Private-equity funds raised a record $401 billion during 2006, as 612 new funds were launched in that span, according to Private Equity Intelligence. This amount exceeded the previous record of $311 billion, set the previous year. 

LPs satisfaction has also reached unprecedented levels: 

• 97% of investors are pleased with their private equity returns over the last year
• 56% of LPs are very pleased, with this category more than tripling in the last two years

As a result, investors intend to continue pouring money into the asset class: 

• 49% of LPs are planning increased allocations to private equity over the next 12 months, 
• 57% plan increased allocations for alternative assets generally over the next 12 months.

In today's borderless world, investors see an LP's location as relatively unimportant to its chances of achieving top-notch returns. Far more critical are the following characteristics (in order of importance):

• The length of time an LP has been investing
• The stability and incentivisation of its investment team
• A proactive approach to building and managing GP relationships
• Critical mass in the investment programme expressed either in investment team size or in number/aggregate value of fund commitments.

The Barometer contains two signs that the private equity boom may be approaching a plateau:

• A significant proportion of LPs believe the exit environment for European and North American buyouts (two of the biggest drivers of returns in recent years) will deteriorate over the next year or two - 43% and 44% of LPs hold this view for the two markets respectively.
• Although on balance distributions are expected to remain strong, there is no longer a majority of LPs expecting distributions to improve - as there was in the Winter Barometer last year and the year before.

PE funds announced $737 billion in buyouts globally in 2006, accounting for 18% of all mergers and acquisitions. More than half, 56%, of those deals were in the U.S. market, according to Dealogic. 

Related commentary:

• Private Equity Expects Record Returns, Warns On Buyouts-Study - Dow Jones Newswire
• Investors' expectations are rising for private equity - Market Watch