As discussed in several prior posts, Drew Bowden, the Director of the SEC’s Office of Compliance Inspections and Examinations, attacked the PE industry in 2014 for, among other things, excessive fees, particularly accelerated monitoring fees. In a May 2014 speech, Mr. Bowden listed and described a number of PE failings in the area of fees. PE firms responded promptly and have reduced certain fees (or at least credited those fees as part of the PE firm’s management fees) and announced changes as to fees in future funds.
In addition, PE firms expanded the disclosures in their Form ADV filings with the SEC. Some PE firms were hesitant to move too swiftly since there was a concern that PE investors would perceive the changes/additional disclosures as a tacit admission of wrongdoing.
With all the publicity over PE fees, you might expect PE investors to possibly scale back the amount of their PE commitments. To the contrary, the statistics set out below reflect PE as an increasingly strong investment.
A few stats courtesy of Preqin.
The proportion of PE funds that reached or exceeded the maximum amount to be raised in 2014 was at the highest level since 2008. As of mid-November 2014, 55% of approximately 280 PE funds reached or exceeded the max; 43% of PE funds met or exceeded their max in 2013.
PE firms took an average of 16.4 months for fund closings in the first 10.5 months of 2014 (the average was around 18.5 months in 2013).
PE firms returned $444 Billion to investors in the first half of 2014 (the previous annual high was $568 billion in 2013).
During the ten years ended June 30, 2014, PE firms reportedly had net annualized returns of 14.26% compared to the S&P 500’s returns during that time period of 7.8%.