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Laxman Pai, Opalesque Asia: Industry dry powder, or uncalled investment capital, continues to grow for alternative investment managers amid elevated market multiples and increasing late-cycle behavior, such as loosening deal terms and structures.
However, diversity of assets under management (AUM), locked-up fee streams, variable costs structures, and solid liquidity profiles continue to underpin the Stable Outlooks for large, diversified alternative investment, Fitch Ratings says.
Dry powder for Fitch-rated firms was up 18% YoY on June 30, 2019 to $387 billion. Global dry powder expanded 11.2% year-to-date through August to $2.1 trillion, with private equity (PE) buyout funds accounting for the largest share at 35% and growth funds increasing most rapidly at 23%, driven by investor demand in software and IT.
Returns from PE funds continue to outperform the S&P 500, driving sustained investor demand for PE strategies despite elevated deal valuations.
Still, limited partners LPs remain cautious about underlying investment valuations, with 73% of respondents believing that portfolio companies are overpriced, according to a recent survey by Preqin. Of LPs questioned, 74% believe the market is at the peak of the equity market cycle and 48% of investors believe a market correction will occur within 12 months.
Global PE fundraising continued to slow for the second straight year, although still remained above historical levels. That said, early 3Q19 activity...................... To view our full article Click here
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