There’s more than 50 private equity firms with enormous five-year fundraising totals exceeding $6 billion. Then there’s the other 6,600 small to mid-sized firms fighting to raise funds and compete for investors. However, a decade-long record of outperforming public markets and outpacing other asset classes has transformed what was a $400 billion private equity industry in 2010 into an industry with assets projected to exceed $4 trillion in the next two years. There should be enough pie to go around.

But 2016 is appearing to break from the norm. Unpredictable and predictable events such as Brexit and the upcoming election notwithstanding, through three quarters of 2016, total capital invested is coming in at $484 billion in 2,477 deals. This marks the lowest amount of PE investments since 2006. Even as assets under management go up, return is becoming more elusive. Despite the overall market not being as strong as it was last year, company valuations are still comparatively strong with median debt usage at 5.4 times EBITDA.

One notable trend is increased GP and LP concentration and segmentation in both fundraising and deal flow. While deals over $1 billion make up the majority of deals in 2016, deals under $25 million have accounted for over 46% of activity thus far in 2016. This marks the highest proportion since 2009. General partners continue to invest in all segments of the market but limited partners are seeking out the best fund managers in each market segment with increased sophistication.

The formerly worn disclaimer that past performance is not an indicator of future success has taken on a new life and pointing to a performance track record of success is no longer a foolproof strategy. LPs are delving deeper into how success was achieved, and more significantly, how success will be maintained. The largest firms and mid-sized firms are taking a page out of the boutique firm playbook and racing to reposition their brand, skills, and other qualities to highlight what they bring to the investor table. This industry structuring provides enormous opportunities for firms to reposition, raise funds, and grow.

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