.png)
The private equity (PE) sector stands on the brink of a significant transformation, a shift underscored by the predictions of industry luminaries such as David Layton, CEO of Partners Group. These forecasts anticipate a dramatic consolidation within the sector, potentially reducing the number of private market fund managers to a mere 100 'next-generation' firms. Such a profound restructuring is driven by a myriad of factors, including escalating interest rates, the hurdles of fundraising, and the burgeoning costs of regulatory compliance. This evolution compels a critical reassessment of talent strategy across the PE landscape.
The momentum toward consolidation has been markedly visible through a surge in acquisition activity within the PE sector throughout 2023 and into 2024. Notable transactions include Target Capital’s intent to buy Grafton Ventures, Investorps 50% acquisition of Corsair’s Infrastructure Business, General Atlantic’s acquisition of Actis, CVC’s acquisition of DIF, Bridgepoint acquisition of ECP, andSearchlight’s acquisition of Gresham House. Although the prevailing theme among these acquisitions has focused on infrastructure managers, the trend is expected to extend to a wider range of strategies.
As of 2024, the landscape has been dominated by the industry's heavyweights. According to Preqin, assets held in illiquid private market strategies amounted to $12 trillion at the close of December 2023. Impressively, the top 25 largest competitors have seized more than a third of the $506 billion of new capital allocated to PE so far this year.
Altus Partners has identified the emergence of two distinct groups within the industry: those capable of swiftly raising capital, often diversifying their strategies to include continuation or impact funds in addition to their core strategy fundraises, and those facing challenges, potentially leading their funds into runoff. This dichotomy has not gone unnoticed by individuals within these funds, triggering a wave of activity in the market as they navigate this evolving landscape.
Adapting to Change: Skills for the Next-Generation PE Professional
The anticipated wave of consolidation in the private equity (PE) sector is set to give rise to larger, more globally diversified firms, necessitating a broader and more sophisticated skill set from PE professionals. In this evolving landscape, proficiency in digital transformation, data analytics, and Environmental, Social, and Governance (ESG) investing will become paramount. Professionals in the field will be expected to navigate increasingly complex markets, which will require a profound understanding of varied regulatory frameworks and cultural intricacies.
Moreover, as PE firms broaden their portfolios across diverse asset classes, there is an expected surge in demand for individuals possessing specialised knowledge in sectors such as infrastructure, secondaries (particularly for continuation fund offerings), technology, private debt, and impact investments. While these areas represent the core specialisations, the industry is poised for a more detailed segmentation of strategy and sector-specific skill sets in response to emerging demands.
A significant trend is the rapid pace at which the industry is adapting to meet the demands of Limited Partners (LPs), placing considerable pressure on the already limited talent pool. This scenario is particularly challenging when seeking candidates from diverse backgrounds, those with in-depth technological expertise, or individuals proficient in impact investing—a strategy that has garnered widespread interest across funds in various capacities. This dynamic underscores the critical need for PE firms to cultivate a workforce that is not only technically skilled but also versatile and adaptable to the shifting paradigms of the investment world.
Opportunities and Challenges in Talent Management
For PE firms, attracting and retaining top talent will become both a challenge and a priority. In an industry, which, by its own omission is great at running other people’s companies, but not as good as managing their own, there are likely to be significant changes to the future of how talent is managed.
There will likely be a greater transparency to retention and succession planning, with this often cited a major reason for (particularly senior talent), individuals being poached. The industry's consolidation will intensify competition for skilled professionals, pushing firms to revisit their value propositions. This means not only offering competitive compensation but also focusing on company culture, and impact initiatives to attract the next generation of talent.
A number of these funds are turning to the BCorp accreditation to help in paving a way for a better internal structures, with the likes of Palatine, ECi, Bridges Fund Management achieving BCorp status and larger mainstream funds such as TowerBrook, joining them.
Additionally, the transition period may see a surge in demand for professionals skilled in integration and change management, as firms navigate mergers and acquisitions. This presents a unique opportunity for talent with experience in managing transitions, aligning cultures, and integrating systems and processes.
Conclusion
The future of talent in the consolidating PE market is both challenging and exciting. As the industry undergoes this significant transformation, the demand for a new breed of PE professionals will rise. For those willing to adapt and grow, the consolidating PE landscape offers a wealth of opportunities for career development and advancement.
Altus Partners
Altus Partners is an LCap Group company, a Group renowned for its expertise in Leadership Insights, Consulting, and Executive Search tailored for high-growth companies and investors. For detailed insights and guidance on human capital strategy for funds, we invite you to reach out via info@altus-partners.com.
.png)
.png)
.png)
.png)
.png)
.png)
.png)
Connect with us