Private equity industry grows

People tend to think of the private equity industry as an industry in decline.

It's true that there have been setbacks over the past four years, but relatively speaking, the industry continues to thrive. The Financial Times reports that assets under management by these firms have soared past $3 trillion. That compares to just over $2 trillion in assets managed by hedge funds. Preqin data shows that private equity assets under management rose 9.4 per cent, down from 11.9 percent.

But the article notes that these rates of growth remain well below the 33.6 percent and 37.6 percent rates registered when the private equity market was still booming in 2007 and 2006. Long-term returns, however, have held up.

"Private equity returns annualized over 10 years to 2011 outpaced the S&P 500 and MSCI Europe indices."

Still, it's a brutal industry, and many private equity firm have struggled. All in all, the industry has performed well enough to keep its investors coming back for more. The number of pensions that are boosting allocations to alternatives continues to grow, as they continue to face shortfalls relative to the future liabilities.

As long as performance holds up, firms will be able to easily raise funds, and the virtuous cycled will keep spinning. 

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