Mega Funds in Private Equity: Which Funds Are They?

What's the definition of mega fund & what careers are like there

By Mike Hinckley

Table of Contents

Add a header to begin generating the table of contents

You may have heard of mega funds in private equity, but who are they and what is the definition?

Mega funds are a massively important part of the private equity ecosystem, and these funds are some of the most prestigious firms to work at in the industry.

In this article, I’ll be looking at what a private equity mega fund is, the top mega funds in the industry, and what you should know about getting a job at a private equity mega fund.

What Are the Mega-Funds in Private Equity?

The first thing to say is there isn’t a strict definition of what a “mega fund” is.

In general, mega-funds are private equity funds with the largest assets under management.

There is no strict cutoff for assets in this regard, but the PE mega funds are usually enormous with several billion in assets under management. PE firms have experienced massive growth in recent years due to the explosion of assets under management.

Some refer to a private equity mega fund as having more than $10 billion in assets, but that description is a bit too general. Some mega funds on the list below have far higher amounts.

With their large amounts of capital to invest, typically mega funds do the biggest deals. That’s why mega funds exist. These deals happen the same way they do for middle-market private equity funds but on a much larger scale.

Because private equity firms make money through fees as a percentage of assets under management, the mega funds traditionally make the most money and pay the highest salaries, as a result. Because it typically doesn’t require THAT many more people to do a $1 billion LBO investment vs. a $50 million LBO, the mega funds have relatively high revenue per employee. Hence, they can afford to pay higher salaries.

Typical characteristics of mega funds

Mega funds stand out in the private equity landscape due to several defining characteristics. Understanding these features helps clarify what makes these funds unique and why they hold such a dominant position.

1. Large assets under management (AUM)

Mega funds are distinguished by their enormous assets under management (AUM), often in the tens or hundreds of billions of dollars. This financial clout enables them to pursue large-scale investments, such as acquiring entire public companies, that are beyond the reach of smaller firms. Their substantial AUM also provides a buffer against market volatility, offering stability to investors.

2. High-value deals

Mega funds typically engage in high-value transactions, including billion-dollar acquisitions and major equity investments. These deals are often transformative for the companies involved, focusing on maximizing returns through strategic changes and efficient management. The ability to execute such large transactions is a key feature that sets mega funds apart.

3. Global presence

With operations in major financial hubs around the world, mega funds have a significant global reach. This extensive network allows them to tap into a wide array of investment opportunities and exert influence in various regions. Their international presence also enhances their ability to drive growth across different markets, both developed and emerging.

4. Diversified investment strategies

Over time, mega funds have expanded their focus beyond traditional private equity buyouts to include a variety of investment strategies, such as real estate, infrastructure, and hedge funds. This diversification helps them attract a broader range of investors and provides more stable, consistent returns by spreading risk across different asset classes.

5. Institutional prestige

Mega funds are highly prestigious institutions within the financial sector, attracting top talent and setting industry standards. Their success stories often shape the broader private equity landscape, making them influential players in determining market trends and best practices. Their reputation and influence make them aspirational models for other firms in the industry.

While there’s no strict definition of what constitutes a “mega fund,” these characteristics should give you a good idea of whether a private equity firm qualifies as one.

Mega funds vs. other types of private equity funds

In the world of private equity, not all funds operate on the same scale or follow the same strategies. Understanding the differences between mega funds, middle-market funds, and boutique private equity firms can provide valuable insights for investors, job seekers, and industry observers.

Deal size and investment focus

Mega Funds: Mega funds are defined by their ability to engage in large-scale transactions, often exceeding a billion dollars per deal. These funds typically target well-established, high-value companies and entire industries, making large acquisitions or significant equity investments. Their focus is on maximizing returns through strategic changes, operational improvements, and large-scale buyouts.
Middle-Market Funds: Middle-market funds focus on smaller deals, usually ranging from $50 million to $1 billion. These funds often invest in companies that are established but still have significant growth potential. The deals typically involve buying controlling stakes in companies that can be scaled up or improved through strategic guidance.
Boutique Firms: Boutique private equity firms tend to focus on niche markets or specialized industries. Their deal sizes are smaller, often under $50 million, and they usually work with companies that require tailored strategies, such as family-owned businesses or startups. These firms might also specialize in distressed assets or turnaround situations.

