Private equity firms have big plans for 2020.
About three-quarters of managers raising a private equity fund in the coming year expect it to be larger than the prior money pool, according to an EY survey released Wednesday. That’s the highest share since 2013, when EY first started posing the question to firms. Almost 60% of managers plan to raise a fund in the coming year, the survey found.
The managers are capitalizing on private equity’s hot streak -- 25% of investors’ alternative allocations went to the asset class last year, compared with 18% in 2018. Investors are pouring money into buyout shops including Blackstone Group Inc. and Carlyle Group Inc. as they seek higher returns after years of low interest rates and lackluster hedge fund performance. And as valuations soar and competition for deals grows, firms are armed with a record level of unspent cash.
Private equity firms are also becoming one-stop shops, launching more non-traditional offerings such as private debt, real asset and real estate funds as a way to expand product lines and create more options for investors.
Other highlights from the report:
- Investors are focusing on diversity. About 81% said they will seek out firms that have gender and ethnic diversity in their leadership
- Among the mid-sized and large firms, fewer than 10% report that they have more than 30% of their investment professional roles filled by women. Firms have been more successful improving gender diversity in the back office
- EY surveyed CFOs, COOs and heads of finance from 100 private equity firms and 62 institutional investors representing about $1.8 trillion in assets under management
