2011-Q4 PE Index: Private Equity Activity Declines Slightly in Q4 Despite Increased Investment

PE Index declines in fourth quarter, but finishes above 2010 level.

Washington, DC, February 16, 2012 – Despite higher investment levels, overall private equity activity fell during the fourth quarter of 2011, according to the Private Equity Index (PE Index) released today by the Private Equity Growth Capital Council (PEGCC). Strong Q4 investment activity held the Index above its 10-year moving average and higher than its 2010 average level.

As of December 31, 2011, the PE Index registered at 103.9, which is 7.4 points below its revised level of the previous quarter. This decline was primarily driven by muted fundraising and exit activity. Despite this quarterly decline, private equity activity has increased on an annual basis. On average, the PE Index registered at 110.4 in 2011 compared to 96.8 in 2010. Some key observations about private equity activity in fourth quarter of 2011 include:

  • Global private equity investment increased from $63 billion in 2011-Q3 to $99 billion.
  • Equity contributed by sponsors in leveraged buyout deals increased from 39% in 2011-Q3 to 42%.
  • Commitments to global buyout funds fell from $31 billion in 2011-Q3 to $18 billion.
  • Global callable capital reserves (“dry powder”) for buyout funds fell to $367 billion.
  • U.S. private equity exits fell from $23 billion in 2011-Q3 to $20 billion.

“While private equity activity declined slightly last quarter, on an annual basis most industry fundamentals in 2011, including investment activity, were at their most favorable levels since 2008,” said Bronwyn Bailey, PEGCC Vice President of Research. “We are optimistic that, with more stable financial markets, private equity will continue to make critical investments that will contribute to U.S. economic recovery and growth in 2012,” Bailey concluded.

Designed to provide an accurate snapshot of the state of the private equity market at any given point in time, the PE Index is a composite measure of global private equity activity based on three key factors: the dollar value of total private equity-backed investment, fundraising, and exits (portfolio company IPOs or sales to corporations or other investors). The Index measures 100 when all three components are at their 10-year moving average. These three factors collectively capture the most fundamental elements of the private equity market.

The Private Equity Index is calculated using data provided by Thomson Reuters, Pitchbook and Preqin. The Council updates the PE Index at the end of each quarter.

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