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The Make-up of Newly Established Private Equity Firms – October 2015

by Luke Goldsmith

  • 20 Oct 2015
  • PE

According to Preqin’s Fund Manager Profiles online service, 475 private equity firms that are active today have been established since the start of 2014, with 320 setting up in 2014 and a further 155 in 2015 so far. Despite the short time these firms have been active in private equity, a considerable amount of fundraising has taken place. Since January 2014, these firms have raised $13bn in aggregate capital commitments.

Cross Ocean Partners has raised the largest amount of capital of all firms established since the start of 2014. The London-based firm is the manager of Capula European Special Situations, which closed on $1.5bn in April 2014. The fund was managed by Capula Investment Management, but Cross Ocean Partners took over the management of the fund in 2015. The firm was formed as a partnership between the Cross Ocean management team and Stone Point Capital. Castik Capital Partners, established in Q2 2014, has raised the second largest amount of capital thanks to their EPIC I vehicle, which closed on €1.0bn in July 2015. The firm focuses on investing in Europe across a range of industries.

In terms of primary firm strategy, venture capital vastly outnumbers other approaches among newly established private equity firms, as illustrated in the chart above. Sixty-one percent of all private equity firms established since 2014 employ a venture capital strategy. Due to the nature of venture capital investing, smaller amounts of capital are needed for deals and funds; therefore, it proves easier to establish a venture capital firm than a larger firm aiming to raise more capital in a first-time fundraise. Buyout firms account for just 15% of new firms, while companies with growth as their primary strategy follow closely behind, accounting for 12%.

Unsurprisingly, newly established firms are predominantly based in North America. Of the 475 newly established firms tracked by Preqin, 256 are based in North America, with 241 in the US alone. There are 113 new firms based in Europe, 76 in Asia and a further 30 in the rest of the world. With the majority of new firms US based, and venture capital dominating the strategies, it is crucial to acknowledge the importance of Silicon Valley to the private equity and venture capital industry.

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