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Alternative Market Briefing

North American buyout funds AUM stands at $1.38tn

Thursday, January 21, 2021

Laxman Pai, Opalesque Asia:

Fundraising and strong performance have helped North American buyout funds soar in value in recent years. Total assets under management (AUM) stand at $1.38tn as of June 2020, a 3.7x increase since 2005, says Preqin.

Average annual fundraising for North America-focused buyouts has been $117bn per year since 2005, but reached a high of $278bn in 2019, prior to the impact of the pandemic. AUM growth has also been helped by consistently strong performance.

"Most North America-focused buyout funds that Preqin tracks have continued to provide returns in excess of public equity markets. The weighted average net IRR of buyout funds has also exceeded returns attainable through investing in the US small-cap space," said Cameron Joyce, VP, Research Insights at Preqin.

Buyout funds have become an increasingly important part of institutional investors' portfolios. This comes as allocators seek alternatives to actively managed public equity funds, he pointed out in a report.

A structural decline in long-term treasury yields has been key to driving flows into the asset class, as well as proving a crucial contributor to its performance. The US Treasury 10-year yield was more than 4.5% at the end of 2005, compared with close to 1% today.

"Going forward, we expect long-term US Government bond yields to remain at low levels. This should underpin the continued strong performance of the asset class by helping financing costs stay low, and poten......................

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