Blackstone just won Asset Manager of the Year for PE Firms with an AUM over $100B at the end of 2024. With $1 trillion AUM and 85 portfolio companies, they’re not alone in dominating the private capital landscape.

The numbers tell a bigger story. Private capital firms now manage more wealth than the GDPs of most countries. And they’re hungry for more.

But here’s what most people miss: these firms don’t just compete with each other. They’re competing for your attention as an accredited investor. And that competition creates opportunity.

Think of it like exclusive restaurants suddenly opening their doors to more diners. Same quality food. Better service. More accessible pricing.

What Private Capital Firms Actually Do

Private capital firms raise money from institutional investors and high-net-worth individuals. Then they deploy that capital through direct investments in companies, real estate, infrastructure, and credit markets.

Unlike public market managers, private capital firms take active ownership roles. They sit on boards. Reshape operations. Guide strategic decisions.

TA is a leading global private equity firm focused on investing in growing companies with high-quality business models across its five core sectors: technology, business services, financial services, healthcare, and consumer. Since its founding in 1968, the firm has raised $65 billion in capital and invested in more than 560 companies worldwide.

That’s the business model. Buy companies. Improve them. Sell them for profit. Share those profits with investors.

The Performance Story

Private-market investments have limited availability and can deliver higher returns — Yieldstreet’s target net returns per year range from 8 to 20%.

But performance varies dramatically between firms. Top-quartile private equity funds historically deliver 15-20% annual returns. Bottom-quartile funds struggle to beat public markets.

The median holding period for a private equity-backed company reached an all-time high of seven years in 2023 but experienced a dramatic decline in 2024 to 5.9 years. Shorter holding periods often signal improved exit environments.

This isn’t day trading. Private capital firms think in years, not quarters. They bet on long-term value creation rather than market timing.

Five Key Trends Reshaping the Industry

Private equity firms will focus on five key trends in 2024. Deploying artificial intelligence will lead the way, followed by investment in infrastructure, particularly related to energy projects. Value creation will also be a priority as firms strive to enhance their strategic and operational efficiency.

Artificial Intelligence Integration

AI isn’t just a buzzword for private capital firms. It’s becoming operational infrastructure. Deal sourcing algorithms. Automated due diligence. Predictive analytics for portfolio performance.

Firms that invest in AI capabilities gain a competitive advantage. Better deal flow. Faster decisions. Enhanced value creation.

Infrastructure and Energy Focus

Energy transition creates massive investment opportunities. Renewable energy projects. Grid modernization. Storage technologies. Carbon capture systems.

Private capital firms are allocating billions to infrastructure deals that offer stable, inflation-protected returns over 15-25-year periods.

Operational Value Creation

With fewer easy deals available, private capital firms focus more on operational improvements. Digital transformation. Supply chain optimization. Market expansion strategies.

This benefits investors. Active management often generates better risk-adjusted returns than financial engineering alone.

Technology Sector Dominance

Private capital firms have been active in several industries, but activity in technology, media, and telecommunications leads the way. And firms pursued fewer megadeals, opting for midsize deals more often.

Software companies with recurring revenue attract premium valuations. SaaS businesses offer predictable cash flows and scalable growth models.

Carve-Out Strategies

Private equity funds have increasingly embraced carve-out transactions as a strategic maneuver to unleash untapped value within their portfolio companies. These transactions involve sellers divesting non-core business units, allowing PE funds to reshape and revitalize their portfolio companies.

Carve-outs create opportunities to buy quality assets at reasonable valuations when large corporations divest non-core divisions.

The Access Equation for Accredited Investors

Traditional private capital required a minimum investment of $25 million. That excluded most individual investors, regardless of their sophistication.

Technology changed the equation. Digital platforms now offer access with minimums starting at $25,000-$100,000. The same institutional-quality deals, scaled for individual investors.

The criteria for being an accredited investor include:

Income: An individual must have an annual income exceeding $200,000 ($300,000 for joint income) for the last two years, with expectations of the same for the current year.

Net Worth: An individual must have a net worth of over $1 million.

If you qualify, you gain access to investment strategies previously reserved for pension funds and endowments.

How Private Capital Firms Generate Returns

Buy-and-Build Strategies

Acquire a platform company in a fragmented industry. Use that platform to acquire smaller competitors. Create market-leading positions with economies of scale.

This approach works particularly well in the business services, healthcare, and technology sectors, where fragmentation creates opportunities for consolidation.

Operational Improvements

Bring professional management to family-owned businesses. Implement modern technology systems. Optimize capital structures. Expand into new markets.

The value creation stems from professionalizing operations rather than relying on financial engineering.