Investment strategies

Mega Funds: The investment strategies of mega funds are broad and diversified. They often engage in leveraged buyouts (LBOs), large-scale mergers, and acquisitions, and they may also manage assets across different classes, such as real estate, infrastructure, and hedge funds. Their goal is to create value on a large scale, often by enhancing operational efficiency, driving market expansion, or restructuring companies.
Middle-Market Funds: Middle-market funds focus on growth equity and operational improvements. They often work closely with management teams to drive business development, expand market share, and improve profitability. The strategies are more hands-on and focused on creating value through business transformations rather than large-scale financial engineering.
Boutique Firms: Boutique firms often employ highly specialized strategies. These might include focusing on niche sectors, turnaround situations, or distressed assets. The investment approach is often more flexible and tailored to the specific needs of the companies they invest in, providing deep industry expertise and personalized management support.

Types of companies targeted

Mega Funds: Mega funds typically target large, mature companies that are industry leaders or have significant market share. These companies are often stable and generate substantial revenue, making them ideal candidates for large buyouts or major equity investments.
Middle-Market Funds: Middle-market funds look for companies with solid foundations but also significant potential for growth. These might be companies looking to expand their operations, enter new markets, or improve their profitability. The focus is often on companies that are poised to scale.
Boutique Firms: Boutique firms target smaller, often underperforming companies or those in niche markets. These companies might require specialized management, a turnaround strategy, or focused growth plans. The firms provide tailored support, leveraging their expertise to unlock value in less conventional ways.

List of Mega Funds

Here are the firms I consider to be the top PE mega funds. Let’s take a closer look.

Blackstone Group

Founded in 1985 by Stephen A. Schwarzman and Peter G. Peterson, the Blackstone group started with an initial $400,000 capital. Today the firm is one of the largest investment firms in the world, with hundreds of billions in assets under management. Based in New York City, this company is well-established and respected in the industry.

A few popular investments for the Blackstone group include Bumble, Hilton Worldwide, Hello Sunshine, and Ancestry.

Apollo Global Management

Established by Josh Harris, Leon Black, and Mac Rowan, the Apollo Global Management headquarters is located in New York City. The company has offices across the globe and is a highly reputable organization in the industry. In 2022, Apollo merged with Athene, making one large publicly traded company.

Some popular investments by Apollo Global Management include Barnes & Noble, Rackspace, and Shutterfly.

Carlyle Group

The Carlyle Group was founded in 1987 by Greg Rosenbaum, William E. Conway Jr, David Rubenstein, Stephen L. Norris, and Daniel A. D’Aniello. It is one of the top investment groups in the world, with billions in investments across multiple continents. It has various offices around the globe, with headquarters in Washington, DC.

Some of the top global investments made by the Carlyle Group include Supreme, Grand Foods Holdings Limited, and Golden Goose Deluxe Brand.

KKR & Co

KKR & Co was founded in 1976 by Henry Kravis and George Roberts. Today, the New York-based company is exceptionally well known for its massive investments and growth opportunities.

Some notable investments made by KKR & Co include ByteDance, Epic Games, and JB Chemicals & Pharmaceuticals Ltd.

TPG Capital

Created in 1992 by Jim Coulter and David Bonderman, TPG Capital is a San Francisco-based company. It is a leader in global asset management and widely recognized for its unique approach to alternative investment.

Some popular investments made by TPG Capital include Burger King, AirbnB, and McAfee.

Honorable mentions

As I said previously, there’s no strict definition for a private equity mega fund. Below are more funds that many in the industry would consider a mega fund:

Apax Partners
Warburg Pincus
Advent International
Silver Lake
Bain Capital
CVC Advisers

How Mega Funds Are Evolving

Most of the mega funds started as pure “buyout” private equity investors. This means they used high debt loads to purchase companies and earn returns in their deals.

