Private equities face capital backlog

June 24, 2010 at 11:53 AM
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NEW YORK, June 24 (UPI) -- U.S. private equity firms have built up -- with time running short on spending it -- unprecedented amounts of capital, an industry research firm said.

Private equity firms have amassed about $500 billion, with firms like the Carlyle Group, Kohlberg Kravis Roberts and TPG holding onto more than $10 billion apiece, research firm Preqin said, The New York Times reported Thursday.

The backlog of capital reflects a shortage of buying opportunities that occurred when the economy turned south.

Equity funds raise capital to buy out undervalued companies with, generally, a three-year limit on finding companies to buy.

The problem: Raising capital before 2007 was relatively easy, but after that finding companies to buy became relatively difficult. As such, it is closing in on time for piles of capital to be returned to investors.

So far in 2010 TPG has spent $9.2 billion buying 11 companies, making it the biggest spender for the year so far, the Times said.

Still, private equities are "feeling a lot of pressure to put the money to work," said William Atwood, head of the Illinois State Board of Investment.

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