The top 50 of this year’s PEI 300 are a diverse bunch, but one theme ties many of them together: expansion into new product lines.
Diversification into other private asset classes, expansion into new geographies and the launch of companion products used to be the purview of only the very largest managers. But in recent years this has become more widespread, with even mid-market firms getting in on the action. In fact, an IPEM survey found 46 percent of European GPs expect to launch a new fund strategy this year.
BC Partners (26), for example, expanded into private credit in 2017 and in May 2018 launched a real estate platform. While other asset classes don’t count towards its PEI 300 fundraising total, the firm still added $1.2 billion to its five-year fundraising total.
Permira Advisers (18), which is up two places, is raising its first growth equity fund, while TPG (12), no stranger to multi-strategy, just closed its first Tech Adjacencies fund on $1.5 billion (as the close was after 1 April, the total is not included in the fundraising total for this PEI 300).
The most market-moving example of expansion-through-acquisition in the last 12 months was the acquisition by Toronto-based Brookfield Asset Management (24) of 62 percent of Oaktree Capital Management. The rationale behind the transaction: to gain a strong and sizeable foothold in private credit. As Howard Marks, co-chairman of Oaktree, told Private Equity International: “[Brookfield chief executive] Bruce Flatt’s expression was he could spend 10 years trying [to build a credit arm] and maybe not end up with what we [Oaktree] have today.”
Other firms have used a mix of acquisitions and organic growth to expand their product offerings and geographic reach. For instance, HarbourVest Partners (45), which has increased its footprint across the US, Europe and Asia over the last few years, launched its credit platform last year. Switzerland-headquartered Partners Group (21) launched PG LIFE, a dedicated impact-at-scale strategy in 2018. It has steadily built its private equity, real estate and credit businesses and been raising client capital that could be deployed to long-hold assets.
The key to winning limited partner trust around strategy expansions? A demonstrable track record, Rhonda Ryan, head of European private equity and debt at advisory firm Mercer, told us earlier this year.
“If you’ve known the GP for some time there’s going to be a certain level of trust, but there still needs to be some proof of concept, such as building out the team. In some cases people might say we’ve moved up in size over recent years and will raise a fund closer to our original strategy.”