According to Preqin’s Fund Manager Profiles online service, the cumulative amount of estimated dry powder available to North America-based private equity firms currently stands at just over $672bn as of March 2014. This is an increase of 118% compared to the $308bn in estimated aggregate dry powder available to firms based in the region in December 2003.
The rise in private equity dry powder, however, has not been a steady upward trend. The level held by North America-based private equity firms fell following the financial crisis, decreasing by 10% between December 2009 and December 2010. The first positive percentage increase in North American dry powder was in 2013, rising from $588bn as of December 2012 to $655bn in December 2013. While the recovery is encouraging, the increase in dry powder could also be an area of concern for the industry, if there is a disproportionate amount of deals available to invest the capital in, or at least, worthy opportunities, available to North America-based private equity fund managers.
Preqin’s data shows that North America-headquartered private equity firms that primarily target buyout investments have the most uncalled capital of all North American firms across all investment strategies. The estimated aggregate dry powder that these companies have at their disposal currently stands at $242bn, a 79% increase compared to December 2003. It should be noted, however, that the amount of dry powder that North America-based buyout firms currently have is almost 21% less than the levels before the recession.
Conversely, a strategy that has continued to grow healthily in North America in terms of aggregate dry powder is distressed private equity. This involves investment into companies that are facing troubled times and require turnaround, reorganization, restructuring or other special situations. The recent volatile economic climate in North America has increased opportunities for distressed private equity firms. The aggregate dry powder available to North America-based distressed private equity firms currently stands at an estimated $60bn and increased by 19% from 2009 to 2010, showing growth despite the decline of global economic markets at the time.
Among North America-based private equity firms, Apollo Global Management has the largest amount of available dry powder. The buyout-focused firm has almost $25bn in estimated available dry powder; recently bolstered by the final closing of Apollo Investment Fund VIII, totalling $18.4bn.