Fueled by a shriveling buyout market and new opportunities in the terrain inhabited by investment banks, private equity firms are branching out. KKR is doing it. So is Blackstone. The Carlyle Group could soon join them. That means downsized investment bankers may be able to take their game elsewhere.
Having poached a team of prop traders from Goldman Sachs, KKR could launch a hedge fund next year. Blackstone boasts a hedge fund and debt trading business, and Carlyle has its eye on AlpInvest Partners.
Though their predicament has grabbed fewer headlines than hedge funds,PE firms face the murk of Dodd-Frank as well. New rules would require firms with more than $150 million in assets to register with the SEC. Those that do will have to add staffing in compliance roles, such as analysts, operations professionals, and technology specialists who can design and manage systems for recordkeeping and reporting.
While the recession has caused deal flow to slow, the forecast for private equity may not be as bleak as you might think. Lastweek, the Private Equity Growth Capital Council reported higher deal volumes - U.S. funds raised nearly $20 billion for investors during the third quarter. Jason Thomas, vice president of research for the group, says the fact that North American PE-backed IPOs performed well during the quarter "may signal that fundraising will pick up in 2011."