The U.S. economy added 227,000 jobs in November, according to the latest jobs report from the US Bureau of Labor Statistics published on December 6. Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2 percent.
The news is positive for the US economy, which has seen the unemployment rate ticking up gradually over the past two years, from approximately 3.6% in October 2022 to this month’s figure.
So, we started to wonder what the jobs situation is like in the world of private investment funds. On Form ADV, the Securities and Exchange Commission requires advisers to submit the number of employees that an investment adviser has in total, as well as those providing investment advisory services specifically.
We collect this data here at 9AT, and the news is better for the private fund folks than it is for the larger population.
We took data from the last six years and separated it into octiles based on assets under management. As can be seen from the tables below, some trends are apparent.
First is that advisers in the upper octile are adding headcount over time across the organization. As can be seen in Figure 1 below, the average headcount for advisers in the uppermost octile was 120 in 2018 and is 139 this year, an increase of 15.8%. Indeed, the average headcount has increased every year for this cohort, with the lone exception of 2021.
They’re also managing much more money: The mid-point AUM of this cohort was $2.421trn in 2018, and is $3.957trn this year, representing a 63.4% increase.
The story is different, however, for the rest of the groups. While octiles 5, 6 and 7 are showing slight decreases, the bottom two octiles – or, quartile, rather – is showing a slight decrease, meaning that the average smaller investment manager is doing more with less. In 2018, the mid-point AUM for this cohort was $52.66bn, and was $59.45bn this year, an increase of less than $7bn or 12.9% in the last six years.
Figure 1: US Investment Advisers, Number of Employees, by Year 2018 - 2024
EMPLOYEES | ||||||||
Octile | ||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |
2018 | 9 | 6 | 8 | 10 | 14 | 22 | 43 | 120 |
2019 | 8 | 5 | 8 | 10 | 13 | 21 | 44 | 122 |
2020 | 8 | 5 | 8 | 9 | 13 | 20 | 43 | 125 |
2021 | 8 | 5 | 8 | 9 | 12 | 21 | 38 | 124 |
2022 | 8 | 5 | 7 | 9 | 12 | 20 | 39 | 129 |
2023 | 7 | 6 | 8 | 10 | 12 | 20 | 42 | 132 |
2024 | 7 | 5 | 8 | 10 | 13 | 20 | 40 | 139 |
It’s a similar, if not perfect, correlation when comparing the overall employee numbers in Figure 1 above to the investment advisory-only numbers in Figure 2 below.
Two data points immediately come to mind here. First is that again, the upper octile is the only one where headcount has been added over the past six years: 65 people versus 53, an increase of 22.6%. But in the bottom four octiles, headcount has remained the same or decreased slightly.
Figure 2: US Investment Advisers, Number of Investment Advisory Employees, by Year 2018 - 2024
EMPLOYEES- INV ADVISORY | ||||||||
Octile | ||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |
2018 | 4 | 4 | 5 | 6 | 8 | 13 | 25 | 53 |
2019 | 4 | 3 | 5 | 6 | 8 | 12 | 25 | 55 |
2020 | 4 | 3 | 5 | 5 | 8 | 11 | 25 | 57 |
2021 | 4 | 3 | 5 | 5 | 7 | 12 | 22 | 57 |
2022 | 4 | 3 | 4 | 5 | 7 | 11 | 22 | 61 |
2023 | 3 | 3 | 4 | 6 | 7 | 11 | 23 | 62 |
2024 | 4 | 3 | 4 | 6 | 8 | 11 | 22 | 65 |
What is not clear is the desire to add headcount; that is something we will never know. But we do know that running an investment advisory firm has arguably never been as onerous as it is today.
But that doesn’t seem to be stopping firms from growing.
As can be seen in Figure 3 below, the mid-point AUM in the bottom two quartiles has risen only slightly, considering that we are working with a six-year time horizon. Investment management firms in the fourth octile are 5.5 times larger at the mid-point than those in the first octile, but are employing only 50% more staff, implying that there is a certain minimum number of employees required to run an investment firm, despite its size.
