Criteria for funds to be considered MF, as opposed to MM

apollo, carlyle, blackstone, kkr

I always was under the impression that MF's were defined by 5 BN+ AUM

10 - 15B + AUM

I don't think there's really a right or wrong answer. Really probably depends on the perception of the person asking the question. In my mind I would go with latest fund size and if that fund is $2bn or greater. Which means they're probably stroking $50mm to $200mm equity checks for every transaction and there's not many firms who can write an equity check that big for every investment in their fund.

Then again there will be some who disagree with me and that goes back to my original point of the perception of who is asking the question.

Many people think of a core group of funds that were (i) some of the first to crack the $5b mark in a single vehicle dedicated to (ii) a generalist focus (iii) based in America. The consensus seven have been Blackstone, KKR, Apollo, Carlyle, TPG, Warburg, and Bain.

Those three criteria together strike out a lot of the big, credible, established guys that we all respect today. Apax is based in London. Silver Lake and First Reserve are sector-focused. American Securities only raised its first $5b vehicle in 2015. Berkshire, CD&R, LGP, and all the other strong MM firms are only recently cracking fund sizes that long.

On the other hand, there's a line of thought that a single vehicle >$5b makes the firm now a "megafund".

It boils down to the perspective you have. I find that a lot of younger guys who either haven't lived through or studied the history of the industry tend to have a more expansive definition of the term.

No reason not to include H&F. And the term should be american MF if iii is a criteria.

I think this is quite vague to clearly define but I overheard one of my VPs outline as follows:

PE category should be thought of as fund size and equity check size, divided into 6 groups: megafunds, large-cap, upper MM, MM, lower MM, and small-cap.

For MFs level, they should have $10bn+ funds investing globally. They should also have a track record of being able to raise such a fund (so can translate into having 2 or more $10bn funds historically). Now, not every firm is structured as a global fund (Bain, Carlyle for example, but if you add the capital allocated to Europe, NA and Asia, they all add to $10bn+), but this criteria makes sense. Given this, only 10 funds are considered MFs: Advent, Apollo, Bain, CVC, KKR, Silver Lake, Blackstone, Carlyle, TPG and Warburg Pincus. I think most people will generally agree with this list.

For large-cap, you'll have the likes of H&F, Apax, Cinven, EQT, Onex, Vista, Thoma Bravo, Permira, Providence, etc. What separates these guys from MFs is only fund size since they compete directly with MFs on many deals. H&F most recent fund breaks the $10bn mark but since this is their first, we'll have to see how they do but I think they'll be MF in a few years time as well given their excellent returns and ability to raise another fund like the latest.

And finally, what separates large-cap from upper MM is the typical equity check size (does not invest below $200-250m per deal) and more global presence / platform.

There are two distinctive ways to identify whether or not you work at a MF.

1) Your parents / family / and friends outside of banking (think they) know the firm. They’ve seen it somewhere...on their 401k...mutual funds...they know it’s Black...something...Black...rock??stone?! Anyhow that’s one way you know 2) college kids know it — because they read the WSO PE forum and have caught a few glimpse of mega funds (most of these kids know all the investment banks...including Centerview and if they are really well-read, perhaps also Qatalyst and Allen & Co.

Those two are the only ways you can define a MF. If your first year banking analysts know the name, that fund can be considered upper MM or higher. If the second year analyst who flunked out of first year cycle knows the name, that firm can be considered middle market or above. If the firm is somewhere your friend from college who fucked up during banking process and went, then it can be considered lower MM.

Hope these practical definitions are helpful.

PE Mega Funds definition: 

- Most recent vehicles > $10 Bn

and

- EV of investments > $1 Bn

To my knowledge, those criteria give a list of 17 funds (12 US based and 5 Europe based): 

• Blackstone
• KKR
• Apollo
• Carlyle
• H&F
• SilverLake
• TPG
• Bain Capital
• Advent
• Warburg Pincus
• Thoma Bravo
• Vista

• CVC
• EQT
• Cinven
• Permira
• Apax

(I might have missed a couple firms, in particular those PE houses who have historically always been UMM but which only recently broke the $10 Bn threshold)

Then, middle market PE firms should be categorized as follow:

• UMM: investment vehicle between $5 Bn and $10 Bn + EV of targets between $500 M and $1 Bn
• MM:  investment vehicle between $1 Bn and $5 Bn + EV of targets between $100 M and $500 M
• LMM: investment vehicle below $1 Bn + EV of targets below $100 M

This discussion is fucking dumb

Y

Above answers generally sound right to me - would categorize MF by the following criteria:

• Fund size > $10bn
• Multiple international offices (typically 5 or more)
• Ability to deploy $1bn+ checks in a single deal; oftentimes you'll see transaction TEVs > $5bn, and sometimes in a consortium, >$10 bn
  • Optional - multiple strategies (ie growth, credit, etc.)

That said - the most important criteria is the ability to write massive checks, which almost is certainly a function of having a large fund. Some top performing MM players (ie Genstar with a $12bn fund), I would not consider a MF as they focus on the MM. Warburg, while fairly dissimilar to the other MFs as it has most of its history in growth, is still a MF given its legacy and international presence. Multiple strategies is where the line gets blurry - funds like CD&R / H&F that have a single PE strategy are great funds, and many would argue they are MFs despite not having multiple strategies, because of how dominant their pureplay strategies are.

Think it makes sense to segment the MFs from a perspective of business models as per the below:

• Publicly traded MFs
  • Blackstone, KKR, CVC, Apollo, Carlyle, TPG, EQT
• Privately held MFs
  • H&F, Bain, Advent, Permira, Warburg Pincus, Apax, CD&R
• Sector specialist MFs (though this sits within the category of privately held MFs)
  • Vista, Thoma Bravo, Silver Lake
• And just for additional reference, would put the below as the top performing UMM funds 
  • Veritas, New Mountain Capital, Francisco Partners, Genstar (though the are pureplay MM), TA Associates, Clearlake (though on the verge of MF)