London has been knocked off its perch as the financial capital of the world by New York for the first time, according to the Global Financial Centres Index. Reasons cited for the London downfall include scandals in markets and banking, such as problems encountered with PPI, uncertainty surrounding the UK’s EU membership and the upcoming Scottish independence referendum. The UK’s capital, however, doubtlessly remains an important player in the private equity universe.
According to Preqin’s Fund Manager Profiles online service, there are 407 active private equity firms that are headquartered in London, representing a vast 81% majority of the entire UK-based private equity firm count. Over the last decade, these houses have cumulatively collected $354bn in capital commitments and have an estimated $94bn of dry powder. Many commentators have pointed out that the UK has a ‘two speed’ economy, with most growth emanating from London and the South East region, and the private equity industry is no different, with evidence showing a prominent gap of activity between the capital and the rest of the country.
London is not just a significant private equity player in the UK; in fact, London-based private equity firms make up over a quarter (28%) of all Western Europe-based firms. To provide some perspective, Paris has the next largest amount with around 11% of all Western Europe-based private equity firms and Munich, in third place, accounts for less than 4%. Furthermore, Preqin’s data shows that London-based firms in the last 10 years have raised 59% of all funds raised in Western Europe.
The ‘new’ financial capital, New York, tops London in terms of the number of private equity firms. Today, there are 623 New York-based private equity firms, which account for over 17% of all US-based firms. In the last 10 years, these New York-based firms have garnered an aggregate $744bn in capital commitments and today, have an estimated $206bn in dry powder. The amount raised is over twice as much as the London-based firms have managed to accumulate in the same time period. Using the above statistics, on average a New York-based firm will have raised $1.2bn over the past decade compared to $871.4mn for a London-based counterpart, showing that the superiority in capital raised is not down to sheer volume of participants.
London’s biggest private equity player is CVC Capital Partners, which has raised a total of over $48bn in the past 10 years. New York’s largest firm, having garnered in excess of $61bn in the same time period, is Kohlberg Kravis Roberts.
As New York and London continue to battle over the top spot in the wider financial world, the Big Apple comfortably sits ahead of its British rival when it comes to private equity.