In a recent article in Forbes, it was noted that even though BlackRock's assets under management rose to a record $6.8 trillion, its clients were "increasingly migrating from high-margin active management to low-margin index-linked products...". The exception for high-margin active management? Private equity.
Many of our PE clients continue to raise significant amounts. And some traditionally hedge-fund focused clients are diversifying into private equity.
According to the SEC's private funds report for Q4, 2018 (released on July 23, 2019) which reflects data collected through Form PF and Form ADV ﬁlings, 56.9% of PE funds were domiciled in the US and 30.6% were domiciled in the Cayman Islands. The next most popular domicile had just 2.4% of PE funds. (Note: the numbers reflect percentages of NAV.)
The Cayman Islands are the jurisdiction of choice for offshore private equity funds and we expect that as the upward trend towards allocations to private equity continues, there will be a related number of new fund launches.
The sole global investment category where BlackRock’s clients and those of its peers are still opting for high-margin active management is private equity. The investment track record indicates that private equity broadly defined - incorporating strategies focused on real assets, credit and venture capital, as well as buyout and growth - is the only investment style capable of producing returns that significantly outperform stock index investing.