The Future of Private Equity
KKR’s Americas XII fund attracted a record $13.9 billion in commitments in 2017, reflecting a generation’s growth in private equity—a long way from its first fund, in 1978, which raised $30 million.
In 2017, private equity (PE) broke all previous records, raising $435 billion, despite challenges to put all that money to work. We are in the midst of an environment of high valuations and fierce competition coming not only from PE funds managed by general partners (GPs) but also from corporate strategic investors and limited partners (LPs).
Preqin estimates that $970 billion in ‘dry powder’ held by PE fund managers is the most ever recorded. Many investors question whether fund managers will be able to generate the same returns they have historically delivered given competitive factors seen and yet to be seen. The saying “Too much capital chasing the same assets” has become a common phrase at industry gatherings in recent years.
The asset class has progressed even more in the past two decades, weathering several crises—from the dot-com bubble’s burst to the 2008 global financial crisis—yet valuations of private holdings have seen unprecedented appreciation.
Let’s look toward the next stages of private equity through the lens of a few maturing trends and try to forecast what’s next.