Growth Capital

Partner with management teams of profitable, growing companies. Provide capital and expertise to accelerate expansion without taking control.

This approach offers lower risk than traditional buyouts but still generates attractive returns through growth participation.

The Fee Structure Reality

Private capital firms typically charge “2 and 20” fee structures. 2% annual management fees plus 20% of profits above preferred returns.

A performance fee is paid based on the returns on an investment and can range from 15% to 20%. This is on top of management fees.

These fees are higher than public market investments. But they align manager interests with investor returns through performance-based compensation.

The key is to ensure that the net returns justify the fees. Top-quartile managers often deliver superior net returns despite higher fee structures.

Liquidity and Commitment Considerations

Many accredited investment vehicles aren’t easily made liquid should the need arise. Not only do you risk not recouping your initial investment, but timing becomes critical.

Private capital investments typically lock up capital for 5-10 years. Capital calls occur over 2-4 years as investments are made. Distributions happen over 3-8 years as investments are sold.

This illiquidity is both a risk and a feature. It allows managers to pursue long-term strategies without worrying about quarterly redemptions.

Plan your liquidity needs carefully before committing to private capital investments.

Due Diligence Essentials

Manager selection drives private capital performance more than asset class selection. The difference between top and bottom-quartile managers can exceed 10% annually.

Key evaluation criteria include:

• Track record across market cycles
• Investment process consistency
• Portfolio company value creation
• Team stability and expertise
• Alignment of interests with investors

Don’t rely solely on marketing materials. Request detailed performance data, reference checks, and operational due diligence reports.

Platform vs Direct Investment

Technology platforms democratize access but require careful evaluation. Not all platforms offer institutional-quality investments or proper due diligence.

Direct investment with established private capital firms offers better terms but requires larger commitments and longer track records.

Consider starting with platforms to build experience, then graduating to direct relationships as your allocation and expertise grow.

The Global Opportunity Set

US private capital firms dominate globally, but opportunities exist internationally. European funds often trade at discounts due to economic uncertainty. Asian markets offer growth exposure but require specialized expertise.

For US-based accredited investors, domestic opportunities remain the most accessible, offering attractive risk-adjusted returns.

Currency hedging costs and regulatory complexity often outweigh the benefits of international diversification for smaller allocations.

Tax Optimization Strategies

Private capital investments create complex tax situations but offer potential benefits:

• Capital gains treatment on most profits
• Tax-deferred growth during holding periods
• Depreciation benefits for real estate investments
• Opportunity zone investments for tax deferral

Work with qualified tax professionals to structure investments optimally and manage K-1 reporting requirements.

Building Your Private Capital Allocation

Start with 5-10% portfolio allocations to build experience. Increase commitments as you develop comfort with illiquidity and manager evaluation skills.

Diversify across strategies, vintages, and managers. Avoid concentration in single sectors or geographies.

Plan capital calls over multiple years. Don’t commit more than you can fund over 3-4 years without impacting other financial goals.

The 2025 Opportunity

Market conditions favour new private capital commitments. Valuations normalized from 2021-2022 peaks. Interest rates stabilized. Exit markets reopened.

Private capital firms face pressure to deploy record dry powder levels. This creates more flexible deal terms and co-investment opportunities.

Technology continues to democratize access while maintaining institutional-quality investment processes.

For accredited investors, the convergence of better access, reasonable valuations, and manager hunger creates a compelling opportunity.

Ready to Access Private Capital Opportunities?

Understanding private capital is valuable. Accessing quality managers and deals requires expertise and relationships.

You might wonder: Which private capital strategies align with your risk tolerance? How do you evaluate manager quality and track records? What allocation makes sense for your overall portfolio?

These aren’t decisions you navigate alone.

Book a call here.

The private capital opportunity window won’t stay open indefinitely. Neither should your decision timeline.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Private capital investments entail substantial risks, including the potential for total loss of invested capital, illiquidity, limited transparency, and complex fee structures. Past performance does not guarantee future results. These investments are suitable only for accredited investors who meet SEC qualification requirements and can afford to lose their entire investment. Private capital typically involves long lock-up periods, capital call obligations, and limited secondary market liquidity. Manager selection is critical, as performance varies significantly across firms. Tax implications can be complex and vary by investment structure and jurisdiction. Market conditions, interest rates, and economic factors can significantly affect performance. Before investing in private capital, carefully consider investment objectives, risk tolerance, liquidity needs, time horizon, and fee structures. Consult with qualified financial, legal, and tax professionals before making any investment decisions. FINMA and other international regulations may apply to certain investment structures. All investments carry risk, and there is no guarantee of returns.