US private equity AUM hits $3.128 trillion in 2024

Assets under management (AUM) of US private equity firms have grown over the past five years, reaching $3.128 trillion as of September 2024, the highest level since December 2020, according to data from S&P Global Market Intelligence.

Fast-growing firms

Between 2022 and 2023, 37 US private equity and venture capital firms saw AUM more than double, with median AUM growth at 8%. This analysis includes SEC-registered firms with reported AUM during this period.

Most of these firms had AUM below $1 billion in 2022, except for CIVC Partners LP, Aquarian Holdings Investment Management LLC and Multicoin Capital Management LLC.

One Madison Group LLC led the list with a remarkable growth rate of 3119%, increasing its AUM to $6.08 billion in 2023 from $189 million in 2022. This firm focuses on industries such as industrials, consumer discretionary and consumer staples. One Madison reported a separately managed account worth $6 billion in its Form ADV filing in April 2024.

Median AUM for 2023 was about $946 million, compared to $954 million in 2022.

– Download a spreadsheet with data featured in this article. – Read about global private equity investment in defense. – Read about global private equity deals in cybersecurity.

Incentive to grow

Setting ambitious goals for growth is a common structural feature of many private equity buyout funds, HEC Paris Business School professor Oliver Gottschalg told S&P Global Market Intelligence in an interview. Gottschalg has conducted research that ranks global middle-market private equity firms based on the aggregate performance of their buyout funds raised between 2011 and 2020.

"100% [AUM growth] in three years is extreme, but it is a structural feature of many buyout funds. The incentives are such that they make money with assets under management because they charge a good amount of fees on assets under management. That [net fee-related earnings] is a meaningful amount of their profits," Gottschalg said.

"There's a big incentive to get bigger because of the fees," added University of Chicago Booth School of Business Professor Steve Kaplan.

Some of the fast-growing funds likely deployed the capital and earned satisfactory returns, Kaplan said. "When a small fund has their first fund, if they performed well and if they can convince investors that they can scale, then they can raise bigger funds."

Co-investing could have also driven fast growth for fast-growing firms, he added.

Overall, private markets AUM is expected to double over the next five to six years, according to a March 14 research note from Evercore ISI. An outsized share of this growth will accrue to "larger, scaled and established players," according to the note.

Fast growth and performance risk

Gottschlag said fast assets under management growth often compromises performance. "The most stable statistical finding in essentially all data sets I ever looked at in private equity is that very fast growth in AUM hurts performance."

Hiring more investment professionals to align with AUM growth is a risk factor for a fast-growing private equity firm. Another risk is strategy drift, when a firm that has been focused on investing in one industry, for example automotive, starts to take stakes in oil and gas companies.

"To me, that's a red flag," Gottschalg said. "Because that means the growth is not doing more of the same, but the growth is pushing them into new territory. There may be cases where they're doing well in those new areas, but the statistical finding is it's difficult to do so."