates US Private Equity Index returned 3.8 percent for the second quarter and 6.5 percent year-to-date ending 30 June 2015, the research firm said.

The index outperformed the Nasdaq Composite, which returned 1.8 percent and 5.3 percent, the Russell 2000, which returned 0.4 percent and 4.8 percent, and the S&P 500, which returned 0.3 percent and 1.2 percent, respectively.

The US private equity index also generated 8.8 percent, 15.2 percent, 16 percent and 12.5 percent for the one-, three-, five- and 10-year periods. It outperformed most public market returns except for the three- and five-year periods leading up to 30 June 2015.

In terms of sectors, healthcare outperformed other sectors in the quarter, generating 9.9 percent. Software generated 7 percent and IT gained 6.2 percent in earnings, Cambridge said. Energy was the only large sector that marked a loss, at 1.3 percent.

Cambridge collected data from 1,220 US buyout, energy, growth equity and mezzanine funds that launched between 1986 and 2015. Their combined value was $627 billion.