Figure 3: US Investment Advisors, AUM by Octile, Mid-Point
MID POINT AUM | ||||||||
Octile | ||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |
2018 | 52,657,272 | 129,252,408 | 189,987,709 | 291,335,925 | 481,659,251 | 930,690,796 | 2,572,608,990 | 2,421,594,240,995 |
2019 | 51,411,179 | 125,051,446 | 182,258,762 | 277,735,931 | 462,101,621 | 893,680,311 | 2,412,060,129 | 2,266,886,021,407 |
2020 | 54,500,001 | 134,994,456 | 197,747,803 | 299,696,221 | 495,491,944 | 951,960,266 | 2,560,654,825 | 2,859,983,982,966 |
2021 | 56,514,738 | 140,002,170 | 206,242,997 | 311,108,327 | 515,223,903 | 988,550,760 | 2,707,264,982 | 3,336,860,736,105 |
2022 | 59,249,397 | 149,256,278 | 223,442,487 | 335,974,566 | 554,838,363 | 1,057,299,983 | 2,918,789,006 | 3,900,259,606,644 |
2023 | 56,513,872 | 141,454,760 | 211,270,179 | 321,653,578 | 527,899,918 | 1,008,189,224 | 2,775,967,509 | 3,326,711,572,493 |
2024 | 59,450,131 | 147,155,960 | 219,060,992 | 332,770,965 | 545,335,483 | 1,049,800,549 | 2,894,149,639 | 3,957,071,364,389 |
As mentioned above, launching an investment firm in this environment is challenging. Despite a handful of regulatory ‘wins’ that the private fund industry has enjoyed in 2024, the growing and evolving operational due diligence process, alongside regulatory change in the past decade, makes starting out a more costly endeavor than in years past.
But for those that do take the plunge, as can be seen, scaling their businesses while not having to add significantly more headcount is a very achievable goal.
The United States has – or, more specifically, will have, on January 20th – a new President. Republican Donald Trump returns for a second (non-consecutive) term after beating Democrat Kamala Harris in the November 5th election.
A recent article from the Wall Street Journal suggests that private equity bigwigs have spent $231m on political donations in the recent presidential election campaign, close to the record set in 2020. So, for this month, we decided to take a look at a range of data points across the private equity corner of the private funds industry during the Joe Biden administration to see how it is faring.
There is, of course, an elephant in the room – the Covid-19 pandemic. The impact of the initial wave of lockdowns on the population was significant. In the private funds industry, like many others, private equity management companies and their service providers had to quickly transition to a working from home environment, which impacted fundraising and deal making. The second half of 2020 and into 2021 was frenetic, as many firms were trying to catch-up from the lulls in activity in the first half of 2020, so it is arguable that the playing field was a little different in the early years of the current administration than in previous ones.
Still, analyzing the data is interesting – at least, to us - and we decided to start with the number of new private equity funds filed using Form D. Table 1 below shows the data, with 2022 being a remarkable outlier - more than twice as many new funds were filed when compared with 2021, indeed.
What will be interesting is to see how the final quarter of this year turns out. If October, November and December deliver numbers similar to the past couple of years, then 2024 will end up with more new funds than last year, but a much lower gross asset value. Bulls will point to the growth in the number of funds generally, bears will point to the declining GAV.
Table 1: New Private Equity Fund Filings, January 2020 – October 2024, by Year
Year | Fund Type | Number of New Funds | Gross Asset Value | Average (Mean) | Q4 |
2021 | Private Equity | 5,259 | $1,278.4 | $0.243 | 1,784 / $202.9 |
2022 | Private Equity | 11,764 | $2,565.2 | $0.218 | 1,546 / $357.8 |
2023 | Private Equity | 7,200 | $1,129.2 | $0.157 | 1,576 / $184.8 |
2024* | Private Equity | 5,911 | $325.7 | $0.055 |
*2024 data is from January 1 through October 31
But it’s not just the private equity types that have been active in this election cycle. Famed hedge fund manager Bill Ackman of Pershing Square Capital added his voice to the cacophony, frequently appearing on X to offer his views.
Table 2: New Hedge Fund Filings, January 2020 – October 2024, by Year
Year | Fund Type | Number of New Funds | Gross Asset Value ($bn) | Average (Mean) | Q4 |
2021 | Hedge Fund | 1,898 | $1,248.5 | $0.658 | 632 / $112.8 |
2022 | Hedge Fund | 3,333 | $1,040.7 | $0.312 | 493 / $86.8 |
2023 | Hedge Fund | 2,505 | $608.2 | $0.243 | 583 / $162.4 |
2024* | Hedge Fund | 2,513 | $264.5 | $0.105 |
*2024 data is from January 1 through October 31
The hedge fund space follows a roughly similar trend to their private equity cousins, albeit with subtle differences. 2024 has already delivered an increase in terms of the number of new funds filed when compared with 2023, with an entire quarter’s worth of filings still to be tallied and added.
