Typically have Assets Under Management (AUM) of $100 billion or more and individual fund sizes of $10 to $15 billion.

Matthew Retzloff

Reviewed by

Matthew Retzloff

Expertise: Investment Banking | Corporate Development


February 7, 2023

Simply put, The "Megafund" PE companies typically have Assets Under Management (AUM) of $100 billion or more and individual fund sizes of $10 to $15 billion. In addition, these firms usually have a significant degree of geographic, industry, asset class, and investment strategy diversification.

Accredited investors provide the money that private equity needs to buy businesses and sell them for a profit. 

Private equity firms actively manage the businesses that make up their portfolios to enhance them, raise their value, and ultimately sell them for a profit through an M&A or an IPO (IPO).

The sector is known as "private equity" because the firms buy holdings in businesses and take them private to improve and raise their value. Afterward, businesses either sell their enterprises to other businesses or become public. 

Additionally, private equity firms do not just operate in the private market. Some PE transactions involve "take-private" acquisitions of publicly traded corporations.

Characteristics of Mega-funds

Given that these funds would inevitably evolve, it might be challenging to establish precise criteria to describe what it is. However, during the last few decades, these characteristics have been more prevalent among top funds:

1. Mega Funds are the Ones with the Most Wealth.

The most evident quantitative statistic is possibly the most easily trusted. Assets Under Management, which measures the total amount of money a private equity fund has raised from its creation, is a measurement we usually use when discussing funds. 


AUM is a total sum that includes all funds that the company has raised. 

Mega funds have raised the most money throughout the years and have the largest cash available for investment.

2. Mega Funds Invest in the Biggest Companies and Assets.

As a result, private equity companies' primary funds frequently purchase the biggest assets in the marketplace. 

No one else can close transactions as these private equity companies can. As a result, they can invest billions of dollars at once and buy whole publicly traded corporations.

3. Provide LPs with a Diversified One-Stop Shop. 

These super funds are also characterized by their investments across various asset types. 

The largest funds also engage in venture capital, real estate, infrastructure, and other areas in addition to private equity. 

All asset managers must continually raise capital and provide their investors with various investment opportunities as part of their lifecycle. 

Due to the disproportionately enormous amount of capital they manage, mega-funds have solidified their position as the sector's most important group of funds. 


Mega-funds comprised over 44% of all the private equity capital raised between 2019 and 2021.

Several reasons have contributed to the rise of mega-funds in the private equity market. The COVID-19 pandemic was a major factor, to name one. 

Following the economic crisis caused by the pandemic, many LPs renewed their relationships with current managers rather than taking the time and perceived risk of looking into new connections, creating a simple fundraising climate for experienced PE companies.

How Gigantic can Mega-Funds be?

Mega funds play a significant role in the ecology of private investments. For example, it is estimated that mega funds made up one-third of the estimated $629 billion in dry powder in US private equity alone at the end of 2017 and were in charge of one-third of all invested capital from 2014 to 2018.

The fundamental idea behind mega-funds is that because they are the biggest pools of capital roaming the investment countryside, they have little competition for the deals they want, can get the best advice, have access to leverage at the best terms, and draw top talent to their organizations and portfolio companies. 

The outcome, one may say, should be ultra-high returns.

PE mega-funds had previously lingered around the $25 billion threshold. However, several businesses have begun to focus on fund amounts over this limit.

Blackstone has recently raised $24.1 billion for a real estate private equity fund. The fund will reach over $30 billion once the business invests $300 million of its funds and an additional $5.9 billion from investors, making it the largest private equity fund to date.

The Carlyle Group has ambitions to raise $27 billion for its 13th flagship fund, showing that they are not the only company stretching the limits of conventional fundraising norms. 

Additionally, several participants in the private market anticipate the appearance of super-mega-funds, or vehicles, shortly.


Today's biggest private equity firms have flagship funds with at least $15 billion in assets. This helps us arrive at a more accurate definition of private equity mega funds and provides a sense of how these funds have been doing recently. 

It's startling that just one in six venture capitalists (VCs) raise a mega fund on their first fund. More than 16% of funds launched as mega funds are without any prior experience, a source of management fees from an earlier fund to pay for travel and personnel, existing investors, or a pitch deck to build on—directly to half a billion dollars.

Naturally, this uncommon kind of company is seldom a novice investor. Instead, they frequently bring track records from earlier venture capital or investing organizations. Occasionally, they are spin-offs like Lee Fixel, who departed Tiger Global to introduce Addition's tiny $1.3 billion fund.

Sometimes they bring the support of corporations or other wealthy investors who can provide a substantial amount of cash.

A Career in Megafunds

Most people choose private equity because it provides higher pay, more flexible hours than investment banking, and more fulfilling work.

Some individuals also love the thrill of working on important deals, mingling with "the finest and smartest," and learning more about how businesses operate.

Contrary to investment banking, exit considerations are not the primary driver for entering private equity because PE is considered an exit opportunity in and of itself.

People who are attracted to the private equity job path are

  • High achievers willing to put in a lot of grueling effort and are competitive.
  • Extremely detail-oriented
  • Instead of merely monitoring the markets or investing in publicly traded firms or other assets, you are interested in transactions.
  • Instead of selling or acting as an agent, you are more interested in operations and investing and use critical thinking to assess businesses.
  • Are open to non-deal activities, such as business monitoring and fundraising, and are interested in long-term objectives like establishing a portfolio company over several years.


