PE continues to grow as an asset class – study

Private equity assets reached $640bn, accounting for 18% of total alternative assets under management worldwide, according to Willis Towers Watson.

Direct private equity funds under management rose 6 percent to some $640 billion in 2015 as the global appetite for alternative assets continued to grow, research by advisory firm Willis Towers Watson has found.

“There’s plenty of dry powder available, but valuations are high, and [private equity] asset managers are waiting for pricing to normalise,” said Luba Nikulina, global head of manager research. “The beauty of private equity is that investors have five-plus years to figure out where and how to invest wisely,” she said.

Between 2014 and 2015 alternative assets – including hedge funds, infrastructure, real estate and others – managed by the top 100 global alternative investment firms increased by 3 percent to $3.6 trillion, Willis Towers Watson’s Global Alternatives Survey found.

Direct private equity – which excludes funds of funds – was the third largest alternative asset class by funds under management, comprising 18 percent of the total. Direct real estate funds topped the global rankings with $1.2 trillion in funds under management, or about 34 percent of the total, while direct hedge funds came in second with about $755 billion, or 21 percent.

The survey also ranks the largest alternative investment managers by funds under management, separating them out by asset class. Sydney-based Macquarie Group topped the rankings with $95 billion in direct infrastructure funds, while Blackstone Group came in second with $94.3 billion in direct private equity assets.

The survey echoes the findings of this year’s PEI 300, which crowned Blackstone as the world’s largest private equity firm, having raised nearly $60 billion over a five year period for private equity investment. Its nearest rival was KKR, which had a five-year fundraising total of $35 billion.

Looking ahead, Nikulina said that the survey could consider collecting data on the “ongoing disintermediation story with private equity” as some LPs seek to co-invest alongside GPs or even carry out deals on their own to avoid having to pay management fees.