The eagle-eyed among you will also notice a striking similarity in the average size of fund filed. For both the private equity and the hedge fund market, the trend of the size of the aggregate gross asset value continues to fall; the average size hedge fund launched in 2024 is just $105m, down from $658m in 2021, and for private equity, it is just $55m, down from $243m three years ago.
Does any of this have anything to do with the sitting President? Probably not. Interest rates have had the biggest impact on the private funds market in the past few years, primarily in terms of fundraising, but also in terms of deal activity in markets such as private equity, real estate and venture capital.
And now, they’re on the way down. In September, the US Federal Reserve cut the Federal Funds Rate by 50 basis points. On November 7th, it cut them again by 25 bps, with the range now being 4.5% to 4.75% after being 5.25% - 5.50% as recently as August. Some think they will go even lower in December. Suddenly, liquid fixed income will look much less appealing, and alternative investments will benefit from rebalancing by investors.
Added to that, we have not published returns / IRR data here. It’s obviously way too early for the private equity funds, and 9AT does not collect returns data from hedge funds.
But what we do think is interesting is if, and how, the data above will change in the next four years (and beyond). The average size can only go so low, for example. And we would expect to see an increase in the number of new funds and the overall GAV over time, given the general upwards trajectory in demand for alternative investments.
Time will tell!
The rising interest rate environment of the past three years has had a marked impact on the private funds market, as investors pulled back from alternatives and rotated into liquid fixed income products, given the higher yield, better liquidity profile, and perceived lower risk. Consequently, fundraising has been down in alternatives generally.
The fund of funds corner of the alternative investment world has, of course, suffered as well. These products have long touted diversification as a key reason to allocate to them, as they reduce single manager risk quite significantly, not to mention effectively outsourcing the manager due diligence function – a task that requires an enormous amount of human capital, and therefore cost – to an expert provider.
But another critical role they play is supporting emerging talent across the alternative investment industry, whether that be the next great equities trader in the hedge fund space, or the next discoverer of tech unicorns in venture capital circles. Smaller, emerging funds are frequently too small to receive a check from an institutional investor, and, as the saying goes, no-one ever got fired for buying IBM – so, the larger, brand name managers get the cash.
The ability to support the next generation has certainly been constrained in the past three years. As can be seen from Tables 1, 2 and 3 below, fund of fund launches have been falling. We looked at data collected by 9AT from October 1st, 2023, through September 30th this year and compared that with the same time period in 2022-2023 and 2021-2022.
In 2023-2024, 1,487 funds of funds have been registered with the SEC, with a total gross asset value of $183.4bn; in 2022-2023, 2,437 fund of funds were registered with the SEC, worth a collective $311.2bn; and in 2021-2022, 2,923 products worth a collective $559.8bn were filed.
In terms of the total GAV*, that is a reduction of close to 70% in just two years.
Table 1: Fund of funds registered with the SEC, Oct 1, 2023 – Sept 30, 2024
Category | Total GAV | Quantity |
Private Equity Fund | $104.2bn | 731 |
Hedge Fund | $45.2bn | 263 |
Other | $25.0bn | 274 |
Real Estate Fund | $6.6bn | 127 |
Venture Capital Fund | $2.0bn | 84 |
Securitized Asset Fund | $283.5m | 7 |
Liquidity Fund | $45.7m | 1 |
Total | $183.4bn | 1,487 |
Table 2: Fund of funds registered with the SEC, Oct 1, 2022 – Sept 30, 2023
Category | Total GAV | Quantity |
Private Equity Fund | $137.8bn | 995 |
Other | $108.4bn | 978 |
Hedge Fund | $48.3bn | 208 |
Real Estate Fund | $9.8bn | 119 |
Venture Capital Fund | $5.2bn | 130 |
Securitized Asset Fund | $1.7bn | 7 |
Liquidity Fund | $0.0m | 0 |
Total | $311.2bn | 2,437 |
Table 3: Fund of funds registered with the SEC, Oct 1, 2021 – Sept 30, 2022
Category | Total GAV | Quantity |
Private Equity Fund | $329.1bn | 1,616 |
Other | $130.7bn | 588 |
Hedge Fund | $64.5bn | 324 |
Venture Capital Fund | $20.3bn | 228 |
Real Estate Fund | $14.2bn | 163 |
Securitized Asset Fund | $1.1bn | 4 |
Liquidity Fund | $0.0m | 0 |
Total | $559.8bn | 2,923 |
September 18th delivered some encouraging news, however, for the alternative investment industry, and fund of funds and emerging managers in particular. The 50 basis points cut by the US Federal Reserve, the first since 2020, could be the beginnings of the spark that the fund of funds space needs to begin to grow again.
