This article will provide an overview of private equity firms, examining their historical evolution. We will also list the biggest private equity firms in the world based on total assets under management (AUM).
The history of private equity traces back to the early days of capitalism.
According to Vault, the first recorded instance occurred in 1901 when J.P. Morgan acquired Carnegie Steel Company from Andrew Carnegie and Henry Phipps for $480 million. Phipps subsequently established a private equity fund named the Bessemer Trust.
However, it was in the 1950s that leveraged buyouts (LBOs) gained prominence. Lewis B. Cullman executed the first modern LBO in 1964 by purchasing the Orkin Exterminating Company. The 1980s witnessed a surge in LBO activity, with the founding of firms like Bain Capital, The Blackstone Group, and The Carlyle Group during this period.
As the private equity industry matured, it diversified its strategies beyond traditional buyouts to encompass growth equity, distressed investing, and venture capital, catering to a spectrum of risk-return profiles and investment horizons.
As highlighted by PR Newswire, the global private equity market was valued at $445.4 billion in 2022 and is estimated to attain $1,098.74 billion by 2032, with a projected compound annual growth rate (CAGR) of 9.7%.
What does a Private Equity Firm do?
Private equity firms are a fundamental aspect of contemporary finance, holding significant sway in various industries and markets worldwide. Understanding their nature, purpose, and impact is imperative to gaining insight into the modern investment outlook.
Private equity firms function primarily as investment management entities that pool capital from investors, including high-net-worth individuals (HNWIs), pension funds, and institutional investors. With this capital, these firms acquire ownership stakes in private companies.
These firms aim to augment the value of their investments over a set period, which usually ranges from three to seven years before ultimately divesting the stakes for a profit.
Private Equity Firm Vs Private Equity Fund
Private equity firms comprise investment professionals specialising in sourcing, negotiating, and managing investments in private companies. These firms play an integral role from a financial standpoint by raising capital from institutional investors and HNWIs.
Once capital is secured, private equity firms establish private equity funds, structured as limited partnerships, to pool the collected capital. Acting as the general partners, these firms leverage their expertise to make strategic investments, often targeting specific industries, geographic regions, or stages of company development.
Private equity firms oversee the entire investment process, from due diligence to post-acquisition management, intending to enhance the value of their portfolio companies and generate attractive returns for their investors.
Private equity funds, on the other hand, represent the investment vehicles formed by private equity firms to deploy capital into promising opportunities. Investors commit capital to these funds for a defined period, during which the private equity firm actively manages and monitors investments.
Private equity funds offer investors access to diversified portfolios of privately held companies, real estate, or other assets, which may not be readily available through public markets.
The funds serve as channels through which investors gain exposure to alternative investments and potentially higher returns, albeit with greater risk and longer investment horizons than traditional asset classes.
In essence, private equity funds bridge the gap between investors seeking attractive risk-adjusted returns and promising investment opportunities in the private markets, facilitated and managed by experienced private equity firms.
Given this backdrop, let’s check the top private equity firms in the world.
Biggest Private Equity Firms in the World
The Blackstone Group Inc.
With $941 billion in total assets under management (AUM), The Blackstone Group is a leading investment firm operating across diverse energy, retail, and technology sectors. Known for its extensive portfolio, Blackstone engages in various investment strategies to maximise returns and create value for its stakeholders.
KKR & Co. Inc.
KKR & Co. manages a substantial AUM of $479 billion and specialises in multiple alternative asset classes, including private equity, energy, and real estate. Renowned for its strategic investments and operational expertise, KKR has a global presence and a track record of generating significant returns for investors across different market cycles.
EQT Partners
Headquartered in Stockholm, EQT Partners manages a total AUM of $101.66 billion and focuses on investing in companies across diverse regions and sectors. With a commitment to sustainable growth and value creation, EQT seeks opportunities to drive innovation and long-term success in the companies it invests in.
Thoma Bravo
With $74.09 billion in AUM, Thoma Bravo specialises in providing capital and strategic support to software companies. Recognised for its deep industry knowledge and operational expertise, Thoma Bravo partners with management teams to accelerate growth and enhance value in the rapidly evolving technology sector.
The Carlyle Group
Based in Washington, D.C., The Carlyle Group manages an AUM of $69.68 billion and is actively involved in private equity, alternative asset management, and financial services. With a global footprint and diversified portfolio, Carlyle focuses on identifying investment opportunities that offer significant growth and value-creation potential.
TPG Inc.
Headquartered in Fort Worth, Texas, TPG Inc. manages a total AUM of $54.96 billion and specialises in leveraged buyouts and growth capital investments. Known for its flexible approach and operational expertise, TPG partners with management teams to unlock value and drive growth in companies across various industries and geographies.
