The days of the mega private equity funds may be numbered as investors are becoming concerned at how quickly the funds are spending their money and coming back for more, according to Reuters. True, private equity has been far outperforming stocks--for the year through June, average p.e. returns were 22.5% vs. the S&P500’s 6.6%. At the same time, however, the number of p.e. exits from companies has sunk by nearly 33% from last year even as the number of buyouts--and the amount they cost--has gone through the roof. In just one year, U.S. buyout funds raised $300 billion--double that of 2005, according to Thomson Financial. What’s more, instead of taking four to five years to spend the collected cash, firms are reopening already bulging funds to attract more money for even bigger buyouts. That strategy may backfire, however, as Reuters notes that institutional investors are concerned that they’re being tapped for more money even before the funds have proved themselves. The effect already is being felt, it seems. According to Reuters, citing sources, The Blackstone Group is finding it tough going to increase its record $15.6 billion pot for its latest fund to $20 billion. “There are a lot of fears at the back of LPs [read: institutional investors] minds that private equity firms are writing checks like crazy,” Kelly DePonte of Probitas Partners told Reuters. That attitude could result in smaller buyout vehicles, as “a lot of LPs are beginning to feel tapped out,” says DePonte. “They’re thinking this may be a great time to sell companies, not a great time to buy.”
