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 Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation 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

                                  Recent Developments

                                  Nov 8, 2022 - SEC Increases Scrutiny Of Record-keeping Practices
                                  • Private equity firms are facing regulatory investigations over use of banned communication channels. Apollo Global Management, KKR & Company, and Carlyle Group disclosed in early November that they face investigations over whether their employees used messaging apps such as WhatsApp to do business. Securities Exchange Commission (SEC) rules require most employee communications to be preserved. Firms whose employees talk about business over prohibited mobile apps risk violating those rules if they don’t retain or monitor those messages. In many cases, according to the SEC, the firms didn’t collect those messages because they were exchanged on employees’ personal phones.
                                  • Global private equity and venture capital deal values have decreased in recent months, slowed by soaring inflation and rising interest rates. The Federal Reserve has raised interest rates four times this year for a total of 2.25 percentage points. Many experts expect the Federal Reserve to raise rates again during its November meeting. Inflation, as measured by the US Bureau of Labor Statics' Consumer Price Index (CPI), increased 0.6% month over month in September, the same as in August, and was up from 0.3% in July.
                                  • Private equity fundraising is slowing following several years of elevated activity, according to according to management consultancy Bain & Company. Private equity raised $645 billion globally in the first half of 2022, compared to $789 billion during the first half of 2021. Buyout funds specifically saw a steep decline, raising $138 billion in the first half of 2022 vs. $284 billion over the same period in 2021. Fundraising isn't the only activity showing signs of a slowdown. Private equity managers are positioning themselves and their portfolio companies more defensively, according to Bain. Inflation is one factor, but debt financing has also increased in cost with the uptick in interest rates. The growing potential for a recession may mean that it makes more sense to hold companies for longer or wait to make new investments if a fund lifecycle allows for it.
                                  • The effects of the sell-off in tech stocks is also being felt by privately held firms, according to industry experts. Tech firms that benefited from the societal effects of the Covid-19 pandemic getting hit harder than others. Tech stocks have faced a reckoning as central banks move to tame runaway inflation. The US Federal Reserve made in mid-June its most aggressive interest rate hike since 1994. Higher interest rates make growth-oriented companies' future earnings less attractive. Tech companies, especially those backed by venture capital, tend to prioritize growth over short-term profitability. "When those companies really start getting down to answering the investor question, the path to profitability, they're not going to love what they see," said Orlando Bravo, co-founder and managing partner of Thoma Bravo, a private equity investment firm that specializes in software and technology-enabled services sectors.
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