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Alternative Market Briefing

The number of private capital industry active firms reached 10,500 as of December 2019

Wednesday, March 25, 2020

Laxman Pai, Opalesque Asia:

The private capital industry continues on its upward trajectory, but evidence of capital consolidation is apparent, revealed a study by Preqin. It has grown significantly over the past 10 years.

Driving this growth, more and more investors have flocked to alternatives in search of greater yield and diversification.

According to Preqin, the number of active firms in the industry has grown to cater to this demand. Between 2014 and 2019, the number of active firms in the private capital industry grew by 40% to more than 10,500, said Preqin.

In 2018, Preqin predicted that the private capital industry would reach $9.3tn in AUM by 2023. "As of June 2019, the industry had reached $6.71tn, meaning we are on track to achieve and possibly even exceed this prediction," said the report.

Although the industry continues to grow, fundraising has leveled out somewhat in the past few years.

In 2019, just under $1tn of capital was raised, compared to 2018's record high of $1.02tn, it said.

The number of funds closed also dropped, from 2,681 to 2,040 respectively. This reflects the growing competition for capital.

Since 2017, the industry has seen increased levels of capital consolidation, with fewer funds raising more capital as they attempt to grow their asset base in order to compete for deals.

Heavy competition for deals is pushing private capital firms to build for scale, allowing companies to expand assets while reducing costs.......................

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