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Bailey McCann, Opalesque New York:

Aberdeen Asset Management has released a new paper focused on lower mid-market private equity. According to the paper, this segment of the private equity market is gaining popularity with private equity investors that are looking for multiple expansion and less crowded deals.

"We think the opportunity set for the lower middle market is immense," says Whit Matthews, Senior Investment Officer, at Aberdeen, in an interview with Opalesque on the paper's findings. "There's still only a small portion of the overall capital interested in private equity that is going to this part of the market." According to Matthews, there is approximately $500bn+ of capital overhang in private equity and some 70 percent of that sits with funds sized greater than $1 billion. Of the remaining 30 percent, only a small portion is sitting with lower mid-market funds which are typically under $1 billion in size. Lower mid-market managers, then, are freed up from some of the problems that plague bigger funds - the competition for deals isn't as crowded and there isn't a big pile of dry powder waiting to be deployed.

GPs that focus on the lower mid-market also tend to outperform. Data in the figure below shows that upper-quartile funds sized less than $1 billion have outperformed their larger peers at the top quartile by nearly 600 basis points (bps) over a 10-year period.

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