2013 will be remembered by institutional investors of private equity firms as the year when they made significant gains, The Wall Street Journal said in its report. For 2013, private equity companies are set to return over $120 billion to their investors, estimates from Cambridge Associates showed. In the first six months of 2013, investors received $60.8 billion from their private equity investments.The WSJ also said private equity companies were able to undertake initial public offerings to company debt deals because of the buoyant markets and a result, were able to pay hefty dividends to their backers.
The report cited the $1 billion gain reaped by Blackstone Group as an example. The Group reduced its stakes last year in SeaWorld Entertainment Inc and Pinnacle Foods Inc, the owner of Vlasic pickles. Blackstone also gained an $8.5 billion profit when it returned Hilton Worldwide Holdings Inc to public ownership on December 11.
WSJ also said that cash generated from sales helped in offsetting losses from failed buyout targets. As an example, a KKR fund raised in 2006 declined because of its flopped bet on Energy Future Holdings Corp, a Texas-based power provider. However, big exits made this year from Dollar General Corp, a retailer, and hospital operator HCA Holdings Inc brought up the $17.6 billion investment pool to a profitable level that will allow KK executives and shareholders to a share of future gains, the report said.
Money managers worldwide also welcome the success of private equity. The report said more pension funds and university endowments are attracted to private equity because of its robust returns and diversification from other markets.
Tony Tutrone was quoted in the report, who said about private equity's record year, "It makes people feel more confident in private equity as an asset class." He also said people expected worse results after the extreme struggle the companies faced during the recession. Tutrone manages private equity investments worth $18 billion at asset management firm Neuberger Berman Group.
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