As a torrent of money pours into the private equity market, some institutional investors are wondering whether it is time to tighten their purse strings, an analyst said Tuesday.

Jesse E. Reyes, a private equity analyst, said he has been advising institutional investors to slow their investment in private equity groups for a couple of years. But only over the last four months has he heard large investors raising similar concerns, he said.

"The equity markets are so high that institutional investors don't have to work too hard to raise the capital to invest," Mr. Reyes told the 1998 Private Equity Markets Summit in New York. "I think the buyout community is raising a war chest. They already have $30 billion to $40 billion that's uninvested."

The private equity market raised $52 billion last year, a 44% increase from the $36 billion it raised in 1996. And in the first quarter alone, the market has raised $19 billion, as much as the private equity community raised in all of 1995.

Most of that went to finance leveraged buyout shops, which took in $33.6 billion last year. But venture capitalists topped $10 billion in investments for the first time in 1997.

These figures do not include the private equity investments made by domestic and foreign bank affiliates and direct investments made by corporations, endowment funds, and individual investors, according to Lawrence G. Graev, a partner at O'Sullivan, Graev & Karabell LLP, the New York law firm that sponsored the two-day conference, which continues today.

Uninvested capital in the buyout community has ranged from 30% to 60% since 1985, according to Mr. Reyes, director of Venture Economics, a subsidiary of Securities Data Co. As recently as 1995, 55% of the capital was uninvested, but since then the buyout shops have started whittling that down, he said.

Mr. Reyes said the tendency of venture capitalists to invest a greater or lesser percentage of their capital was often countercyclical to that of buyout shops, until 1995, when both groups began pursuing more aggressive investment strategies.

The pace of distributions has picked up in recent years. In 1995, for the first time, private equity funds distributed more to limited partners than they took in. "It took the private equity market 15 years to break even," Mr. Reyes said.

Mr. Graev told those at the conference that there is less leverage going into private equity deals than in the 1980s, a time when highly leveraged buyouts were the rage.

"Deals were often leveraged 20-to-1 in the '80s because many of these companies weren't capitalized enough to make the types of investments they wanted to make," Mr. Graev said. "That also means that companies are having to pay the higher stock prices today."

Another speaker said the range of investments that buyout shops are making has moved beyond the traditional buyouts and restructurings that made the industry famous in the 1980s.

Today, the shops are just as likely to invest in start-ups or foreign companies, blurring the lines between private equity segments, said Hamilton E. James, chairman of banking at Donaldson, Lufkin & Jenrette Inc.

He said the proliferation of private equity groups investing in a range of businesses means they should hire more specialists to handle the new complexities. "Private equity groups didn't used to have these pressures. That's why they could use so much leverage."

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