Despite market turbulence and a harsh fundraising environment, private equity’s biggest fundraisers have hoovered up a record amount of capital for the asset class. Over the past five years, the top 300 private equity fundraisers gathered $3.13 trillion between them, up around $530 billion on last year’s total.
What’s more, Blackstone has earned back its top spot in the ranking, pipping last year’s winner KKR to the post. It’s a position that Blackstone has held for six years over the past decade.
When asked what’s driving investor interest in Blackstone’s PE products, Joseph Baratta, global head of private equity, tells Private Equity International the firm “act[s] with a healthy measure of risk management”. This means it is not investing its capital over a compressed period of time or overconcentrating in one narrow sector vertical.
“[Blackstone adheres] very strictly to what we told [LPs] we were going to do in our flagship buyout [fund]. It’s a control strategy [with] larger, higher quality companies, and we do exactly that.”
Baratta also highlights the launch of the firm’s growth equity platform, which closed its debut fund on its hard-cap of $4.5 billion in 2021, and its life sciences platform, whose inaugural fund reached its $4.6 billion hard-cap in 2020. Baratta also highlights the firm’s core platform, which allows Blackstone to hold companies for 15 to 20 years. The firm’s second core fund, which is more than 70 percent larger than its predecessor, closed on $8 billion in 2020, according to a statement.
All the while, Blackstone has been upping its private equity flagship. Blackstone Capital Partners VIII closed on $26 billion in 2019, above its $25 billion target, with the vehicle around 45 percent larger than its predecessor. The firm is in the market with Blackstone Capital Partners IX, with the firm targeting “a vehicle of substantially similar size as the prior fund”, president and COO Jonathan Gray said on the firm’s first quarter earnings call in April.
More capital required
The PEI 300 measures the amount of private equity capital raised over the five years to 31 March 2023. This year, firms needed to have raised a minimum $2.08 billion in that time to secure a spot in the ranking. Blackstone’s peers among the upper echelons of the ranking are raising increasingly vast sums of money: this year’s list marks the first time that three firms – Blackstone, KKR and EQT – have exceeded the $100 billion mark. Only last year, KKR was the first firm to break the same barrier.
In general, LPs are consolidating relationships, Baratta says. “It’s not necessarily just with the large multi-product managers like Blackstone. We are certainly, we believe, taking market share among the largest few hundred LPs in the world who allocate substantially to alternatives, but I think the general trend is towards consolidating relationships to fewer, higher quality, more reliable, more predictable managers.”
This year’s numbers, which take into account years where oversubscribed and one-and-done fundraisings were still a regular feature of the market, reflect the lofty highs and quick successions of past raises. Until the recent lull in fundraising, GPs were investing their funds quicker than they had done historically. “Returns were great, and LPs were allocating increasingly more capital to private equity strategies,” Baratta says.
Today, there’s less capital available and “heightened concern, rightly, among LPs on how the capital that was put in the ground over the last three or four years is going to perform”.
However, Baratta adds, there currently isn’t enough capital to satiate Blackstone’s ambitions. “I’m amused when I read there’s this enormous amount of dry powder and too much money chasing too few deals. We’re not experiencing that. We’re experiencing the need to go out and partner with people to allow us to transact in the way that we want.” In the next five years, he expects the firm to manage even larger funds for its core strategy of buying controlling stakes in companies.
“Since 2007, the global market cap is up four-plus times. But the largest PE managers are still investing out of circa $20 billion funds… So actually, we’re not over capitalised. If anything, we’re undercapitalised for our strategy.”
Methodology
How the ranking is determined
The 2023 PEI 300 ranking is based on the amount of private equity direct investment capital raised from third-party investors by firms for funds closed between 1 January 2018 and 31 March 2023, as well as capital raised for funds in market at the end of the counting period.
Definitions
Private equity
For purposes of the PEI 300, the definition of private equity is capital raised for a dedicated programme of investing directly into businesses. This includes equity capital for diversified private equity, buyouts, growth equity, venture capital and turnaround or control-orientated distressed investment capital.
Capital raised
This means capital definitively committed to a private equity direct investment programme. In the case of a fundraising, it means the fund has had a final or official interim close after 1 January, 2018. We count the full amount of a fund if it has a close after this date, and we count the full amount of an interim close that has occurred recently, even if no official announcement has been made. We also count capital raised through co-investment vehicles and other separate accounts that either invest alongside their main fund or are stand-alone, as long as these are not deal-by-deal fundraises.
What does NOT count as private equity?
Funds of funds, as well as funds that follow a secondaries, real estate, infrastructure, hedge fund, debt or mezzanine strategy, and PIPEs.
The PEI 300 is not a performance ranking, nor does it constitute investment recommendations.
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