There are challenges, of course. A common complaint about fund of funds from investors is that the fees are too high, and they need to ensure that any managers in their portfolio that don’t meet the hurdle rate are compensated for by those that do.
Overcoming those objections is part and parcel of running a fund of funds offering, and they will remain regardless of the prevailing interest rate environment. But it is not only the fund of funds themselves who will be hoping for an upswing in fortunes – budding Henry Kravis’s, Ray Dalio’s, and Michael Moritz’s will also have their fingers crossed.
Summer is now over – unofficially, at least – and the private fund industry in the US is now back in full swing for what is the home stretch of the year.
So, with the mid-year slowdown behind us, for our blog post this month, we thought we’d check in on the current state of which service providers have been hired by new funds identified from Form ADV’s filed in 2024 so far. We’re also including the overall league table – so, older funds that were previously on the adviser’s Form ADV document - to see if there is anything interesting in terms of firms taking or losing share when it comes to new funds.
We’re looking at administrators, auditors, custodians and prime brokers for this one; we’re also using Gross Asset Value (GAV) of the funds as the league table position determinant. Data is used for the period up to and including 9/2/24.
Administrators
The top five fund administrators for new funds identified on Form ADVs submitted this year are well-known. But what is notable is the gap between State Street, which occupies first place with a GAV of $99.2bn, from US Bank, which holds second place with $36.9bn – almost three times the size.
The biggest mover among the firms nearer the top of the league table is US Bank. Overall, the firm ranked tenth, but is second in the table for new funds.
6,451 new funds representing a GAV of $518.6bn and 72,341 funds in total representing a GAV of $23,765.2bn were filed on Form ADVs submitted since January 1 this year that referenced their administrator.
Figure 1: Top Five Fund Administrators of New Funds Identified from 2024 Form ADV Filings (GAV)
Administrator | Funds GAV | Advisers | Private Funds | Market Share* |
State Street | $99.2bn | 31 | 94 | 19.1% |
US Bank | $36.9bn | 41 | 123 | 7.1% |
Bank of New York Mellon | $32.4bn | 23 | 63 | 6.2% |
SS&C Technologies | $30.7bn | 135 | 286 | 5.9% |
CITCO | $25.4bn | 60 | 128 | 4.9% |
Figure 2: Top Five Fund Administrators of All Funds Identified from 2024 Form ADV Filings (GAV)
Administrator | Funds GAV | Advisers | Private Funds | Market Share* |
SS&C Technologies | $3.70trn | 1,087 | 5,480 | 15.6% |
Citco | $2.95trn | 453 | 3,608 | 12.4% |
State Street | $2.70trn | 297 | 3,359 | 11.4% |
Northern Trust | $1.59trn | 224 | 1,275 | 6.7% |
Bank of New York Mellon | $1.20trn | 199 | 1,490 | 5.0% |
Auditors
No-one should be surprised by the league tables at the auditor level. Even for new funds identified on the Form ADV, the big four dominate. The only surprise here, perhaps, is the extent to which they do: in both cases, 80% of all funds are audited by one of the big four. That said, for new funds, the total penetration of the big four was 84%, down from 89% of all funds. Could this be the beginning of a trend?
4,434 new funds representing a GAV of $519.3bn and 70,972 funds in total representing a GAV of $28,434.6bn were filed on Form ADVs submitted since January 1 this year that referenced their auditor.
