Private equity firms had a record $2.49 trillion in assets as of Dec. 31, and 319 new firms launched in 2016, according to a new report by Boston Consulting Group, “Capitalizing on the New Golden Age in Private Equity.”
This is up 4% from $2.4 trillion in total worldwide assets under management at the end of 2015 and 264 new firms launched in 2015, the report noted, citing Preqin data. The private equity industry has close to $900 billion in dry powder, the report stated. This is up from $839 billion as of Sept. 30, according to Preqin.
But there are forces that could end the “golden age in private equity,” including intensifying competition and investors’ continued culling of manager relationships as they commit larger amounts of capital with fewer numbers of managers, the report said.
Management fees overall are down 20 basis points on average and for some funds carried interest is down to 10% from 20%.
A number of private equity firms, mainly the mega managers, are becoming “one-stop yield shops,” managing multiple funds across different investment strategies with lower percentages of capital in buyout strategies, the report said. For example, Blackstone Group has 28% of its assets in buyouts with the remainder in real assets, credit and hedge funds. Apollo Global Management has the bulk of its assets, 72%, in credit, with 22% in private equity and 6% in real assets as of November 2016.
The report is available on Boston Consulting Group’s website.