If you had to guess which states are most favored by private equity firms for investment purposes, you might not guess Colorado, Utah, Massachusetts, Texas and Vermont. But the data suggests that this is in fact the case.
States with a lower number of investment bankers per dollar of GDP may prove more lucrative for new firms or satellite offices.
In this study, we look at the quantity of investment bankers by state and compare that to the state population and the state GDP to arrive at the “density” of investment bankers by state.
We currently track ~11,400 private equity funds in our Research Database at www.PrivateEquityInfo.com.
The minimum investment required from Limited Partners to invest in the various PE funds scales with fund size and typically ranges from $100,000 to $10 million.
Except for the largest 5% of funds (those with more than $1 billion in AuM), the median minimum investment for Limited Partners is about 1% of the total AuM. The largest funds have a minimum investment of about 0.4% of AuM.
We currently track ~11,400 private equity funds in our Research Database at www.PrivateEquityInfo.com. Collectively, these private equity funds hold $1.9 trillion in Assets under Management (AuM).
For the funds we track…
Assets under Management is the value of the fund’s remaining cash plus all assets. It is NOT net of debt.
Access to our PE funds data is available with the Pro-level subscription option.
We currently track ~11,400 private equity funds in our Research Database at www.PrivateEquityInfo.com.
Although 412 funds have AuM greater than $1 billion, most funds center around the $50 – $250 million range. The histogram below shows the number of private equity funds for each range of Assets under Management (AuM).
Using our M&A research database at www.PrivateEquityInfo.com, I studied private equity investments and exits for the years 2015, 2016 and 2017.
The ratio of the number of PE (Investments / Exits) over time, sliced by deal size shows a significant industry trend – private equity firms moving down market to focus on smaller deals.
When the ratio of (Investments / Exits) = 1, private equity firms (in aggregate) are making one investment for every exit. This would be the “no growth” scenario. When the ratio is above 1.0, the private equity industry is a net acquirer of portfolio companies. This is the “growth” scenario.
For PE firms focused on Mid-, Large- and Mega-sized deals in 2015 – 2017, the (Investments / Exits) ratio was consistently about 2-to-1. Overall, private equity firms in these segments have been net acquirers of businesses over the past three years at the pace of roughly two portfolio company investments for each exit. This is no surprise as most people intuitively know private equity firms have become more prominent in recent years.
Small $0 – 50 million Mid $50 – 250 million Large $250 – 500 million Mega $500+ million
The same ratio for the PE firms focused on Small deals clearly illustrates that private equity has made a huge push into the lower middle market over the last two years. In the Smaller deal segment of the market, PE firms collectively made about 3-to-1 investments over exits in 2016 and 2017, compared to 2.3-to-1 in 2015.
The chart below is the exact same data, but with the bars re-arranged to group the years together.
A year ago, I created a portfolio of 655 publicly-traded stocks based on private equity ownership in each company. I called it the “PE-basket”.
When I checked the performance of this PE-basket at the 6-month mark, it was lagging the performance of the general market. However, now that a full year has passed, the PE-basket has in fact out-performed the broad market as well as the other benchmarks I selected.
A study of our private equity fund data shows the bulk of the $1.8 trillion in private equity assets are concentrated within a small number of PE firms.
Although the mega funds control a disproportionate percentage of the total AuM, there is a long tail to the distribution of assets on the lower end of the market.
So while the top 50% of funds control 96% of all private equity assets, the remaining 4% of assets is still $75 billion dollars. This is a sizable amount of capital deployed to mid-market companies by 3,200 funds.
Consequently, if your firm offers sell-side advisory services, and you think your client’s company might be too small to attract the attention of the private equity universe because they have traditionally looked at much larger deals, this may no longer be the case.
In a previous blog, I showed the distribution of private equity funds by the amount of capital raised. This study shows the distribution of private equity funds by assets under management (AuM).
The 6,472 private equity buyout funds included in this study account for a staggering $1.8 trillion.
The distribution of fund AuM tends to center around $100 – $250 million, with a median fund size of $65 million.
I previously discussed the trend in median holding periods for private equity-owned portfolio companies. However, there is a significant standard deviation in the data.
The histogram below shows the distribution of holding periods for portfolio company exits in 2017 YTD.
While the data looks much like a normal distribution for holdings periods 0 – 8 years, there’s an unusual bump up in years 8 – 10. Read my previous explanation about this effect related to the recession of 2008 – 2010.
Also, a large portion of the longest held investments (12+ years), were European private equity firms holding European portfolio companies. Cultural difference.
Industry Trends Report