However, in today’s market many mega funds have evolved their business model to have many different lines of business and investment strategies.

Some common business lines include:

Venture capital
Investment banking and capital markets
Real estate
Infrastructure
Public markets/hedge funds
Growth equity

This evolution of private equity firms means that they are essentially becoming large-scale asset management companies, who are no longer tied to the boom and bust cycle of leveraged buyouts (which are beholden to interest rates).

It has also allowed funds to raise capital and earn fees from LPs without cannibilizing their existing business.

As part of this evolution, mega funds have expanded their investment focus to include high-growth sectors like technology and healthcare. By targeting innovative companies in these areas, they stay ahead of emerging trends and continue to drive profitability in a rapidly changing market.

Mega funds have also adapted to new regulatory challenges and embraced Environmental, Social, and Governance (ESG) criteria. These changes help them align with global standards and meet the evolving expectations of investors.

In addition, technology now plays a critical role in their operations.

Tools like advanced data analytics and artificial intelligence are increasingly used to identify opportunities, manage risks, and optimize performance, ensuring these firms remain competitive in the industry.

Reasons to Consider Working at Top Mega Funds

Working at a top mega fund is highly desirable for many candidates. Here are some of the top reasons why:

Highly prestigious: These companies made it onto our list for a reason. They are well-known and respected in the industry. Finding roles at any top firm means joining an extremely prestigious organization with incredible exit opportunities from there.
Very strong compensation: Since these investment firms have huge assets under management (and charge large fees on top of that), it’s no surprise that they can afford to hire the best. This means they pay exceptionally well, and the compensation can be large at every level.
Great for your resume and exit opportunities: If you’re ever in the job market after employment at one of these private equity firms, your job opportunities (or MBA application odds) increase dramatically. Having one of the firms on your resume looks brilliant, particularly if you’ve managed to stay on for a few years.

(Article continues below)

PREMIUM COURSE

Become a Private Equity Investor

Reasons You May Not Want to Work at Top PE Mega Funds

While mega funds offer incredible opportunities, it’s also true that there are downsides to working there. Here are a few considerations you should keep in mind before you go mega fund or bust:

Very challenging to win an interview/offer: Getting your foot in the door at prestigious private equity firms is very tough. You need an excellent private equity resume with a lot of experience and studies to back it up. Check out my guide on how to standout and get into private equity
Hierarchical structure: In a top mega fund, there isn’t a lot of autonomy and there is pretty strict career progression. Many analysts and associates find it challenging to thrive since there’s so much hierarchical structure.
Very crowded: There is lots of competition for promotions. Everyone who works at these funds is A+, and they want to further their own career. That means career progression is generally competitive because is fighting against each other for promotions.
Challenging work/life balance: Working in one of these private equity mega funds can require very long hours and high commitment. While every situation is different, you’ll likely have to give up a lot of weekends and free time to make yourself available for work. However, you are well compensated for the sacrifice.
Difficult to outperform benchmarks: Once flagship funds reach a certain point, it’s challenging to perform how they would have as smaller private equity funds. Smaller deals with unique asset classes do very well because it’s new. However, once PE firms grow, they’re up against the top competitors with fewer niche investment opportunities.

Career progression at mega funds

Climbing the career ladder at a private equity mega fund involves moving through well-defined roles, each with increasing responsibilities. Knowing what to expect at each stage can help you prepare for the challenges ahead.

