Big is Beautiful, Say PE Investors | Chief Investment Officer

(October 1, 2013) — Large private equity (PE) funds have continued to snowball, according to Preqin data, as investors continue to favor sizable and established managers.

The first nine months of 2013 saw 20% more PE capital raised than for the same period last year, but it was dispersed among fewer funds, the data showed. The total number of PE funds closing hit a six-year low in the July-through-August third quarter.

“Many investors are increasingly looking to place more capital with larger and more established managers,” Ignatius Fogarty, head of private equity products at Preqin, said. “With a record breaking number of private equity funds currently in the market competing for capital, the remainder of 2013 is set to continue to be highly competitive for fund managers.”

Still, the average size of shuttered PE funds was $532 million in the third quarter, down $164 million from the April-through-June period.

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In this latest three month stretch, 179 funds accumulated $87 billion—a figure that Preqin expects will rise by 10% to 20% as new information becomes available.

A total of 606 funds closed during first nine months of 2013, raising a total of $311 billion, according to the alternative asset data firm.

Of these funds, North American entities represented 66%, or $57 billion, of aggregate capital raised, the report stated. European funds secured $22 billion, while those based in Asia drew $4 billion.

Across all PE strategies, buyout funds secured the most capital—$28 billion—this quarter, the data showed.

CVC European Equity Partners VI was the largest fund to close, accounting for almost 63% of capital raised by European funds, with €10.5 billion secured in seven months. GSO Capital Solutions Fund II, an American distressed debt fund, came in second, with $5 billion.

Stiff fundraising competition is expected, the Preqin report said, with a record of 1990 PE funds in the market as of October 1, together aiming to raise $721 billion.

(October 1, 2013) – Chile’s nation-wide and privately-run defined contribution (DC) scheme has been posting some robust results, according to a study.

Male workers who contributed 10% of their paychecks over a 40-year career replaced an average 87% of their salary in monthly retirement income. For women, however, that figure was 58%.

On average, the study showed Chileans replaced 71% of their ten highest salaried years with post-retirement payouts.

Dictuc, a consultancy affiliated with the Catholic University of Chile, performed the research, taking into account data from 28,000 households. It was commissioned by the country’s Administradora de Fondos de Pensiones (Pension Fund Administrators), private institutions responsible for handling DC assets.

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As with Australia, retirement contributions are mandatory in Chile.

Chile’s system came eighth in the world in Mercer Australia’s latest annual global pension index. It beat out the United States, France, Germany, Singapore, Poland, and Brazil with a rating of C+.

Denmark achieved the only A.

According to Mercer’s report, Chile’s retirement scheme has some good features, but should raise its mandatory minimum contribution level. Furthermore, the study recommended “introducing a requirement that part of the retirement benefit must be taken as an income stream.”

This would, of course, capitalize on the Chilean system’s proven strength at providing income—for half the population, at least.

Related Content: Profile of Klaus Schmidt-Hebbel, Chairman of Chile’s SWFs