PitchBook News - PE giants are changing the game

EQT set the standard for managers going public, by choosing to distribute upwards of two-thirds of management fees while keeping most carried interest to compensate employees—rather than a 50-50 split that many firms utilize.

TPG and Blue Owl underwent similar restructurings before going public.

Other public managers are taking note. KKR made changes to how it distributes profits, keeping more carry in-house and distributing up to 75% of its management fees to shareholders.

Apollo announced a comparable structure, and indications suggest Blackstone could follow suit.

Public investors also prefer simplicity. Brookfield's convoluted share structure has long confounded public investors and the firm indicated it could streamline its ownership structure by spinning out the asset manager into a pure-play offering.

This would have the added benefit of separating the manager from the massive balance sheet, which public investors have not valued as highly.

Brookfield's move may force other public PE firms to adjust their approach.

Heading into 2022, many questions remain around whether higher payout ratios and lighter balance sheets will force all public firms to employ similar strategies.

To gain a deeper understanding of these trends and more, please download our free analysis of Q4 2021 public PE earnings.

As always, please reach out with any questions or comments.