The Private Equity Paradox

Institutional investors continue to commit billions to massive private equity funds, despite slowing deal flow and increasingly high levels of dry powder.

Five private equity firms announced in as many days that they had raised an aggregate of roughly $42.2 billion to put to work in private equity. This is despite data from groups likealternative asset manager Pantheon和data provider eFrontthat shows that smaller firms and smaller buyout deals tend to deliver better returns for investors.

“机构投资中存在固有的紧张局势，”Angeles投资顾问的首席投资官员迈克尔·罗森通过电子邮件发送给星期二。“突出的资产是必要的，以吸引和维持足够的资源，以确定卓越的投资思想。但特殊投资既缺乏缺乏和能力约束。“

Public pension fundsare some of the major institutions deploying their capital into these mega-funds, meeting minutes show. And they have options: nearly 4,000 funds are in the market, targeting fundraises of nearly $1 trillion, according toa July report from Preqin.

罗森说，“即使这是一个巨大的投资，即使是一个很大的投资，即使是一个很大的投资，即使这是一个巨大的投资。”

私人股本支柱KKR & Co。announcedTuesday that it had closed its largest-ever European fund with €5.8 billion ($6.4 billion), which it will primarily deploy in Western Europe. Investors included the明尼苏达州的投资委员会,California Public Employees’ Retirement System, andNew York City Employees’ Retirement System在其他人中，会议纪念碑。

Also on Tuesday, a new private debt firm calledArcmont Asset Management, backed by Neuberger Berman’s Dyal Capital, announced that it had launched with €13 billion in assets under management.

“People will invest in these very big funds because they’re easy to invest in,” David Lanchner, a spokesperson for private equity placement agent Triago, said by phone Tuesday. “Due diligence is easy, and you can invest a lot of money at once.”

This way, Lanchner said, investors can spend more time researching the smaller, more niche strategies. “They get beta from the big funds and outperformance or alpha from the smaller funds,” he added.

仍然，kkr和arcmont不是刚宣布他们本周在面团中耙的唯一资金。

[IIDeep Dive:私募股权损失了原来的目的吗？]

Brookfield Asset Managementsaid Mondaythat it had closed its fifth private equity fund with $9 billion to deploy, exceeding its original $7 billion target. Investors included theSouth Carolina Retirement Investment Commission和theNew Jersey State Investment Council，会议钟表。

On the same day, Altas Partnersclosedits second fund with $3 billion to deploy. Investors includedLouisiana State Employees Retirement System和a few当地县retirement systems, according to meeting minutes.

In addition, a November 1Securities and Exchange Commission filingfrom Platinum Equity Capital Partners shows that it has raised nearly $9.4 billion for its fifth fund. Investors include theKansas Public Employees Retirement System和theNew Mexico State Investment Council.

There can be attractive reasons to invest in mega-funds, according to Lanchner. He noted that they have a small number of competitors when it comes to deals. “They would argue that they’re investing on a scale that other firms can’t invest on,” Lanchner said.

And it’s not like these mega funds are just throwing money at any available deal. In fact,an August reportfrom EY showed that the number of deals completed by private equity firms in the second quarter declined by 11 percent year-over-year.

Still, Rosen believes that the main function of these mega-funds is to help huge investors deploy their capital.

“The mega-funds exist not to deliver exceptional performance, but to provide capacity for massive pools of capital seeking a home,” Rosen said. “If history is a guide, and it is, most of these mega-funds will produce mediocre returns, which will (just) satisfy their investor base, and generate massive fees for the GP. Win-win?”

A previous version of the story said that Arcmont had announced that it had raised €13 billion. This is not the case. The firm spun out of another, and now manages €13 billion.IIregrets the error.