According to Preqin’s Fund Manager Profiles, the cumulative amount of estimated dry powder available to North America-based private equity firms currently stands at just over $638bn as of September 2013. This is an increase of 106% compared to the $308bn in estimated aggregate dry powder available to firms based in the region in December 2003.
The level of dry powder 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 has been registered this year, rising by 8% from the end of 2012 to September 2013. However, the increase in dry powder could be an area of concern for the industry, suggesting a lack of deals – or at least, worthy opportunities – available to North America-based private equity fund managers.
North America-headquartered private equity firms that primarily target buyout investments have the most uncalled capital. The estimated aggregate dry powder that these firms have at their disposal currently stands at $217bn, a 61% increase compared to December 2003. As a result of the strategy’s dominance in the private equity industry, buyout-focused GPs were among the hardest hit by the recession in 2008. Now, the estimated dry powder of North America-based buyout GPs has shown recovery; 2013 brings the first year-on-year increase in aggregate dry powder since 2009. It should be noted, however, that the amount of dry powder that North America-based buyout firms currently have is almost 30% less than they did 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 the investment into companies that are facing troubled times and require turnaround, reorganization, restructuring or other special situations. The recent economic climate in North America has bolstered opportunities for distressed private equity firms. The aggregate dry powder available to North America-based distressed private equity firms increased by 18% from 2009 to 2010, showing growth despite global economic uncertainty at the time.
Among North America-based private equity firms, Kohlberg Kravis Roberts (KKR) has the largest amount of available dry powder. The buyout-focused firm has just over $18bn in estimated available dry powder; this figure has shown an increase of $3bn since May 2013. KKR’s eleventh flagship fund, KKR North American XI Fund, is currently seeking capital commitments from investors, and has already held a second close in December 2012. Another offering from the firm currently in market is KKR is KKR Special Situations Fund, which is targeting $1bn and has so far reported one interim close on $363mn.