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 $343 billion across 405 funds during 2022, according to PitchBook. Estimated deal value for US PE firms totaled $1 trillion.
                                  Industry Forecast
                                  Private Equity Fund Managers Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Mar 13, 2023 - Lending Decreases
                                  • Private equity firms that make loans for risky leveraged buyouts are doing less business just as higher interest rates have made that practice more lucrative, according to Reuters news service. Buyout firms with direct lending businesses, such as Blue Owl Capital, Blackstone, and Apollo Global Management disbursed a total of $151.3 billion in 2022 for so-called middle-market deals -- midsized acquisitions by private equity firms, according to financial data provider Refinitiv. That was 23% less than the $195.7 billion lent out in 2021, but still 41% higher than in 2020. The amount of loans disbursed by direct lenders so far in 2023 has not increased, the Refinitiv data shows. Seven private credit executives interviewed by Reuters attributed the drop to fewer companies contacting direct-lending private equity firms, with the financing turning more expensive, and the lenders becoming more-risk averse amid concerns about a potential economic slowdown.
                                  • The US Treasury and the Federal Reserve announced measures on March 12 to contain the financial damage from the March 10 closure of Silicon Valley Bank (SVB), which was used by some private equity industry firms to “custody” their fund assets. Data compiled by Castle Hall Diligence and based on public annual SEC filings shows that 1,074 private equity and venture capital firms had at least some portion of assets from a collective 5,994 funds at SVB by year-end in 2021. All deposit accounts at SVB will be guaranteed, according to a joint statement released by the Federal Reserve, the Department of the Treasury, and Federal Deposit Insurance Corporation (FDIC). US Treasury Secretary Janet Yellen said that the actions taken will protect “all depositors,” signaling aid to those whose accounts exceed the typical $250,000 threshold for FDIC insurance. Venture capital firms, which are a subset of the private equity industry, are legally required to “custody” their fund assets at a financial institution. They use “custodians,” which are banks like SVB, that will monitor and safekeep the capital and ensure it is not stolen or lost. Firms are required to report which banks they use to store assets from each fund only once a year, so the analysis was based on the latest available data — meaning that the data may not be an entirely accurate representation of each firm’s holdings with SVB at the time of its collapse.
                                  • Private equity (PE) funding continues to flow into healthcare, according to market data firm PitchBook. PE firms announced or closed an estimated 863 deals in 2022, making last year the second-highest on record for activity in the sector, after 2021. PitchBook has been tracking the data since 2017. Deal activity is expected to slow in the first half of 2023 amid staffing-related margin pressures, liquidity constraints, and a difficult PE fundraising market. There could be a rebound in the second half of the year, however if macroeconomic conditions stabilize, PitchBook researchers said.
                                  • Emergency physicians and consumer advocates in multiple states want stiffer enforcement of decades-old statutes that prohibit the ownership of medical practices by corporations not owned by licensed doctors, according to the Louisiana Illuminator. Thirty-three states and the District of Columbia prohibit the so-called corporate practice of medicine. Critics say that companies have sidestepped bans on owning medical practices by buying or establishing local staffing groups that are nominally owned by doctors, but the physicians’ have no direct control. Those campaigning for stiffer enforcement of the laws say that physician-staffing firms owned by private equity investors are the most egregious offenders. Private equity-backed staffing companies manage a quarter of the nation’s emergency rooms, according to Dr. Leon Adelman, co-founder and CEO of Ivy Clinicians, a job site for emergency physicians. The two largest are Envision Healthcare, owned by investment giant KKR & Co., and TeamHealth, owned by Blackstone.
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