Alternative investment firms rated by Fitch Ratings had $387 billion in dry powder as of June 30, up 18% from the same period a year ago, according to a report from the ratings agency.
The increase in dry powder continued amid elevated market multiples and increasing late-cycle behavior, such as loosening deal terms and structures.
"Dry powder continues to reach new levels," said Dafina Dunmore, director in financial institutions at Fitch Ratings and co-author of the report. "Fundraising remains pretty solid, though it's down from most recent levels. There are not a lot of opportunities to deploy capital."
Ms. Dunmore noted that large, global managers with more diversified investment strategies "tended to find pockets of deployment."
The low interest rate environment is also driving increased institutional investor appetite for private equity strategies, as institutions need to reach a certain yield.
Global dry powder expanded 11.2% year-to-date through August to $2.1 trillion, with private equity 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, according to the report.