Figure 1: Top Five Fund Auditors of New Funds Identified from 2024 Form ADV Filings (GAV)
Auditor | Funds GAV | Advisers | Private Funds | Market Share* |
EY | $179.5bn | 153 | 413 | 34.6% |
Deloitte | $113.3bn | 108 | 356 | 21.8% |
PwC | $91.2bn | 158 | 454 | 17.6% |
KPMG | $54.0bn | 175 | 365 | 10.4% |
BDO | $10.6bn | 92 | 194 | 2.0% |
Figure 2: Top Five Fund Administrators of All Funds Identified from 2024 Form ADV Filings (GAV)
Auditor | Funds GAV | Advisers | Private Funds | Market Share* |
EY | $8.92trn | 1,446 | 12,722 | 31.4% |
PwC | $7.26trn | 1,444 | 13,646 | 25.5% |
KPMG | $4.99trn | 1494 | 9,266 | 17.5% |
Deloitte | $4.37trn | 1,056 | 9,658 | 15.4% |
Grant Thornton | $547.1bn | 365 | 1,909 | 1.9% |
Custodians
There is a similar story playing out in the custody world. Market share is not as clear here given that many advisers list multiple custodians for their funds on their Form ADV, but there are two notable differences at the new fund level, with State Street coming in third, up from eighth in the overall table, and Barclays coming in fourth place, moving up from seventh overall. Additionally, the market share of the top five providers at the new fund level is significantly lower than that of the overall picture.
5,721 new funds representing a GAV of $587.9bn and 84,589 funds in total representing a GAV of $26,528.5bn were filed on Form ADVs submitted since January 1 this year that referenced their custodian.
Figure 1: Top Five Fund Custodians of New Funds Identified from 2024 Form ADV Filings (GAV)
Custodian | Funds GAV | Advisers | Private Funds | Market Share* |
JP Morgan | $215.1bn | 508 | 1,276 | 36.6% |
Citigroup | $113.4bn | 62 | 172 | 19.3% |
State Street | $105.7bn | 34 | 121 | 18.0% |
Barclays | $98.1bn | 19 | 48 | 16.7% |
Bank of New York Mellon | $91.9bn | 175 | 411 | 15.6% |
Figure 2: Top Five Fund Custodians of All Funds Identified from 2024 Form ADV Filings (GAV)
Custodian | Funds GAV | Advisers | Private Funds | Market Share* |
JP Morgan | $11.58trn | 2,917 | 19,865 | 43.6% |
Bank of America | $8.99trn | 1,253 | 9,441 | 35.2% |
Bank of New York Mellon | $8.59trn | 1,082 | 7,051 | 32.4% |
Citigroup | $6.40trn | 650 | 4,731 | 24.1% |
Goldman Sachs | $5.68trn | 1,169 | 1,169 | 21.4% |
Prime Brokers
While specific to the hedge fund category, the prime brokers league table still sees the ‘brand names’ atop both lists. Like the custodian category, hedge funds can, and do, utilise multiple primes, so the market share does not exclude other firms. Still, as in some of the other categories, the market share of those firms atop the overall league table is generally much higher than those atop the new funds table.
1,097 new funds representing a GAV of $162.0bn and 9,904 funds in total representing a GAV of $9926.0bn were filed on Form ADVs submitted since January 1 this year that referenced their prime broker.
Figure 1: Top Five Prime Brokers of New Funds Identified from 2024 Form ADV Filings (GAV)
Prime Broker | Funds GAV | Advisers | Private Funds | Market Share |
JP Morgan | $117.0bn | 69 | 108 | 72.2% |
Barclays | $87.6bn | 15 | 16 | 54.1% |
Citi | $85.3bn | 14 | 15 | 52.7% |
Morgan Stanley | $43.7bn | 86 | 119 | 27.0% |
Goldman Sachs | $40.7bn | 86 | 98 | 25.1% |
Figure 2: Top Five Fund Prime Brokers of All Funds Identified from 2024 Form ADV Filings (GAV)
Prime Broker | Funds GAV | Advisers | Private Funds | Market Share |
JP Morgan | $6.44bn | 689 | 2,299 | 64.9% |
Goldman Sachs | $6.28bn | 946 | 2,549 | 63.3% |
Morgan Stanley | $6.07bn | 1,004 | 2,517 | 61.2% |
Barclays | $5.27bn | 189 | 625 | 53.1% |
Bank of America | $5.27bn | 473 | 1,345 | 53.1% |
That the big names continue to dominate the league tables in the four categories above should be a surprise to no-one; private fund managers tout their use of ‘brand name’ service providers as a middle and back-office differentiator, hoping that the potential investor feels more comfortable and confident investing in private funds that have an ecosystem supported by these so called ‘blue chip’ providers.
