Have you ever wondered how you would spend a massive cash windfall, like winning the lottery?
In the 1985 movie Brewster’s Millions, Monty Brewster accepts the challenge to spend $30 million in 30 days in order to receive a $300 million inheritance from his great-uncle.[1] He rents a suite at the Plaza Hotel, pays the New York Yankees to play against his minor league team, runs for Mayor of New York City, and does everything he can imagine to get rid of the money.[2] Monty spends it all by the skin of his teeth and receives the full inheritance.
The largest alternative investment firms (the “Megas”) have mastered fundraising and now face a new challenge: deploying mountains of capital. They have scaled dealmaking by building internal teams, making acquisitions, and entering joint ventures. There’s one playbook left to duplicate from the hedge fund world.
Industry Consolidation
Ian Charles, on the Capital Allocators podcast, discussed that “Level 10s” are the only firms meeting the needs of the growing private wealth, sovereign wealth, and insurance channels. The numbers are staggering. Level 10s comprise 0.2% of the industry’s participants yet manage 20% of its capital. In 2024 alone, four of them – Blackstone, Apollo, KKR, and Ares – raised over $500 billion combined, and their market share is increasing.[3]
Capital Deployment
This has me thinking about how these firms will invest this new money and its implications for the industry. Level 10s need to organize human resources and have four options to consider.
- Organic talent development. Historically, the Megas groomed junior talent from investment banks. But there’s only so much capacity any deal team can handle, and only so many Board seats a senior professional can serve.
- Acquisitions. Some Level 10s have grown capabilities by acquiring asset managers, as Blackstone did with GSO and Ares has done repeatedly.
- Joint Ventures. Megas can create joint ventures with other asset managers to broaden their origination. Apollo’s partnership with Mubadala is one example, and Blackstone’s minority investing alongside private equity GPs is another.[4]
- Platform model. In the hedge fund industry, Millennium and Citadel have built platforms to hire portfolio management teams from other firms that lack scale. The challenging fundraising environment, with over 1,300 private equity firms coming to market in 2025, will leave high-quality talent without capital to invest.[5] There’s a market for pairing the Megas (long distribution and short dealmaking capacity) with middle-market players (short distribution and long dealmaking capacity). I suspect the platform model will come to the private market soon.
Implications
The Megas insatiable appetite for deals raises questions that will shape the future of private capital.
- In private credit, will price discipline and underwriting standards erode with each incremental deal? What will happen to the maturing debt of struggling companies? What will happen in a soft economy? And will Level 10s move away from high-yield securities and turn to the larger investment-grade debt market, with incumbent lower risk and returns?
- In private equity, can the Megas exit portfolio companies without a receptive IPO market? Will they invest in more businesses or turn to larger deals, perhaps shrinking the number of public listings further? Will they become the exit strategy for all middle-market businesses? And what will this mean for valuations and market clearing prices?
- In real estate and infrastructure, will we see more deals, bigger projects, or large-scale contrarian investments in areas like commercial properties?
- Most importantly, how can any of this be accomplished without reducing returns? And how will investors respond if returns end up lower than expected?
Ultimately, the Megas will set prices, drive benchmarks, and determine the fate of many orphaned companies. Organic talent is tapped out, and acquisitions and joint ventures are heating up, but it may not be enough. Perhaps Blackstone will become private equity’s Millennium.
Unlike Monty Brewster, the Megas must keep buying to satisfy the demands of their clients and public shareholders. Monty’s spending after his windfall would have been too boring to make a sequel.[6] The Megas have demonstrated the ability to invest at scale so far; their sequel will be one for the ages.
