The Global Overhang (According to Goldilocks): Too Much, Too Little, or Just Right?
Following the global financial crisis, we were the first to measure the capital overhang in the US private equity industry and have continued to track its movements, noting that it has been primarily receding. The capital overhang represents unexpired, uncalled capital commitments and is essentially the industry’s dry powder. The size of the overhang at any given point in time is impacted by the overall fund-raising environment and the velocity at which the capital is put to work, which is dependent on transaction volume, equity contributions, and the availability of credit in certain strategies. We are now taking the measure of the global overhang and introducing a framework for assessing overhang progression, offering another perspective on the private investment industry’s immediate capital supply. Like Goldilocks, we want to know if private capital is being deployed slower than normal, faster than normal, or right on time.