Every now and then, private equity data provider Pitchbook produces some incredible forecasts for the future of private equity activity. This year’s 2022 outlook is one of those forecast years. Here’s a look.
Megafunds Raise $250 Billion
Perhaps the most amazing prediction out of Pitchbook is that mega-funds will raise at least $250 billion in 2022, including the three largest-ever buyout funds. Pitchbook’s thinking is as follows. In 2021, mega-funds, which are those with $5 billion or more, raise $138 billion in aggregate through the third quarter. Pitchbook sees these twelve mega-funds becoming even more mega in the coming year, and with an uptick in revenue growth and multiples leading to faster investment monetization, many funds’ distributions were simply recycled into new, larger funds. Pitchbook also notes that it thinks many limited partners are looking to consolidate into deeper relationships with larger investment managers, which suggests an incredibly favorable storyline for 2022.
What are the New Flagship Funds?
Given their massive prediction, who exactly is Pitchbook thinking of when making these predictions? Among the funds mentioned are The Carlyle Group, Apollo Global Management, and Blackstone. These funds may lead the way in 2022 mega-fundraising activity, perhaps accumulating over $80 billion for just these three firms alone.
Another Massive Prediction: The Big Five Alternative Mangers’ Assets Under Management Will Surpass $3 Trillion in 2022
Another astonishing prediction out of Pitchbook is their view on the five biggest public alternative managers. Pitchbook sees assets under management eclipsing $3 trillion in 2022. The five big managers are Blackstone, KKR, Apollo, Carlyle, and Ares. They managed a total of $2.25 trillion through November 2021. Pitchbook does mention a few events that are required for the $3 trillion to materialize. First, continuation funds, which offer limited partners liquidity earlier in the fund’s lifecycle but keep the assets at the fund provider, is one potential path to the $3 trillion. Another road to the $3 trillion is through insurance companies and the mass affluent.
A Relatively Cautious Projection: Seeding Firms Close at Least Six Funds to Back Emerging Managers
Not all of Pitchbook’s projections are as grandeur as the prior two. A third prediction out of the data providing firm is that seeding firms will close at least six funds to back emerging managers. Pitchbook’s rationale is that the practice of seeding, which was first pioneered in the hedge fund world, has expanded, and become prevalent in the closed-end private capital sphere as an avenue for managers to raise capital from their first institutional funds to secure the immensely important first-close capital. In exchange for the seeding, the limited partner is rewarded with something around 20 percent at the general partner fund level. If things turn out successful, it’s an exceptionally good deal for the investor.
Summing Up
Overall, coming off the heals of a massive 2021, Pitchbook sees even more umph to private equity’s sails than anything we’ve seen before. If Pitchbook ends up being correct, 2022 may be looked back on as the greatest year ever for private equity investing. In around 365 days, we’ll take a look back and see how they did.
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