Contrary to the academic justifications that once underpinned their activities, four of the leading private equity firms have gone public, with share prices that have increased by between 48% and 131% since May 2012. In this article, the author implicitly challenges readers to consider whether this market enthusiasm is justified.

As measured by assets under management, the four leading private equity firms—KKR, the Carlyle Group, Blackstone, and Apollo Global Management—have grown rapidly since 2005. At the same time, these firms have become, according to the author, duller than they used to be. The mainstay of private equity, the leveraged buyout deal, is turning into a marginal activity in favor of the less crowded field of lending money to companies. Investing in infrastructure is also popular.

Analysts examining alternative investment firms attach three times more value to reliable income from annual management fees than to more erratic income from carried interest. This result provides an additional incentive for firms to pursue growth in assets under management rather than in risky deals.

In addition, the nine founders of the four leading firms are nearing retirement age, and the potential successors appear to be more like administrators by comparison.

According to the author, the outlook for the firms is mixed. The low interest rate environment that attracted customers will not last forever. The current “bubbly” stock market—which the firms benefit from—is also unlikely to last. The firms’ highly valued fees are coming under pressure, and in the United States at least, so is the favorable tax treatment that some parts of their businesses enjoy.

Although this short article is not a detailed analysis of the four leading private equity firms, the author does convincingly explain why investment professionals should more closely scrutinize the apparent contrast between the firms’ (at least until fairly recently) exciting stock performance and the relative “dullness” of their current activities.