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Biggest Private Equity Participants Increase Their Market Clout

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The 100 largest private equity fund managers and investors are playing an increasingly prominent role in the industry, alternatives data provider Preqin reported this week.

The biggest managers can raise ever-larger funds quickly, offer investors a wide range of structures and vehicles, set competitive fees and outbid their smaller counterparts.

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Large institutional investors can influence fee rates, demand access to direct and co-investments and spur the growth of fund managers.

A recent Preqin report showed that the private equity industry’s total assets under management grew by 4.2% from the end of December 2015 — for the eighth consecutive year — to a new record of $2.5 trillion as of June 2016, more than double the size of the industry at the end of 2006.

Many industry participants expect growth to remain on an upward trajectory over the next 10 years, thanks to strong demand — a median $7 trillion, implying an annual growth rate of 5.8%, SEI Investor Management Services reported in November.

Top 100 Managers and Investors

Preqin’s top 100 report showed that the biggest private equity managers had raised $1.5 trillion from investors over the past 10 years and were holding $494 billion in dry powder.

The 10 largest private equity funds that closed in 2016 accounted for 26% of overall fundraising, up from 19% in 2014.

And the proportion of capital represented by the 20 largest funds grew from 30% to 38% over the same period, while the 100 largest funds accounted for 64% of capital raised in 2014 and 67% in 2016.

The report found that eight of the 10 most sizable private equity firms are based in the U.S., and 64 of the 100 biggest fund managers are located in North America. Europe accounts for 24 of the largest firms worldwide, while 11 are headquartered in greater China and one in South Korea.

The top 100 private equity investors have allocated an aggregate $791 billion to the industry, according to the report. They invest 12.1% of total assets on average to private equity, and are targeting an overall allocation of 12.5% to the asset class.

Three of the 10 biggest investors are based in Canada, and two in the U.S. Two-thirds of the 100 largest ones are located in North America, with an aggregate allocation of $523 billion to the private equity market.

Public pension funds comprise 43 of the 100 largest investors, while asset managers and insurance companies each represent 13 of the top 100. Although only seven sovereign wealth funds made the rankings, two were in the top three: Abu Dhabi Investment Authority and GIC (of Singapore).

— Check out 7 Challenges Private Markets Face in 2017 on ThinkAdvisor.


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