In a recent analyst note, we predicted another fall in US firm counts this year. There are a few broader trends that we don’t see reversing any time soon, which points to a sustained culling of PE players over the near term. For one, first-time funds aren't forming fast enough to make up for the number of firms at risk of being inactive (i.e., having not closed a fund in the last four years or a deal in the last two). Through November, we counted 265 such at-risk funds in the market, the highest we’ve recorded, against just 26 new funds in 2017. Far from a blip, those 26 first-time funds were in line with what we’ve seen going back to 2012 (about 32 per year, on average). Those new firms represented about 1% of the 2017 totals—10 years ago, first-time funds made up about 10% of the total.
Check out the 2018 Private Equity Outlook.
This column originally appeared in The Lead Left.