What’s at stake? Inside the booming market in GP stakes investing

Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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For years, bankers and consultants have pitched consolidation as a miracle cure for the multitude of challenges facing fund managers. 

Fee margins are coming down? M&A!

Regulatory pressure is ramping up? M&A! 

Fund flows bifurcating between low-cost passive and high-margin alternative products? M&A!

In October 2024, Blackrock acquired Global Infrastructure Partners for a cool $12.5B. According to Financial Times, “the deal could accelerate a wider wave of consolidation. The largest privately held alternative firms may be forced to consider stock market listings or strategic partnerships with traditional asset managers.” 

In fact, in recent years hundreds of alternative managers have raised external capital, though not necessarily from strategics. 

Enter General Partner (GP) stake acquirers. 

These firms, often of American origin, specialize in acquiring both minority and majority economic interest in asset managers, especially of the alternative kind. Private equity, hedge funds and real assets.

We’re talking about firms like these:

NB: not to be confused with private equity secondaries investors like Ardian or Coller, that invest in funds or investee companies. 

How big is the investable universe?

According to Bain, global alternatives AuM is poised to grow from $26T in 2022 to $61T in 2032.

The bulk of these assets are institutionally managed: Harvard Business Review estimates that there are 10,000 private equity firms alone.

P10’s proprietary database lists nearly 5,000 GPs (snapshot below). 

At the same time, the alternatives industry is consolidating. The largest players such as Blackstone and KKR have been absorbing a growing % of institutional allocation. More recently, fundraising as well as deployment have stalled, putting pressure. 

These trends have fuelled the growth in GP staking, which grew from practically nothing 20 years ago, to a $3-4B market 10 years ago, to a $10B market currently. According to Pitchbook, the market sees an average of 100 deals per year. North America and Europe based GPs represent the lion’s share of deal flow: 

There’s more to come given the $30B+ in dry powder raised in the last 3 years. 

• In January 2023, Blue Owl, Dyal’s owner, closed the largest ever GP stakes fund, at $12.9B AuM. The fund, whose LPs include sovereign wealth investors, public and corporate pensions plans, endowments, foundations and family offices in the Americas and Asia, aims to invest in approx. 20 managers over fund lifetime. 

• Closed in late 2021, Blackstone’s second GP Stakes Fund has an AuM of $5.6B. 

• Petershill closed its fourth fund at $5B in 2022. 

Too many buyers?

According to an Investcorp whitepaper, “The overall competitive landscape remains relatively benign, with fewer than 10 overall dedicated buyers”. 

Several industry players that I spoke to disagree. Their counter is that there have been new entrants to the GP stake investing arena, represented by LPs themselves, such as insurers (Apollo’s Athene / Diameter, Sofinova, Guardian Life / HPS) and sovereign wealth funds (Mubadala / Silver Lake). Unlike dedicated acquirers, these investors bring very meaningful capital commitments. 

According to the Athene / Diameter press release: “To date, funds affiliated with Apollo and Redding Ridge have deployed more than $1 billion of debt and equity capital across Diameter’s CLO and CBO investment strategies.”

How are these deals structured?

Aggregator investments come in three main varieties:

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