Deal activities in the United States among private equities suffered in the second quarter due to economic uncertainties. This resulted in a drop in the number of closed deals by private equities to 303, down from 363 deals in the first quarter. However, the dollar value of the private equity deals done during the quarter was relatively closer to the first quarter. The most recent quarter saw deals worth $51 billion compared to $55 billion a quarter ago.
The depressing market conditions also led to private equity firms aggressively exiting investments. During the quarter, private equity firms sold stakes worth $35 billion, much higher than the $19.8 billion raised through disposal of investments in the first quarter. The firms increased their share of exits from the energy sector to 11 percent from 7 percent in the prior quarter.
Financial services industries also witnessed increased share of exits by private equities to 7 percent from 5 percent in the prior quarter. The IT sector presented a mixed picture with the exits accounting for 13 percent of the stake sold, which is higher than the financial services and energy sectors but an improvement of over 16 percent in the first quarter. Among the investments made during the quarter, the business products and services industry attracted 35 percent of all invested capital up from 29 percent in the same period last year.
North American endowments increase private equity investment
Data from research agency Preqin show that North America-based endowments, the fourth largest institutional private equity investor group, have steadily increased their allocation to private equity in recent years. The average private equity allocations of such endowments stand currently at approximately 13.2 percent of the total assets under management, a significant increase from around 8.5 percent in 2007. According to the Preqin survey, an overwhelming 94 percent of such institutions intend to either increase or maintain their exposure to private equity in the longer term. Despite the increased capital allocation to private equities, many endowments say they are more conservative than normal in their private equity investments due to the financial crisis.
Private equity firms more bullish in 2012 versus 2011
Despite continued economic uncertainty, 77 percent of private equity firms think that there will be more attractive investment opportunities in 2012 compared to 2011 according to a report on private equity trends by research firm Rothstein Kass. In anticipation of attractive investment opportunities, approximately 70 percent of the firms plan to actively raise capital in 2012. Can an increase in jobs be far behind?
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