It is clear to see that the admin category is the one where the firms atop the leaderboard have the smallest market share. Regular readers of our blog might recall last month’s piece, where we offered our thoughts on the current state of that category specifically. However, what is notable about the data above is that in every category, the total share of the top providers is lower for new funds than it is overall.
Time will tell as to whether other firms end up taking more share or whether this most recent year is an aberration. And it must be emphasized that the data is only for new funds listed on Form ADVs filed so far this year; with four months still to go, much can change.
Still, we’ll be keeping a keen eye on this as we enter the home stretch of 2024 to see if this is indeed the beginnings of a trend in the private funds space.
*The data used in this article comes directly from the SEC’s Form ADV filings. 9AT does not edit or override data, even when it may appear that a mistake has been made by the filer, due to our data ethics and methodology policy.
A news story from Reuters recently suggested that buyout firm Astorg “is exploring options, including a sale, for its fund services business IQ-EQ” with a view to a sale in 2025.
Whether they sell it next year or hold it for longer remains to be seen. But what does not remain to be seen is the sheer scale of the involvement of private equity in the fund administration industry.
In June this year, trade magazine The Drawdown published its latest Fund Admin Report, which contains a table of fund administration providers, along with their ownership details; of the 30 firms listed, approximately a third are owned either outright by a buyout shop, or have a private equity minority investor.
Private equity firms love themselves a ‘platform’ investment, and fund administrators provide a natural home here due to the complimentary nature of their business with other service providers to pooled investment funds. These deals can scale quickly.
However, the good old-fashioned competitor acquisition would seem to have just as many legs.
Data collected and analyzed by 9AT suggests that, so far in 2024, 281 different firms were listed as the administrator of new private funds based on ADV filings submitted in 2024.* And while some of these private funds administrate their own funds as opposed to hiring an external provider, the long tail in the space remains a boon to buyout firms looking to either enter the space or grow their existing platform portcos.
The outlook for the market is an interesting one. Most industry players agree that generally, the fund administration industry will increase in size, but that is a misleading statement, because its size depends entirely on the AUM of the funds that they administer. Still, with global private capital AUM set to hit $18trn by 2027, there would seem to be plenty of opportunity to for admin firms to increase their AUA.
What is not certain is whether the increase in AUA will be absorbed mainly by the larger firms, or whether smaller players have a chance at closing the gap. One on hand, smaller firms might find it increasingly difficult to compete versus the larger ones as the metamorphosis of a private equity-backed fund admin provider into a diversified middle and back-office fund services business creates a greater gulf between the haves and have nots.
But on the other, smaller firms are nimbler generally, and it is not outside the realms of possibility that a well-funded start-up admin firm could take meaningful share quickly, particularly if they focus on a certain corner of the market – the underlying assets that private fund managers invest into are becoming broader, which should lead to opportunities for specialists to secure a foothold. Add to that the potential for a buyout firm to look to do a lift out of a larger firm’s fund admin team to a separate firm – the advantages which will be existing expertise, existing clients and brand name recognition – and you could see more ‘new’ firms enter the market.
Clearly, there are a few potential developments for the space, and it is unknown which way the market will go. But what is known is that private equity will remain, one way or another.
*The data used in this article comes directly from the SEC’s Form ADV filings. 9AT does not edit or override data, even when it may appear that a mistake has been made by the filer, due to data ethics and methodological considerations.
Back in April, we took at look at some of the Form ADV data to see how many times a private fund changed auditor. In case you missed it, here is the link to that one.
So, now that the first half of the year is in the books, we decided to take a look at the filings data again but this time from a different perspective – just how many private funds have filed a Form D in H1 this year and what, if anything, can we deduce about the results?
Well, the first thing to note is that, by any measure, the private funds industry seems to remain in good health.
According to 9AT data, 5,632 Form D filings were submitted to the SEC between January 1st and June 30th this year, good for a total Gross Asset Value (GAV) of $146bn.* Of those, 462 were hedge funds ($5.8bn), 1,563 were private equity funds ($76.1bn), 2,583 were venture capital funds ($27.1bn), and 1,024 were ‘other’ private funds ($37bn).
