Private equity funds that closed in 2007 and 2008 have a combined $332 billion in unspent capital or “dry powder,” according to an analysis released Friday by Preqin, an alternative investments research firm.
The median investment period for private equity funds is five years, according to Preqin research.
For managers with funds nearing the end of their investment lives that have billions of dollars in dry powder, Preqin concluded that “this suggests that it is going to become more common for fund managers to seek to negotiate extensions” with their investors, Preqin concluded.
For example, the $5.9 billion mega buyout fund BC European Cap VIII recently won approval from limited partners to extend its investment period to June 2011 from November 2010, Preqin said.
Separately, Preqin said private equity funds achieved an average 13.8% internal rate of return for the year ended Dec. 31, up from -27.6% for the previous year.
Buyouts returned 16.7%; venture capital, 5%; mezzanine 2.3%; and private equity funds of funds 0.2% for the year.