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Alternative Market Briefing

North American private equity sits on a record dry powder pile of almost $980bn

Tuesday, April 13, 2021

Laxman Pai, Opalesque Asia:

North America-based private equity firms boasted a record-high $976bn in dry powder as recently as last September, said a study.

According to the Preqin study, the amount of dry powder as of September 2020 made up just less than a third (32.5%) of the total $3.0tn in AUM, which is slightly below the 10-year average of 32.6%.

"The dry powder pile, coupled with $2.03tn in unrealized value, drove aggregate assets in the region to historic levels, as investors continue to flock to the asset class," said the report.

"In absolute dollar terms, the amount of capital waiting to be deployed may alarm some investors, who could be wondering if the market has become saturated. Of the 186 private equity managers surveyed by Preqin in November 2020, about half told us the market was at least somewhat overvalued and could stand some reduction. Only 2%, however, believed valuations were a significant issue," pointed out Charlie McGrath, Senior Writer at Preqin.

Calming anxieties, perhaps, is the amount of dry powder relative to the total assets. Concerning the absolute number, the private equity industry has shown itself capable to take on more capital while still performing for its clients.

According to the report, between 2008 and 2019, industry assets more than doubled, fueled in part by growing interest from US public pension funds. This cohort of nearly 200 institutional investors has collectively increased its private equity allocation i......................

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