LONDON, July 31 (Reuters) - Private equity returns saw their steepest declines on record in 2008, down by over a quarter as the value of firms' investment portfolios tumbled in the wake of the credit crisis, according to a study published on Thursday.
Private equity firms took the knife to company valuations last year as falling stock markets and poor earnings outlooks forced them to pare back the value of their investments.
Private equity returns fell 27.6 percent in 2008, exceeding the decline of 9.1 percent seen in 2002 at the height of the dotcom bubble, consultancy Preqin said.
But there are signs of value returning to the sector, Preqin said.
"December 31, 2008 represented a low point for the private equity industry, but early data from March 2009 already confirms that the industry is already recovering," Etienne Paresys, head of performance and general partner data, said in a statement.
Leading European buyout house BC Partners [BCPRT.UL] recently wrote up its current fund by 22.4 percent for the first half of 2009, returning it to par value, a source familiar with the situation said. [ID:nLR165894]
Private equity firms are sitting on over $1 trillion of "dry powder" -- capital committed but as yet unspent -- waiting to be invested when conditions improve, said Preqin. (reporting by William James and Simon Meads; editing by David Cowell)
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