More private equity firms go out of business


You hear a lot about the number of hedge funds that go out of business every year. But not so much about private equity funds that bite the dust. So it came as something of a surprise that private equity fund managers went out of business last year at the fastest rate since records started up 10 years ago, and another 150 firms are expected to disappear this year, according to data from Prequin, notes Deal Journal.

Currently, 183 funds managers are "in run-off"--when firms wind down assets and cease investing--compared with 90 in 2009. Only 13 firms went bust during the dotcom crash of 2000.

The total number of private equity managers now stand at 4,146. If you include venture capital funds as a subset of private equity funds, this number makes a lot of sense. The start-up route remains hard across the alternative investment spectrum. As with hedge funds, size remains a critical advantage in the private equity world. The institutional investors want a certain heft and track record. You can't blame them.

The silver lining is that the funds that do make it past the start-up stage can be quite proud of themselves.

For more:
- here's the article

Related Articles:
Cautionary tales in private equity exits

Study highlights problems with private equity industry
Private equity firms still hungry to invest in banks