In the latest Global Alternatives Survey, Towers Watson highlighted the sectors that saw the most growth in the alternative investment industry. Private equity managers currently control 22 percent of the alternative investments sector, behind only real-estate (at 35 percent) and ahead of hedge funds (21 percent).
The Big Picture
The total alternative investment sector is growing at a substantial pace, now accounting for 20 percent of all pension fund assets, up 5 percent from 15 years ago. Pension funds represent over half of assets managed by alternative investment managers. “The ongoing global economic crisis has driven all types of institutional investors toward having more diversified investment portfolios, with investment managers offering significant alternative capabilities being the clear beneficiaries,” stated Craig Baker, head of research at Tower Watson.
The Big Firms
Despite the growing market, private equity investments rest primarily with a handful of firms, with 68% of all invested capital in the asset class under management of the top ten private equity managers. This top ten includes names such as The Carlyle Group, Goldman Sachs and Blackstone Capital Partners. The concentration amongst the top firms was furthered on July 3rd, with the acquisition of Swiss Re Private Equity Partners (SRPEP) by BlackRock, Inc .
The concentration of private equity investment isn’t just firm specific, but also geographic. While several other alternative asset classes, such as hedge funds or infrastructure funds, see significant dollars invested in Europe or Asia Pacific, the Tower Watson survey indicates that the vast majority of private equity funds are invested with North American domiciled fund managers.
The Impact on Hiring
What does all of this mean for those interested in opportunities in private equity? Despite growing assets under management in such funds, the industry is becoming more concentrated with fewer key players. This means fewer new employment opportunities in many cases, as one source of synergy in business combinations is reducing ‘redundant’ staffing through layoffs or attrition. Individuals interested in becoming part of the private equity industry are being forced to compete with others that have been victim of transactions like the BlackRock and Swiss Re deal.
Potential employment opportunities are also geographically situated primarily in North America, even more so than other alternative asset classes. All but two of the top ten and six of the top twenty five firms are located in the United States, primarily in New York. Other leading firms are located in London and some of the financial centres in the Caribbean.
Opportunities can be lucrative when available in private equity management, but may be difficult to find in the current environment. Experts in certain industries or asset classes that can add unique analysis angles stand the best chance of gaining employment in this sector.
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