Private Equity’s Mountain Of Cash

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What's going on?

American private equity firm Carlyle Group – investor in Dunkin’ Brands, Getty Images and Hertz, at one time or another – published its second-quarter earnings on Wednesday, beating expectations.

What does this mean?

Carlyle gave with one hand and took with the other: per-share profits were a third higher than analysts expected, but down 15% on the same time last year – making this the fourth consecutive quarter that the firm’s beaten expectations. Carlyle’s one of the largest private equity firms in the world, boasting $210 billion of assets – that’s nearly 600 times Beyoncé’s net worth (tweet this) – not to mention the $18.5 billion that it just added in its recent, biggest-ever fundraising round.

Why should I care?

For markets: Carlyle’s peers left it in the dust.

Blackstone, possibly Carlyle’s worthiest opponent (with an even more jaw-dropping $440 billion in assets), outperformed Carlyle this quarter. The value of its private equity funds grew by 9.5% compared to Carlyle’s 3%, while competitor KKR & Co grew its own by 6.7%. Ouch. One way these companies get their hands on even more money to invest is by buying stakes in insurance companies (like Carlyle announced it would on Wednesday). The premise of insurance is that policyholders pay up ahead of time in case the worst happens – and in the meantime that cash gets put to work earning… more cash.



For you, personally: There’s tons of money (literally) in private equity right now.

With the spending power of more than 1,800 Beyoncés between Carlyle and Blackstone alone, private equity firms are sitting on a lot of dollar dollar bills – termed “dry powder” (investment bankers and powder? Go figure). This cash is funds that have been raised but not yet invested, and there’s as much as $1.7 trillion of the stuff (the most ever, up from $1 trillion last year). When companies “go public”, they’re held to more stringent rules that don’t apply to private companies – so as long as there are more private funds to be invested, we may well see fewer companies choosing to go public.

Originally posted as part of the Finimize daily email.

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