Over the last 10 years, private equity fundraising in North America has witnessed highs, and also extreme lows, primarily attributed to the financial crisis. As the global economy recovers from the downturn, North America-based managers have seen a steady increase in aggregate capital raised, with the same trend being broadly repeated in Europe up until 2014. Since 2005, firms based in North America have raised nearly $2.4tn in capital with an estimated $713bn in dry powder. Preqin’s Fund Manager Profiles online service currently tracks 4,506 firms that are based in North America; this blog will take a closer look at the top 10 North American cities based on the number of private equity fund managers headquartered there.
New York, the most populous city on the East Coast, has by far the largest number of private equity firms in North America; in fact, it houses 16% of all firms based in North America and accounts for 39% of all capital raised over the last 10 years by North America-based managers. The largest fund manager based in New York is Blackstone Group, which has raised nearly $69bn in capital over the last 10 years. Blackstone invests predominantly in buyout opportunities on a global scale in a diverse range of industries including aerospace, financial services and technology.
In second and third place respectively are San Francisco City and Chicago, both of which have far fewer firms than New York and account for only 10% of the total North America-based capital raised between them. Alongside San Francisco City, two other cities within the San Francisco Bay Area appear in the above table: Palo Alto and Menlo Park. In these two cities, 84% of firms target venture capital opportunities, with this figure dropping to 65% in San Francisco City. The West Coast US as a whole has become synonymous with start-up companies and venture capital, which is reflected in the above figures.
Toronto, the only non-US North American city featured in the top 10, hosts 125 private equity firms. The number of private equity firms in Toronto has been on the rise, with a majority of firms making venture capital investment their core strategy. The largest firm headquartered in Toronto is Onex Corporation. Founded in 1984, the firm has successfully raised six funds and currently has $5.4bn in estimated dry powder. The Canada-based firm uses a buyout strategy to invest capital throughout North America in a diverse range of sectors including business services, entertainment and outsourcing.
Overall, these top 10 cities account for 44% of all firms based in North America and 72% of all capital raised over the last decade. There is a large gulf between the top 10 and other cities in North America, with fund managers tending to prefer bases with well-connected transport links, better infrastructure and a larger population, potentially due to more opportunities for investment and a larger talent pool. It is likely that this trend of firms accumulating in North America’s larger cities will continue, as more and more people head to these cities in search of opportunities for wealth.