Type | Quantity | GAV |
Hedge Fund | 462 | $ 5,835,772,494 |
Other | 1,024 | $ 36,967,567,668 |
Private Equity Fund | 1,563 | $ 76,116,296,889 |
Venture Capital Fund | 2,583 | $ 27,105,706,746 |
*On occasion, filers may put the same GAV on multiple filings for the same product, which can lead to double counting in certain situations
Source: 9AT
At the domicile level, naturally, the United States occupies top spot, but in terms of offshore locations, Cayman is, once again, the most common offshore jurisdiction in the Americas for Form D filings in the US, accounting for 245 of the Form D filings in the first half of the year, followed by Luxembourg (114 filings). Ireland, a popular domicile in Europe for European managers launching a UCITS vehicle, saw only 10 filings in H1.
Domicile | Number of Filings |
United States | 5,019 |
Cayman | 245 |
Luxembourg | 114 |
Canada | 40 |
United Kingdom | 29 |
Source: 9AT
But what most folks really want to know is who is raising money. And it’s mostly the private equity types.
Of the top 10, 5 are private equity funds, 3 ‘other’ funds, one venture capital fund and one hedge fund*. 41 funds in total are raising $1bn or more.
Fund Name | Fund Type | GAV |
Nautic Partners XI, L.P. Nautic Partners XI-A, L.P. | private equity fund | $ 3,750,000,000 |
Pomona Capital XI (Offshore), L.P. Pomona Capital XI, L.P. | private equity fund | $ 3,500,000,000 |
Stellex Capital Partners III LP Stellex Capital Partners III-A LP | private equity fund | $ 3,000,000,000 |
Ninety One Global Alternative Fund 2 SCSp - RAIF - Africa Credit Opportunities Fund 3A | other | $ 3,000,000,000 |
ARCH Venture Fund XIII, L.P. | venture capital fund | $ 3,000,000,000 |
Sterling Group Partners VI, L.P. Sterling Group Partners VI (Parallel), L.P. | private equity fund | $ 2,750,000,000 |
Bridge Workforce & Affordable Housing Fund III LP Bridge Workforce & Affordable Housing Fund III-R LP Bridge Workforce & Affordable Housing Fund III International Master LP Bridge Workforce & Affordable Housing Fund III International LP | other | $ 2,500,0000,000 |
Heitman Value Partners VI, L.P. | other | $ 2,000,000,000 |
CDOF IV Cayman Fund, L.P. CDOF IV Delaware Fund, L.P. | Hedge fund | $ 2,000,000,000 |
Kline Hill Partners Feeder Fund V LP Kline Hill Partners Offshore Feeder Fund V LP | Private Equity Fund | $ 1,600,000,000 |
Source: 9AT
*Filers select the option of their choosing; 9AT does not change the definition in its database, regardless of whether industry participants might consider the fund to be a hedge fund, real estate fund, etc.
**The GAV listed in Table 3 for some funds is an aggregate amount of one or more funds, for example, the onshore and offshore versions of the same fund. We have combined those here, where applicable.
The data is notable, especially given the significant coverage in the trade media around the current fundraising climate. Industry data tracking firms across the board are showing that a significant pull back in allocating to private funds such as hedge funds and private equity is occurring, and industry conferences are replete with panels asking when the fundraising environment might begin to pick up.
We’re not saying that there isn’t a fundraising challenge right now. The prevailing interest rate and the geopolitical environment makes allocating to more liquid fixed income strategies more appealing both in terms of an acceptable yield and a perceived safe haven, and certainly, some private asset classes are struggling to maintain an acceptable spread over the risk-free rate.
But an industry that’s raising $146bn in six months arguably doesn’t show an industry that’s struggling either. Plenty of brand name managers are out there raising capital, and there are plenty of opportunities across a range of asset classes where that capital can be deployed.
What will be interesting is whether the second half of 2024 picks up. The recent court ruling in the United States at the beginning of June, where a group of trade associations banded together to sue the SEC alleging an overreach of authority with regards to the regulator’s Private Fund Adviser rule, has been welcomed in many quarters as a win for the space. All things being equal, it might be expected that a clearer regulatory environment (and a less onerous one) should be a catalyst for managers who have been sitting on the sidelines to now file their Form D and officially get out into the market to raise money.
We’ll have to wait until January 2025 to find out how the market fares in the second half of this year.