McKinsey & Company released its annual review of private markets: The Rise and Rise of Private Equity. What I found most interesting, as it relates to private equity, is that a disproportionate amount of the funds raised are in the so called “mega fund” category. This category excluded, private equity fundraising efforts would have otherwise been down for the year.
I have included a few excerpts from the report (emphasis added):
“Private asset managers raised a record sum of nearly $750 billion globally, extending a cycle that began eight years ago.”
“Within this tide of capital, one trend stands out: the surge of megafunds (of more than $5 billion), especially in the United States, and particularly in buyouts.”
“Median PE EBITDA multiples in 2017 exceeded 10 times, a decade high and up from 9.2 times in 2016.”
“It was a record year for fundraising, but growth was overwhelmingly concentrated in just one region, sub-asset class, and fund size: US buyout megafunds. Indeed, if growth in these funds had been flat versus 2016, overall fundraising would have fallen by 4 percent. Megafunds now account for 15 percent of total fund raising, up from 7 percent in 2016, having exceeded their previous peak of 14 percent in 2007.”
I highly recommend this report to any private equity practitioner. Please see the link below.