Preqin currently tracks 209 US-based investment consultants that actively advise on and invest in the private equity asset class. The chart below shows a breakdown, by US region, of where these consultants are headquartered.
The largest proportion of consultants (41%) are based in the Northeast US, with the majority based in New York. Private equity consultants in the region have a median of $1.9bn in private equity assets under advisement, and a median of $10.4bn in total assets under management. In terms of nature of service, over two-thirds of Northeast US-based consultants (69%) provide both non-discretionary and discretionary services, 23% provide solely non-discretionary services and the remainder (8%) exclusively offer discretionary services.
The West hosts the second largest concentration of all US-based private equity investment consultants (24%). Being the hub of private equity and particularly venture capital activity, the state of California is home to most of these consultancies. Despite the region having a lower average allocation to private equity ($912mn) compared to the Northeast, the region has higher median assets under management, at $11.5bn. Fifty-eight percent of consultants based in the West provide both non-discretionary and discretionary services to their clients, while firms providing a solely non-discretionary service make-up 32% and 10% provide solely discretionary services.
The Midwest ranks third, domiciling 17% of US-based consultants that are tracked by Preqin. Although falling slightly short of the Northeast’s average amount of private equity assets advised, consultants based in the Midwest possess a much greater median total assets under advisement ($22bn). The majority of these investment consultants are based in Illinois. The nature of service for consultants based in the West is divided as follows: 51% provide both non-discretionary and discretionary services, 43% provide solely non-discretionary services and 6% provide solely discretionary services.
As confidence in the US economy improves and the general LP appetite for private equity remains high (see Preqin Investor Outlook: Alternative Assets, H1 2015 for more information), investment consultants in the US are likely to maintain a key role in the advisory of commitments to private equity vehicles. Many investors looking to access the asset class and fund managers seeking an understanding of the LP community will call on investment consultants to provide valuable insight.