The largest private equity firms manage billions of dollars of capital.
2022 was a rough year for many public market investors. Major stock indexes fell sharply, with most ending the year in bear market territory. Fixed income didn’t do much better, as bonds slumped amid a serious bout of inflation. The weakness in these major asset classes has caused many investors to consider alternatives. One promising option is private equity. Over the years, some private equity firms have delivered market-beating returns while offering a more stable series of investment results to their clients. While these firms will have to adjust to the current economic uncertainty, market conditions should offer them plenty of opportunities in 2023. What follows are 10 of the biggest private equity firms in the world, all of which are fundraising all-stars.
How private equity works
Private equity firms operate in a unique part of the marketplace. Instead of owning publicly traded stocks or bonds, private equity can buy up whole companies and seek to improve and optimize their performance. This ownership factor, plus having access to assets that aren’t publicly traded, can help the industry achieve superior returns compared to public market alternatives. Institutional investors, such as pension funds, endowments and sovereign wealth funds, have rushed to deploy capital into private equity investments in recent years to take advantage of these unique traits. Which private equity firms are making the most of this opportunity? Private Equity International releases its annual PEI 300 list of the top private equity firms in the world based on money raised over the past five years, with $1.85 billion as the minimum qualifying amount. Here are the 10 private equity firms that topped the PEI 300 list for 2022.
KKR & Co. Inc. (ticker: KKR)
KKR rose to the No. 1 spot on the PEI 300 list in 2022. It did so by overtaking the prior champion, Blackstone. KKR also claimed another honor: being the only private equity firm to top the $100 billion capital raised mark. In fact, it brought in a stunning $126.5 billion over the past five years. And, as of September 2022, the company had $496 billion in assets under management, giving it a massive amount of firepower to work with to secure deals and investment opportunities for the firm’s clients. Since inception in 1976, KKR has achieved cumulative gross internal rates of return, or IRR, of more than 25% annually. The S&P 500, by contrast, has generated returns of less than half that figure over the same period.
Blackstone Inc. (BX)
Blackstone slipped from its usual spot atop the PEI 300 list in 2022. Despite that, the company remains a dominant player in the industry. As measured by assets under management, Blackstone is far ahead of even KKR, as Blackstone had an AUM of $951 billion as of the third quarter of 2022. That figure, impressively enough, jumped 30% year over year despite weakness in the broader equity and fixed-income markets. Blackstone is a great example of how private equity can continue to perform even in a shaky investment environment. The company’s size and scope give it access to a variety of unique deals. For example, in December, reports surfaced that a Blackstone fund was nearing a $200 million deal to acquire pop music superstar Justin Bieber’s music catalog. Blackstone has also delivered for its public shareholders, with BX stock rising more than 400% over the past 10 years.
EQT AB (EQBBF)
Sweden-based EQT rose from No. 6 in 2021 to the third spot in 2022, with $57 billion of capital raised. And EQT’s rise may not stop there. In October, EQT closed its $6.7 billion acquisition of Baring Private Equity Asia, which was the third-largest firm in this industry in Asia prior to being acquired. EQT’s CEO, Christian Sinding, explained the move by pointing out that Asia is expected to produce more than 40% of the world’s gross domestic product within a decade. EQT believes that picking up this leading Hong Kong-based operation will give it the global reach to take advantage of new and emerging opportunities in the Asian market. Prior to the acquisition, EQT had 77 billion euros ($83.2 billion) of assets, and that figure should top 100 billion euros once it reports combined results with its new Baring business.
CVC Capital Partners SA
Citigroup Inc. (C) launched a division dedicated to private investments decades ago. Over time, this turned into CVC Capital Partners, which became a separate Luxembourg-based business. CVC is now Europe’s largest private equity shop. It is known for its involvement with prestigious assets such as Formula One. CVC has roughly 700 employees and currently manages 89 billion euros of assets. The company intended to launch an initial public offering in 2022, but this was ultimately delayed after Russia’s invasion of Ukraine roiled European equity markets. Regardless, much speculation remains, and it seems only a matter of time until Europe’s highest-profile private equity leader makes its debut on a major stock exchange.
