Private equity firms have come out of the pandemic red-hot, inking more than 2,300 deals in the first five months of 2021, an increase of 21.9% from the same period last year.

A combination of historically low interest rates and record levels of fundraising has sent private equity investors racing to source deals – in fact, according to a recent survey conducted by S&P Global Market Intelligence, only 7% of private equity investors expect the investment landscape to deteriorate in the coming months. But who are these private equity firms and how do they make their money?

What Is a Private Equity Firm?

Simply put, private equity firms obtain capital from institutional investors, such as pension funds, endowments and sovereign wealth funds, to invest in private companies for a set period of time. Then, utilizing their capital, connections and expertise, private equity firms implement managerial, financial and operational changes aimed at improving profitability and growing revenue.

“Private equity firms are looking to invest in a company and increase their value over time,” says Scott Hendon, national and global leader of private equity at BDO USA.

Private equity firms typically target mature companies, with predictable, steady cash flows, that will benefit from operational changes or additional growth capital. “Private equity firms are looking to build earnings before interest, taxes, depreciation and amortization (EBITDA) because generally valuations are a multiple of EBITDA for the eventual sale,” Hendon says.

“It’s a buy it, build it strategy,” he says, and “for each investment, firms will target a specific multiple on invested capital, or MOIC.” Ultimately, private equity firms realize these returns when they sell of the investment.

How do private equity firms make money? Private equity firms make money from management fees, usually around 2% of total assets under management (AUM), and also when they later sell a portfolio company and realize a percentage of the gain. Some firms, in order to maximize their return, will use leverage to decrease the amount of capital they need to put forth.

According to a paper from the Becker Friedman Institute, U.S. firms shoot for a multiple on their invested capital of about 2.8, and typically take around 20% of realized gains.

What’s the future for private equity? “With around $3 trillion of dry powder sitting out there (in investable funds) and a substantial amount of assets under management, you have a lot of money that’s being invested,” Hendon says, “and I think that with the returns private equity offers their investors, I don’t see it slowing down in the near future.”

Here are the top 10 largest private equity funds, ranked by AUM:

1. The Blackstone Group ($212 Billion)

Former Lehman Brothers bankers Peter Peterson and Stephen Schwarzman founded The Blackstone Group (ticker: BX) in 1985, originally offering mergers and acquisitions advisory services to large corporations. After overcoming initial fundraising difficulties, by 1987, the partners closed their first investment fund, with large investors including Prudential Insurance Company (PRU), Nikko Securities and the General Motors (GM) pension fund. More than 30 years later, the group manages more than $212 billion in private equity funds, as well as more than $400 billion in alternative investments including real estate, credit and hedge fund solutions.

In June 2008, the firm went public and opened its first day of trading on the Nasdaq at around $30 per share. After a hot start to 2021, the stock currently trades at close to $100 per share. First-quarter results showed Blackstone recorded more than $1.75 billion in net income, including $741 million in fee-related earnings.

Notable Blackstone investments include its 2019 $3 billion acquisition of a majority stake in Bumble (BMBL), the popular dating and social networking app in which women make the first move. Bumble, which went public in February, currently has a market capitalization of more than $6 billion. In addition, Blackstone has invested in Ancestry.com, SeaWorld (SEAS), Motel 6 and Legoland.

2. KKR ($149 Billion)

In 1976, Jerome Kohlberg Jr., Henry Kravis and George Roberts, all former employees of Bear Stearns’ leveraged buyout group, came together to form their own buyout firm, KKR (KKR). In 1989, the firm executed what was the largest buyout in history, acquiring tobacco and food producer RJR Nabisco for $25 billion. Interestingly, KKR invested only $15 million of its own money, or 0.06% of the total, funding the rest with loans and funds from institutional investors.

In July of 2010, KKR went public on the New York Stock Exchange (NYSE), with shares finishing the first day of trading at a price of $6.08, adjusted for stock splits and dividends. The stock now trades for around $60 per share. In Q1 2021, KKR posted net income of $1.64 billion, a significant improvement from the $1.29 billion loss in the same quarter a year prior.

As of March 31, 2021, KKR had completed private equity transactions with around $650 billion in enterprise value over its corporate lifetime. Noteworthy investments include 1-800-Contacts, US Foods Holding Corp. (USFD) and ByteDance, TikTok’s parent company.

3. The Carlyle Group ($137 Billion)

The Carlyle Group (CG) was founded in Washington, D.C. in 1987 by five business partners, including current chairman and noted investor David Rubenstein. By 1990, the firm had secured more than $100 million to launch its first fund. Today, the firm manages $260 billion in assets across 256 portfolio companies, with $137 billion invested in its global private equity business and the remainder split across its global credit business and other investment solutions.

Like Blackstone and KKR, Carlyle decided to go public, and in May of 2012, Carlyle began trading on the Nasdaq. Historically, the firm has offered substantial dividends for its investors and in 2020, delivered distributable earnings of $762 million, the highest figure in the last five years.

