Distributions to LPs exceed calls in H1

The first six months of 2012 saw around 6% of total committed capital redistributed to LPs, while calls represented around 5.5%.

This is the first time distributions have outweighed calls since the financial crisis. Depressed deal activity is however putting downward pressure on calls, and significant dry powder is likely to have an effect on the market.

Last year, distributions were 9% with calls of 10%, while in 2010 just 6.5% was distributed while a huge 11% was called.

Triago believes full year numbers for 2012 will show distributions of around 10% while calls will reach 11%.

Increasing distributions to LPs is likely to be positive for those looking to fundraise. Triago expects that, if conditions persist, then LPs will earmark more capital for investment in private equity funds, and return fundraising volumes to a sustainable level of $300-400bn. This is less than half the peak level seen during the bubble years of 2005-2008 but would be in line with 10-year averages and would suggest the industry is in reasonable health. Triago believes total fundraising for 2012 will reach $265bn, up 15% compared to 2011.

With an estimated $193bn of outstanding commitments to leveraged buyout funds due to expire in the next 16 months, GPs may rush to deploy cash.

Triago expects the huge amount of dry powder in the market to in turn drive volatility in entry multiples.

"That's the biggest capital bulge ever set to expire in such a short time frame," the report says. "Volatility in purchase prices will probably continue as GPs scramble to spend".

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• Topics
• LPs
• Fundraising
• Triago