People like lists, and yet private equity, for several reasons, has been particularly resistant to list-building.
First of all, it's hard to compile information in a non-transparent industry. A second impediment has to do with the many stations at which capital stops on its way from investor to GP to portfolio company and back. In determining the “size” of a private equity firm, for example, at what stage in this journey do you measure the capital? Finally, there isn't a universal definition of “private equity”. Do you include real estate? Infrastructure? Debt funds?
Pardon us if we seem to be a bit oppressed by these complexities – we've recently spent a great deal of time on them in building the PEI 50. The May issue of Private Equity International includes the debut of our proprietary ranking system, which we hope to see become a new standard for sizing up the global private equity industry. We think the list will be helpful in bringing more transparency to the market, in measuring how it has grown in relation to the rest of the finance world, and in measuring how the various constituent firms are growing in relation to each other.
The PEI 50 uses an elegant standard for measuring size, that being capital raised for direct private equity investment over the past five years. Actually collecting, vetting and organising this data, however, is a rather inelegant process. We received great help from some firms and no help from others. Basic information, such as the year of a final close for one of the biggest buyout funds in the world, took weeks to track down. Building the PEI 50 was like herding cats, except that some of the cats were actually lynxes, some had five legs, two were Siamese twins and several were invisible.
That said, we believe we have created a ranking that incorporates the most accurate and up-to-date information available. One statistic to emerge from the PEI 50 project should not be surprising – the 50 biggest private equity firms in the world have raised almost 70 percent of global private equity capital over the past five years. The law of maturing industries dictates that this dominance will only grow.
Enjoy the issue,