Analyst (0-2 years of experience): Entry-level analysts are usually recruited directly from top investment banks or consulting firms. The role primarily involves financial modeling, due diligence, and support on transactions. Analysts are expected to work long hours and develop a deep understanding of the private equity industry quickly.
Associate (2-4 years of experience): After a few years as an analyst, or with an MBA, professionals may be promoted to associate. Associates take on more responsibility, including leading aspects of deals, managing junior analysts, and interacting with portfolio companies. This role is crucial for developing deal execution skills and gaining a more strategic view of the investment process.
Senior Associate (4-6 years of experience): Senior associates begin to take a more active role in sourcing deals and managing the entire investment process. They work closely with Vice Presidents and Principals, developing the skills needed for higher-level decision-making.
Vice President (6-8 years of experience): Vice Presidents are responsible for leading deal teams, managing client relationships, and overseeing the execution of transactions. They play a key role in deal origination and strategy formulation, often working closely with senior partners.
Principal (8-10+ years of experience): Principals are the right hand of the partners, deeply involved in the strategic direction of the firm. They are responsible for sourcing deals, leading negotiations, and making investment decisions. This role is seen as the final step before becoming a partner.
Managing Director/Partner (10+ years of experience): At this level, professionals are focused on the big picture, including firm strategy, fundraising, and the overall management of the portfolio. Partners are key decision-makers and typically have a significant stake in the firm’s profits.

Understanding the career path in a mega fund can help you set clear goals and get ready for what’s next. As you advance, your role grows in importance, and so do the rewards, making a career in private equity both challenging and highly rewarding.

Mega Fund Private Equity Salary

Salaries in private equity mega-funds vary greatly, and the pay depends on the role, location, and size of the investment firm.

Here are the average salaries in the US, including bonuses:

Associate: $150k-$300k
Senior Associates: $410k-$610k
Vice President: $570K-$780K

If you make it past this point, you can expect to earn into the millions, but this is based on the size of the private equity mega funds you’re dealing with. You can also expect real dollars from carried interest, which is something to be aware of.

How to recruit at private equity mega-funds

Landing a position at a private equity mega fund is a highly competitive and challenging process, but with the right strategy, it’s achievable. Here’s a detailed guide to help you navigate the recruitment process and stand out among other candidates.

1. Recruitment timeline

Recruitment at mega funds typically follows a structured timeline, especially for those transitioning from investment banking or management consulting roles.

The recruitment process often begins early in the year, with interviews for Associate positions usually taking place in the first and second quarters. It’s important to be aware of these timelines and prepare well in advance, as the competition is fierce and spots fill up quickly.

2. Key qualifications

Mega funds generally prefer candidates with strong backgrounds in investment banking, management consulting, or other high-demand finance roles. An MBA from a top-tier business school is often highly valued, although some firms may also consider exceptional candidates from top undergraduate programs or those with significant relevant experience.

Having a track record of high performance in previous roles, particularly in deal-making or financial analysis, is critical.

3. Networking

Networking plays a crucial role in the recruitment process for mega funds. Building relationships with professionals currently working at these firms can provide valuable insights and even lead to referrals. Attending industry conferences, alumni events, and finance-focused networking gatherings can help you connect with the right people.

It’s also beneficial to reach out to former colleagues or alumni who have made the transition to private equity, as they can offer advice and possibly recommend you for roles.

4. Preparing for interviews

Interviews at mega funds are rigorous and typically include multiple rounds. Candidates can expect a combination of behavioral interviews, technical assessments, and case studies. The technical interviews will often test your financial modeling skills, understanding of leveraged buyouts (LBOs), and ability to analyze complex financial scenarios.

Practicing these skills in advance, possibly through mock interviews or by working with a mentor, can significantly increase your chances of success.

5. Set yourself apart

To stand out in a highly competitive field, it’s important to demonstrate not only your technical skills but also your ability to think strategically and critically about investments. Highlighting your experience with large-scale deals, your ability to work under pressure, and your understanding of the private equity landscape will help set you apart.

Additionally, showing a strong cultural fit with the firm—such as aligning with their values, work ethic, and long-term vision—can be a decisive factor.

Recruiting at private equity mega funds is challenging, but by understanding the process, preparing thoroughly, and leveraging your network, you can improve your chances of success.

FAQs

What Is The Largest Mega Fund?

As of December 2022, Blackstone Group has over $289 billion in private equity. They have a further $326 billion in real estate, $80 billion in hedge fund solutions, and $280 billion in credit and insurance.