US private equity grows in Q3

The combined value of US investments rose for the second consecutive quarter in Q3, while exit values experienced a 28% quarterly decline. 

The value of US private equity deals rose 7 percent to $87 billion during the third quarter of 2013, the second consecutive quarterly increase of the year, according to a study from the Private Equity Growth Capital Council.

US fund managers generated $73.4 billion of investment activity during the first quarter and $81.7 billion in Q2. The increase was accompanied by unchanged levels of equity financing for US leveraged buyouts, which remained at 32 percent during both the second and third quarters of 2013.

While exit activity declined 28 percent from $50 billion in Q2 to $35.9 billion in Q3, the combined value of exits dropped only 6.5 percent compared to the third quarter of 2012.

“The private equity exit environment continues to be strong, which means the distribution of capital back to investors such as pensions, charitable foundations, and university endowments who rely on private equity returns to fulfill their social missions,” said PEGCC president and chief executive officer Steve Judge.

US pensions in particular have generated higher returns from private equity than all other asset classes in recent years, according to a separate PEGCC study. Private equity generated a median 10-year annualised return of 10 percent for US pensions compared to 6.7 percent for real estate, 6.6 percent for fixed income and 5.8 percent for public equities.

In terms of fundraising, capital raised by general partners fell from $57 billion to $18 billion during the third quarter, though fundraising remains on par with third quarter levels from prior years, the study said.

“Private equity activity continues to trend higher on an annual basis since the lowest point of the recession in 2009,” said Judge.