India stands among the top 10 countries in terms of professionals employed in the private equity industry. There are about a 1,000 people employed in the Indian PE space, according to an Employment and Compensation report by Preqin, a London-based research firm that tracks private equity fund raising globally.
On the face of it, the number might appear small, but India houses more number of professionals compared to Hong Kong (900), Switzerland (900), China (800), Italy (800) and Sweden (800). India closely trails Japan (1,100). The US, with the largest PE professional resource base, houses 38,500 people in this industry with UK (7,700), a very distant rival.
Despite the economic downturn, the number of firms actively managing a private equity fund continued to grow in 2009, with 412 new firms established worldwide this year as of October, bringing the total to 4,270, according to the report.
When private equity firms that do not raise distinct funds (or those who manage corporate or personal capital) are included, the figure is more like 6,000. There further lies a group of smaller firms that invest lesser sums of capital, raising money from private sources such as friends and family, added the report.
The US remains the most developed country for private equity and this is reflected in its share of the number of firms headquartered there. North American firms represent 53% of the total number of private equity fund managers worldwide, and the overwhelming majority of these are based in the US.
Venture and buyout focused firms employ the largest number of people, with each sector accounting for around 30% of the total, despite the fact that buyout firms manage well over twice the amount of assets that venture firms manage, suggesting that large private equity firms can benefit from significant economies of scale, said the report.
Consequently, and particularly in light of the current economic climate and its impact on the GP (manager)/LP (investor) relationship, there is pressure from LPs on GPs of the larger funds to reduce the management fee rates for new vehicles looking to raise capital.
Investors are seeking to bring management fee levels more in line with the actual costs associated with running funds of different size and type. Providing figures for the trends in management fees by fund size and vintage year, the research report showed that the biggest decreases in management fees for the most recent buyout funds came from the largest group of funds.
In one of its interesting conclusions, the report said that the favourable operating economics of the largest funds are channelling through to remuneration for employees at these firms to some extent. For example, the average total remuneration for a managing general partner of a private equity firm in the
smallest size group in Preqin’s sample earns $1.4 million per year, while this figure increases to $5.1 million for those in the largest size group.