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The first generation of Wall Street's Barbarians at the Gate have taken their firms public and charted out ambitious expansions into hedge funds, debt financing and real estate.
Now there is a new breed of private equity firms emerging: Advent International, KPS Capital Partners, Silver Lake and Vista Equity.
Business Insider combed through private equity performance numbers maintained by U.S. pensions to highlight some of private equity's top performers.
Both people who work in the asset class, and investors who put money into private equity funds say, these four firms are the industry's rising stars.
Some from our list have carved out a specialized niche focus, like technology deals, or focused on operational overhauls.
They also appear to have learned from their predecessors' mis-steps. Many big PE firms larded investments with debt in the pre-crisis years, with that debt later proving difficult to pay down. The likes of KKR and Blackstone did behemoth transactions leading up to the financial crisis, and in some cases have seen them amount to disappointing returns.
The new class of private equity up-and-comers has stuck to smaller, more conservative deals and focused on operational improvements.
They're also raking in impressive returns.
There are two ways investors gauge the performance of the private equity firms they back: internal rate of return (IRR) and investment multiple. The investment multiple relates to what the individual fund made back on its deals, while the IRR sets out what the fund made back on an annualized basis.
Here is what you need to know about the four firms:
Advent International's consumer plays have paid off
Graphic by Andy Kiersz
Advent International funds have outpaced most LBO shops' performance.
Advent is one of the bigger private equity firms to make the cut on our list. The firm, which has $30 billion under management, has built its reputation on mid- to large-sized acquisitions, buying out the likes of Bojangles', Lululemon and The Coffee Bean & Tea Leaf. It has invested in over 300 private equity deals in more than 40 countries, according to its website. Led by managing partner David Mussafer, Advent has taken on ambitious expansion in emerging markets, as well, bolstering its reputation as an international player in private equity.
*Performance data for Advent funds prior to 2001 were not available.
Silver Lake Partners is a specialist in investing in technology companies
Graphic by Andy Kiersz
Silver Lake raised in 2013 its biggest fund ever to back the Dell LBO.
Silver Lake Partners should be the most recognizable name on this list, in no small part due to their dalliance with Michael Dell's company and the slugfest with Carl Icahn that was necessary in order to get complete the deal. But the private equity firm headed by Glenn Hutchins had done plenty of successful tech deals prior to the transaction for which it is most famous. This includes buying into GoDaddy, Virtu Financial and Skype, to name a few. Silver Lake has racked up impressive returns over-the-year, and the Dell investment holds up, its most recent fund, which is also its biggest at $10.3 billion, could be its best. The PE firm has about $26 billion in assets under management.
Vista Equity is establishing a solid reputation
Graphics by Andy Kiersz
Vista Equity Partners has gotten creative to do big deals with a smaller fund than some of its competitors.
Founded by Robert F. Smith in 2000, Vista today manages $14 billion in total assets. The private equity firm raised its biggest fund last year, raking in $6 billion. The fund has gotten creative in order to borrow more to buy target companies, taking loans from non-traditional lenders. The private equity firm's portfolio flies below the radar, even in the heady tech sector.
KPS Capital Partners is private equity's next up-and-coming firm
Graphics by Andy Kiersz KPS' funds have generally outperformed industry averages.
Founded in 1997, Michael Psaros' leveraged buyout shop has an unconventional fee structure. The firm eschews the industry tradition of "2 & 20," meaning that they claim a management fee of 2% and 20% of profits, and instead employed a "1 & 30" on its most recent special situations fund. The firm consistently attracts more cash than it is seeking to raise, as well. The most recent fund raised $3.5 billion, exceeding what Psaros had initially sought. Now, KPS manages about $6 billion. The private equity firm has the performance to back it up; it's never had a losing fund. New Jersey State pension documents detail how well prior funds have performed.