The post-Lehman winners

This year’s PEI 300 paints the clearest picture yet of the fundraising market since the financial crisis, with overall totals down as the 2008 funds drop out.

This autumn, it will be six years since the collapse of Lehman Brothers. In the next few years, as the economic downturn took hold and many LPs found themselves in straitened circumstances, raising fresh capital was a huge challenge for every GP in the market.

That’s why those groups who have made it into this year's PEI 300 have reason to feel proud of themselves – because this year, for the first time, we're only including funds raised in the post-Lehman world.

Compiled by our in-house Research & Analytics team, the PEI 300 ranks the world’s leading private equity managers by size according to a very simple metric: the amount of capital they’ve raised for direct private equity investment in the preceding five years (this being a proxy for an average fund cycle). And this year, therefore, we’re only counting capital collected since the start of 2009. In other words: the firms in this year’s list have successfully weathered the economic storm and convinced investors they were still a good bet.

Inevitably, the five-year fundraising total for the GPs on this year's list is quite a lot lower than the equivalent figure last year (when 2008 funds were still included). Between them, the firms in this year’s PEI 300 have raised $1,026.8 billion since the start of 2009. That’s more than 10 percent below last year's five-year total of $1,134.8 billion. And it’s more than 20 percent below the 2012 figure of $1,311.5 billion (which included 2007 and 2008 funds).

Since GPs raised almost $540 billion in 2008, but less than half as much in each of the next two years, that’s hardly surprising. It also explains why some of the big firms who were raising huge sums in 2008 – including TPG, Warburg Pincus, Bain Capital and Goldman Sachs – have slid down this year’s ranking.

Indeed, this year’s PEI 300 provides further evidence that even the biggest GPs have suffered as a result of the downturn. For the first time since we started doing this ranking, the biggest 50 firms have raised less in the last five years than the next 250 biggest firms ($513 billion versus $514.9 billion). In other words, the mega-firms are now accounting for a smaller share of committed capital, relatively speaking.

This is partly due to lots of LPs choosing to shun the mega-cap space in favour of the mid-market in the few years after the crisis hit. However, the success of recent large fundraises (The Carlyle Group, Warburg Pincus, CVC Capital Partners, Silver Lake and Apollo have all raised $10 billion plus funds recently) proves that the mega funds are very much back in demand.

Indeed, it’s worth remembering that the PEI 300 takes a long-term view of capital flows. Although less capital has been raised across the last five years, fundraising conditions clearly eased substantially last year: GPs amassed over $420 billion in 2013, making it the best post-crisis year by some distance. And many observers are expecting a similarly strong year in 2014. So it seems likely that overall totals will be up again next year (when we’ll be stripping out the annus horribilis that was 2009).

One last thing: perhaps the most important point, at least as far as LPs are concerned, is that the PEI 300 groups are still delivering above-market returns. According to figures from Cambridge Associates, these 300 GPs generated median net IRRs of 17.5 percent in both 2013 and 2012, when the market averages were just 13.7 percent and 13.6 percent respectively. There’s a reason why these firms are the best fundraisers in the business.