Private Equity Fund Managers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 24,100 portfolio management firms in the US includes private equity (PE) fund managers who invest in the stock of companies that are not publicly traded. PE funds typically take a significant stake in portfolio companies that allow them to influence or control management and governance.

High Risk, High Reward

As a long-term investment, private equity funds offer higher risk and higher reward compared to more traditional asset classes.

Dependence on Debt

Private equity firms are heavily dependent on debt to finance acquisitions.

Industry size & Structure

The US private equity fund management industry is part of the portfolio management industry. The average portfolio management company employs 9 workers and generates about $11 million annually.

    • The US portfolio management industry consists of about 24,100 firms that employ about 220,200 workers and generate $267 billion annually.
    • In 2020, the global private equity industry held about $4.7 trillion in assets under management and $1.6 trillion in “dry powder,” or cash reserves, according to Preqin.
    • The global private equity industry is concentrated; about 45% of the aggregate capital raised in 2019 was secured by the 20 largest funds, according to Preqin.
    • The North American PE market is the largest in the world and accounts for just under half of global deal value, according to Bain. Other important PE markets include Europe and China.
    • Large firms with private equity operations include the Carlyle Group, Blackstone Group, KKR, Apollo Global, and TPG. Large firms are often diversified, manage different types of assets, and typically have operations throughout the world.
    • US PE firms closed on $203 billion across 231 funds during 2020, according to PitchBook. Estimated deal value for US PE firms totaled $708 billion.
                                  Industry Forecast
                                  Private Equity Fund Managers Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Coronavirus Update

                                  Apr 27, 2022 - Pension Fund Managers may Allocate Less To PE Sector
                                  • Pension funds deployed record capital to private equity managers in 2021 but the frenetic pace isn’t likely to continue, according to some experts. “Investors are not expecting 2022 to yield the same returns as 2021, as investment staffs cautioned trustees in year-end reports that the double-digit figures that easily surpassed benchmarks were not sustainable,” said Mazen Jabban, chairman and CEO at Vidrio Financial. Jabban expects allocators to focus on a more equal mix of public and private investments.
                                  • Global private equity buyouts reached a value of more than $960 billion in 2021 among 2,026 deals, according to December 2021 data from research firm Dealogic. The first half of 2021 alone saw $487 billion in PE buyouts, marking the biggest half-year for buyout activity since 2005. The factors that drove such high levels of deal activity in 2021 will still be in place in 2022, according to Law360. Low interest rates should continue to drive deals, especially in segments like technology and healthcare that were boosted by the pandemic.
                                  • Interest in special-purpose acquisition company (SPACs) deal increased during the pandemic. SPACs raise money through an IPO then use it to buy other companies. There were 248 SPAC IPO transactions in 2020 compared to 59 in all of 2019, according to SPAC Insider. The gross proceeds of SPAC IPOs in 2020 were $83 billion – more than six times the $13.6 billion in gross proceeds in 2019. The average SPAC IPO size was $336 million in 2020 compared to $230.5 million in 2019. The number of SPAC IPOs accelerated in 2021, mainly in the first quarter, and hit a total of 613 by the end of the year. However, according to The Wall Street Journal, start-up CEOs may be increasingly skeptical of SPAC deals after seeing peer companies experience falling share prices and investor disappointment after SPAC merger IPOs. Industry watchers suggest that start-ups are increasingly wary of SPAC deals and are more likely to rely on more traditional private financing rounds, including venture capital and private equity. While SPAC IPOs and gross proceeds raised increased in 2021, by the end of the year, the average IPO size was down to $265 million compared to $336 million in 2020.
                                  • Some PE firms turned to net-asset-value (NAV) facility lending to fund bolt-on deals, refinance debt, or prop up floundering companies in their portfolios when credit markets tightened up early in the pandemic, according to Bloomberg. PE firms use stakes in their funds as collateral for financing NAV loans. NAV loans are typically secured against the entire PE fund, so lending rates are usually below the debt taken on to finance the original acquisitions. Such loans are also attractive because they can leverage the strength of a PE firm’s best-performing companies to spread capital across the entire portfolio. Industry watchers suggest PE firms will need more cash as the global economy recovers, possibly fueling demand for more NAV lending. Some industry insiders believe that the pandemic increased the holding time for PE-backed firms in hard-hit industries, postponing exits for up to two years, according to Acuity Knowledge Partners. PE firms may tap NAV-based financing if portfolio companies need to be held for more extended periods.
                                  • Hedge fund and private equity fund insiders suggest private debt will be a fast-growing asset class as the global economy recovers. More than 80% of institutional investors have investments in private debt. Among those, more than 90% plan to maintain or increase their investments in 2022, according to a survey conducted by CoreData Research for Natixis Investment Managers in October and November of 2021.
                                  • Large private equity firms may be regaining their appetite for multi-billion-dollar deals after a lull during the pandemic-induced economic downturn, according to The Wall Street Journal. In June, three PE firms – Blackstone Group, Carlyle Group, and Hellman & Friedman – teamed up in a $34 billion buyout deal for family-held medical supply firm Medline. Deal watchers suggest PE firms’ appetite for large deals may be returning after a dry spell earlier in the pandemic when many target companies struggled or went bankrupt. Experts note the climate is ripe for big buyout deals – interest rates are low, and PE firms are flush with dry powder.
                                  • Tech trends that accelerated during the pandemic, including e-commerce and remote work, may prompt PE firms to look for middle-market software deals in 2022, according to Pitchbook. Key areas of interest include data integration and cloud software as firms seek to reduce data silos and trim the costs of having on-site data centers. Financial software firms may also be attractive targets for consolidation as more small businesses look to make finance and accounting functions more efficient through analytics and automation.
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