You can find a comprehensive list of PE firms to work for through our Company Database.

Pros and Cons of working at a PE Megafund

As middle-market strategies grow more saturated, private equity megafunds provide GPs with a (relatively) less competitive path for conducting business.

A smaller number of GP partnerships is one of the most alluring advantages of participating in private equity megafunds from the LP's point of view.

An LP can save expenses and time associated with due diligence by having fewer GP contacts. In addition, the less competitive megafund environment further makes forecasting simpler and more predictable for huge pensions and endowments.


  • High salaries and bonuses at all levels, with carry having the potential to increase senior-level remuneration much above what investment bankers make.
  • Employment that is more intriguing than sell-side positions, like investment banking.
  • A more consistent schedule and slightly better hours than investment banking, at least at mid-sized and smaller funds, assuming you're not working on a big deal.
  • Direct contact with various businesses, markets, and management teams, and substantial responsibility, even at the junior levels.
  • Since companies are tiny, your ability to progress is directly related to your performance; office politics are less of a concern than they are at major institutions.


  • You may still have to work fairly long hours in a demanding atmosphere and frequently travel, especially as you develop.
  • Depending on the size, policies, and level of the company, there might not be a clear path to development in your employment place. Even if there is a path, moving up the corporate ladder might be difficult because Partners seldom become "burned out" and quit.
  • Instead of executing transactions, you could spend a lot of time researching, conducting interviews, or keeping track of your portfolio companies. Even if you work on negotiations, you'll be lucky to execute one significant transaction year.

The trajectory of these super huge funds

According to PitchBook data, private equity had a record-breaking year for transactions, exits, and funding in 2021.

According to the study, private equity deal-making "continued at a frenzied pace" in the second quarter of 2021, with funds concluding 3,708 deals for $456.6 billion. For comparison, there were 5,734 transactions worth $711.6 billion in 2020.

As institutional investors abandoned the cautious decision-making they had taken in 2020 and expanded their allocations to alternatives, US PE fundraising continued to improve in Q2 of 2021. 

Most of the capital was still being raised by megafunds, defined as entities that have raised $5 billion or more.

Over $5 billion in funds raised more than twice as much money so far in 2021 than they did a year ago. Particularly in the second quarter of 2021, several flagship funds closed, with values above US$10 billion.

The most intriguing aspect of this is that even at that size, many of these funds closed rapidly, were bigger than their previous funds, and sometimes had a huge amount of oversubscription.


Private equity is still reeling from the pandemic's reverberating shockwaves. The rise in mega-funds is not a COVID-19-specific trend, although the epidemic likely boosted the funds. 

After Q2 2020, mega-fund internal rates of return (IRRs) recovered more swiftly than smaller funds. This is because its bigger portfolio holdings may have been more robust to pandemic impacts and more likely to have been marked to market than comparable public companies, allowing these funds to participate in the stock markets' quick rebound.

A valuation process known as "marking-to-market" bases an asset's value on similarly situated assets with established market prices. 

These funds use comparable public corporations as a benchmark for valuing their portfolio companies.

An outlook of the Private Equity world

According to a McKinsey study, the median return is equal across fund sizes, from small-cap (less than USD 1 billion) to super-cap, for buyout vintages from 2000 to 2016. (more than USD 5 billion). 

However, in small-cap funds, the return distribution is much more evident. This indicates that when investing in small-cap funds, it is far more probable that investors will choose a manager in the lowest quartile, and it will be considerably more difficult to locate managers in the top quartile.

The Inflation Reduction Act's enactment in the US may be the major event impacting the PE market in 2022. 

Private equity firms saw the effects of the Inflation Reduction Act of 2021, but new changes to the law have proven to be less demanding for businesses.

The Inflation Reduction Act's incentives for renewable energy projects—including those involving wind, solar, carbon capture and sequestration, hydrogen, and other technologies—have boosted investors' trust in the sector. 

To improve the longer-term view of investments in renewables and persuade PE investors to take a strategic look into the industry, the IRA sets a target of $369 billion for energy and climate investment over the next ten years.


According to statistics from PitchBook, the US private equity industry concluded deals for a total of $280.64 billion in Q3 2022, a YoY fall of 20.4%. 

While there is much-untapped potential, companies and investors have grown more rigorous in their due diligence, searching for undiscovered gems and organized ways to buy new assets.

Due to the delay in exits, many limited partners (LPs) are still waiting for re-ups, making it difficult to finance projects through traditional methods. Instead, they prefer to stick with existing ties to get through this period of uncertainty.

Many experts anticipate that 2023 will bring rougher times for the PE industry. Still, incumbents that were able to boost capacity and resilience by investing in innovation in the face of challenges in 2022 are likely to succeed. 

Many businesses will concentrate on producing income and offering PE investors chances to purchase assets at a discount. As a result, flexibility and inventive deal-making will enable some development despite more challenging circumstances.

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Researched and authored by Tirath Shah | LinkedIn

Reviewed and edited by Parul GuptaLinkedIn

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