While there are some concerns about overcrowding and ability to deliver returns as capital flows in, the size of the private capital market continues to grow, a report says.
There has been a rebound in the number of private capital firms (debt, equity and other asset classes) in recent years, with 500 new organisations being created in 2016 and a further 309 getting off the ground so far in 2017, according to Preqin, the research firm.
There are 7,500 firms active in the market, employing nearly 200,000 people. The average number of employees varies with the assets under management of the firms in question, with the smallest firms employing an average of 13 members, and the largest firms employing an average of 199 people. When split by geographic location, North America has the largest average number of employees, seeing a mean of 53 members of staff, while Asia-Pacific-based firms came in second with an average of 42 employees.
As at December 2016, assets under management amounts to $4.6 trillion, while 2015 and 2016 saw the highest capital distributions on record ($858 billion and $909 billion respectively). There are 7,500 active firms currently active in the market, employing nearly 200,000 members of staff.
“The private capital industry has seen an overall trend of healthy growth, with the number of active firms in market increasing at a more rapid pace in the past couple of years. Since 2008, private capital distributions to investors have been growing as well, and in the last five years, distributed capital has outstripped annual called capital, with 2015 and 2016 seeing record amounts of capital returned to investors,” Christopher Elvin, head of private equity products at Preqin, said.
In recent years, wealth managers, including family offices, have become more interested in raising private capital exposure, seeking superior returns to those available from conventional, public markets at a time of low interest rates. However, some commentators have told Family Wealth Report there are limits to the inflow and concerns that at some stage returns will be compressed. A recent, separate report by Preqin said there are some concerns about the sheer number of private equity funds on the road.
Among other figures, the report said that firms in the Asia-Pacific region reported the highest median number of employees (18), while the US saw the highest mean average number of employees (53).