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PE returns fall to levels last seen in financial crisis

Private equity limited partners (LPs) had the lowest amount of cash returned to them from their investments last year since the global financial crisis, restricting efforts by buyout firms to launch new funds, according to a report by Bloomberg.

The report cites data from investment bank Raymond James Financial as revealing that distributions to LPs totaled 11.2% of funds’ net asset value — the lowest since 2009 and well below the 25% median figure across the last 25 years.

With higher borrowing costs, volatile markets and economic uncertainty all combining to make it more difficult for PE firms to exit their investments via the traditional IPO or sale route, the return of capital to investors has been restricted, meaning that pension and sovereign wealth funds, as well as other investors have less cash for new private equity allocations.

According to Raymond James, the median holding period for a buyout for asset is now 5.6 years, up from the industry norm of around four years. Fundraising timeframes have also lengthened from 18 months a couple of years ago to an average 21 months today.

In another measure of the tougher fundraising environment, the number of new funds raised last year dropped by 29%.

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