![]() Unfortunately, such returns of cash have dried up in recent months because sales of companies at a profit are now tough to execute. ![]() Assuming they had owned the companies for three years and the company enterprise values had increased 20 percent each year, then after paying back debt and subtracting the buyout firms’ fees, investors would get about half that, providing funds for some two-thirds of their new commitments. Since the beginning of 2007, private equity firms have sold companies worth about $440 billion. Investors are also used to getting money back from private equity funds, which helps them finance new investments. If about a third of each deal was paid for in equity and the remainder was financed with debt, investors have handed over only about $300 billion, around half what they have promised managers. Private equity firms bought companies worth nearly $900 billion last year and so far this year, according to Dealogic, probably using funds raised from 2006 onwards. But not all of this money has yet been called. But another reason is that they committed too much during the buyout boom.įrom 2006 to the end of September this year, investors committed more than $650 billion to buyout funds, according to Private Equity Intelligence. ![]() Part of the problem may be that assets elsewhere in their portfolios have fallen drastically, which can make the private equity investments breach the proportion of their overall investments that they are allowed to put in buyout funds. But to understand why these investors are selling more than $100 billion worth of buyout investments at a huge loss, Ivy Leaguers might have to think outside the box.Įndowments and pension funds are dumping stakes in private equity funds at some 50 percent of their values. to figure out why endowments like Harvard’s are down significantly this year.
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