In 2017, funds managed by Carlyle acquired Golden Goose, a distinctive luxury fashion brand, and helped the company open more than 100 stores across the globe, more than doubling its revenue. At the end of 2020, The Carlyle Group invested more than $11 billion through its private equity platform and raised more than $27 billion in new capital.

4. Apollo Global Management ($89 Billion)

Since its inception in 1990, Apollo Global Management (APO) has invested in more than 150 companies across nine different funds and currently has more than $89 billion under management in its private equity business. Apollo utilizes many different investment strategies including leveraged buyouts, carve-outs and distressed investments.

Apollo went public on the NYSE in 2011, raising $565.4 million. On an adjusted basis, shares are up more than 700% from the initial public offering.

Apollo is well known for partnering with Metropoulos & Co. to take a majority stake in the then-defunct brand Hostess (TWNK), famous for snack foods such as Twinkies, Ho Hos and Ding Dongs, for $410 million in 2013. Recently, Apollo purchased Verizon Media, which included AOL, Yahoo and Verizon Digital Media Services, for $5 billion dollars from Verizon Communications (VZ).

5. CVC Partners ($87 Billion)

CVC Partners is a privately owned investment fund established in 1981 and headquartered in Luxembourg. The firm traces its roots to Citicorp Venture Capital, the investment arm of major bank Citicorp, now Citigroup (C), which helped to fund more than half of CVC’s first fund, before the two entities split in 1993.

Today, CVC’s private equity platform manages almost $87 billion assets across four strategic funds: Europe/Americas, Asia, Strategic Opportunities and Growth Partners.

Notably, CVC took a majority stake in the Formula One Group between 2005 and 2006 and planned to take it public. Although the planned IPO fell through, in 2017, CVC sold its stake in Formula One to Liberty Media (LSXMA) for $4.4 billion.

6. Advent International ($76 Billion)

Advent International was founded in 1984 and has since invested $56 billion across more than 375 different investments.

Headquartered in Boston, the firm opened its first fund in 1987, raising more than $225 million. Now, the firm invests across five core industries – business and financial services, health care, industrial, retail, consumer and leisure, and technology – and raised $17.5 billion for its latest fund in 2019.

Notable investments include a 2005 acquisition of a minority stake in Lululemon Athletica (LULU) and a 2011 acquisition of Bojangles’ Famous Chicken ‘n Biscuits. Both have been divested for substantial profits.

7. TPG Capital ($72 Billion)

Originally founded as the Texas Pacific Group in 1992, TPG made its first and most famous investment in 1993 when the firm invested in the then-bankrupt Continental Airlines. Founders David Bonderman and Jim Coulter, confident the buyout would be lucrative, quit their jobs and raised $66 million to take a controlling stake in the airline company. By 1997, Bonderman and Coulter had realized a more than 1,000% return on their investment.

In addition to its investment in Continental Airlines, other notable TPG investments include a $2.3 billion leveraged buyout of Burger King as well as early stage investments in Uber (UBER) and Airbnb (ABNB). What’s more, in February, the firm entered an agreement to take a 30% stake in a newly formed spinoff consisting of DirecTV, U-verse and AT&T TV.

8. Warburg Pincus LLC ($63 Billion)

Warburg Pincus LLC traces its roots to E.M. Warburg & Co., an investment banking firm founded in New York in 1939 by Eric Warburg. In 1966, Lionel I. Pincus & Co., a New York-based venture capital group, acquired the firm and the names were combined. Since, the firm has invested more than $90 billion across more than 930 companies, ranging from growth capital for startups to large-scale buyouts of mature companies.

Former U.S. Treasury Secretary Timothy Geithner serves as the company’s president. While headquartered in New York, the firm actively pursues deals across the Americas, Europe and Asia.

9. Bain Capital ($60 Billion)

Former Bain & Company consultants Mitt Romney, T. Coleman Andrews III and Eric Kriss founded Bain Capital in 1984. The firm, a separate entity from consulting group Bain & Company, would combine the management consultants’ powerful strategic insights with significant amounts of private, flexible capital. Today, most managing directors at Bain have backgrounds in consulting and rely on this experience to evaluate companies for potential investment, implement operational changes and complete management changes.

One of Bain’s first investments, a $4.5 million early stage investment in Staples, returned 5.75 times Bain’s initial investment when Staples went public several years later. Other notable investments include buyouts of Burlington Stores (BURL) and Michaels Stores as well as large stakes in The Weather Channel and the micro-investing app Acorns.

10. Neuberger Berman Group LLC ($56 Billion)

Neuberger Berman is a private, employee-owned investment manager founded in 1939 by Roy Neuberger and headquartered in New York City. The firm offers an array of solutions, including fixed income, hedge fund, real estate and insurance strategies for wealthy individuals and institutions, but it’s most known for its private equity business. For over 30 years, the firm has been investing in private markets and currently has $56 billion in assets under management and more than 200 investment professionals in 10 countries.

Notably, Neuberger Berman prides itself on corporate culture and an impressive employee retention rate; since 2009, the firm has retained 97% of its senior professionals. What’s more, inspired by Neuberger’s love for contemporary art, the firm now maintains a sizable and valuable collection, proudly displayed in hallways, reception areas, and meeting rooms.