PE (Private Equity) is new conglomerate. Unlike in the past, they are now expanding distinctly from their predecessors. Their capital does not follow cross subsidies anymore but fully own the company. Tim Jenkinson from Oxford University Business School said that Blackstone and KKR now look more like financial supermarkets. They have a modern strategy to approach midcap industries or commercial properties.
Management and performance fees are the main sources of PE income. In the past carried interest or performance fees was PE’s key source of profit. Meanwhile, management fees are covering the administrative costs. But now, management fees poured profit, making up to 60-70% of total GDP. While keeping the interest in management fees, PE also aims at escalating higher returns. By only focusing on certain geographical areas, PE like Blackstone will be a specialist in return superior.
PE focused more on value than growth before. This time is different. They are targeting new-economy firms. Technology related firms are trending these days. Plus it targets content industries such as Moonbug and Hello Sunshine as well. Growth equity alone makes up 20% of all PE. Thus, Growth equity is the best strategy for startup entering maturity and popularity.
Polishing PE reputation also means involving in green tech and energy transition. Brookfield Asset Management raised a $15bn for environmental-based businesses. So, Blackstone and Carlyle launched initiative to offer ESG buyouts. Today, several firms are now expressing their confidence that PE can lead green businesses.
The PE capitals are now chasing for high-end retail businesses too. They are still open for property and infrastructure funds for small investors. They could be the new vehicles that can invest longer. Long term capitals allow the businesses to broaden their success capabilities.
