The value of assets managed by private equity firms worldwide grew by 9.4 per cent last year, according to data from Preqin.
Total assets hit a record $3trn (€2.4trn), calculated by unrealised portfolio value and dry powder, after experiencing the second highest year of growth since 2007.
Preqin has reported that annualised horizon returns for private equity over the ten years to December 2011 stand at 11.9 per cent, higher than the S&P 500 and MSCI Europe indices.
“The sustained growth of industry assets highlights the fact that private equity continues to be attractive to institutional investors that are willing to forego liquidity in return for outperformance. Despite the uncertainty and volatility that has prevailed in recent years, faith remains that private equity fund managers can still deliver these returns,” said Bronwyn Williams, manager of performance data at Preqin.
However, Preqin also notes that the gulf between top- and bottom-quartile performers has increased in recent quarters. Moreover, experts suggest that the increase in assets under management reflects how long it takes for private equity firms to die out. The size of the asset class is a legacy of the massive growth in funds between 2004 and 2007, when the industry expanded by 136 per cent.
A report by Triago in March suggests that the industry is due to shrink from 2015 onwards as failing boomtime funds finally die out.