Thoma Bravo LLC
Thoma Bravo is an American private equity firm that specializes in the technology market. It has made a name for itself with shrewd dealmaking in the software arena. It was a pioneer in the buy-and-build strategy where it furthers a portfolio company’s operations by acquiring additional firms that can add onto its existing product offering. Thoma Bravo has raised more than $50 billion over the past five years. And it’s now putting that capital to good work in this bear market for tech stocks. In 2022 alone, Thoma Bravo acquired numerous companies worth $2.5 billion or more including Anaplan, Bottomline, Ping Identity and SailPoint. It picked up these firms at prices far below where they were valued at their 2021 peaks. It’s not all wins for Thoma Bravo, however. The firm was a significant investor in failed cryptocurrency exchange FTX, and Thoma Bravo reportedly lost $130 million on that unfortunate investment.
Carlyle Group Inc. (CG)
Carlyle Group is a private equity group hailing from Washington, D.C. As one might expect for a firm based in the nation’s capital, Carlyle has focused on industries that have ties to the government and federal agencies. These include fields such as aerospace, health care, media and government services. Through early 2022, Carlyle had been posting strong fundraising and operating metrics. However, things took a turn for the worse, and former CEO Kewsong Lee left the company in August. CG stock has lost roughly 35% of its value over the past year, as it looks for a new leader and deals with challenging market conditions. That said, for investors that want exposure to the private equity space, Carlyle’s temporary stumble could be an opportunity. CG stock is now trading for just 7.5 times forward earnings and offers a 3.9% dividend yield.
General Atlantic Service Co. LP
General Atlantic is a New York-based PE firm. It was founded in 1980 as Atlantic Philanthropies, which was the charitable foundation of billionaire Charles Feeney. Over the years, it evolved into its present form as a leading global private equity operation. General Atlantic is present in many emerging markets and has developed a particular acumen for investments in India. Today, the company has 215 portfolio companies across six sectors. Assets under management total $73 billion. In November, the company opened its latest office in Miami, Florida. This is the firm’s 16th office worldwide and continues its tradition of locating its employees in key technological hubs where there are numerous opportunities to invest in fast-moving growth companies.
Clearlake Capital Group LP
Santa Monica, California-based Clearlake Capital Group is one of the newer stars near the top of the PEI 300 list. Founded just 17 years ago, Clearlake leapt into the top 10 in 2022, rising from 22nd place the prior year to No. 8 today. The company has raised $42 billion over the past five years, and that figure continues to climb. In September, Clearlake Opportunities Partners III finished fundraising, bringing in more than $2.5 billion in commitments. This was well ahead of the $1.5 billion target that Clearlake had previously set for this fund. The ability to raise money in September, during the worst of the recent bear market downturn, speaks to the stability of Clearlake’s business model. Co-founder and Managing Partner Jose Feliciano stated that the company’s “all-weather approach” allows it to preserve capital and obtain attractive yields and equity-like upside in its investments.
Hellman & Friedman LLC
Hellman & Friedman is a San Francisco-based private equity firm that has been in business since 1984. It has made a name for itself with both leveraged buyouts and investments in growth-oriented equity investments. Cumulatively, Hellman & Friedman has invested in more than 100 different companies and raised more than $70 billion of total capital. Much of that success has been recent, with Hellman & Friedman raising $40.9 billion over the past five years. This accomplishment vaulted Hellman & Friedman from a ranking of 37 in 2021 to No. 9 on PEI 300’s 2022 list. While the firm enjoyed a tremendous rise during the recent tech bull market, the change in sentiment in Silicon Valley may prove to be an interesting challenge for Hellman & Friedman going forward.
Insight Partners LP
The 2022 top 10 private equity firms ranking rounds out with Insight Partners. It has been another big mover and shaker, rising up the list from No. 28 the prior year. The New York-based company was founded in 1995 and specializes in early stage tech investing. It has been involved in high-profile tech firms including both Shopify Inc. (SHOP) and Twitter Inc. Overall, it has invested in more than 600 different companies over the years, with more than 55 of these ultimately reaching a completed IPO. Insight has continued to have success recently. It raised a gigantic $20 billion sum for its 12th flagship fund in February 2022. A cool $40.1 billion in fundraising over the trailing five years was good enough to earn it the 10th spot on PEI’s list.
The top 10 biggest private equity firms in the world:
— KKR & Co. Inc. (KKR)
— Blackstone Inc. (BX)
— EQT AB (EQBBF)
— CVC Capital Partners SA
— Thoma Bravo LLC
— Carlyle Group Inc. (CG)
— General Atlantic Service Co. LP
— Clearlake Capital Group LP
— Hellman & Friedman LLC
— Insight Partners LP
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The Top 10 Largest Private Equity Firms in the World originally appeared on usnews.com
Update 01/13/23: This story was previously published at an earlier date and has been updated with new information.
