So much for the reports of a struggling private equity market…
At a time when private equity mega-deals are under pressure, it is important to put it into perspective and understand just how dominant a player the private equity industry has become.
As recently reported in Fortune, Blackstone recently passed $1 Trillion in AUM. It is no longer just large pension and endowment funds investing in the space. More and more, private equity funds like Blackstone are tapping into the high net worth individual space.
Per the article: “In recent years Blackstone has been pushing to attract high net worth individuals. While PE firms have historically invested cash on behalf of large pensions and endowments, individual (and rich) investors have played a big role in asset growth. As of the firm’s latest earnings, about a quarter of their total AUM ($240 billion) now comes from individual investors, via their private wealth business.”
One of the strongest arguments for private equity as a funding source for companies is its ability to be patient and align itself with management’s growth plans. The ability to invest over longer time horizons are what makes pensions, endowments, and now wealthy families so attractive to private equity funds.
Publicly-traded companies are held hostage to the whims of the stock market’s ups and downs. Private equity backed companies have interests that are more closely aligned with their investors and have the ability to ride out the short term ups and downs of the market.
It is this alignment that will always make private equity an attractive source of funding for growing companies. While the recent interest rate spike has put mega-deals on the back burner, this is most likely a short term development.
As the first private equity fund hits $1 Trillion in AUM, it is a good time to put the recent challenges in perspective.
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