Los Angeles is where big business goes to thrive

Ares Management, No 4 in the world in private equity based on market capitalisation and ranked fifth in assets under management, is the peerless performer among its four largest competitors -- KKR & Co (New York), Blackstone Inc (New York), Brookfield Corp (Toronto) and Partners Group Holding AG (Baar-Zug, Switzerland) -- with a 37 percent appreciation during the past 12 months. Not only is Ares poised for 96 percent sales growth through 2025, replicating the increase of 71 percent the past three years, but assets under management are up 231 percent since 2017 and 136 percent since 2019. All of which underpins a total return (income plus appreciation) of 480 percent, more than triple global private equity's average of 153 percent, 14 times the S&P 500 Financial Index (34 percent) and seven times the return of the broad S&P 500 Index. During the past two years when global private equity shares declined 16 percent on average, Ares became 45 percent more valuable, according to data compiled by Bloomberg. Meanwhile, the number of people it employed soared 75 percent to 2,100 between 2019 and 2022.

Houlihan Lokey, the second-largest Los Angeles company based on market value and one of the world's biggest publicly-traded firm specialising in acquisitions and financial restructurings, reported an 87 percent increase in sales the past five years, double the average for its industry. Headcount increased 75 percent to 2,610 employees. Houlihan Lokey's shares gained 142 percent the past five years, five times the 25 percent gain for a world institutional brokerage index. Radnet Inc, the No. 1 US provider of outpatient diagnostic imaging services, continues to outperform its global competitors with a 68 percent gain to shareholders this year after appreciating 10 times during the past decade.

For all the handwringing over the 3 percent decline in population to 3.7 million since 2020, the high cost of housing and homelessness, the City of Angels still benefits from America's largest (500,000) manufacturing base and almost a dozen industries collectively distinguished by their diversity: aerospace, biosciences, design, entertainment, electric vehicles and advanced transportation, fashion and apparel, food manufacturing, information technology, ocean economy, tourism and trade. More than 92 percent of Los Angeles commerce is small business.

“There's this certain kind of ambition, swagger in LA that makes people want to do very ambitious things and I think propels people to dream very big,” said Tim Ellis, the 33-year-old co-founder and chief executive officer of Relativity Space, an eight-year-old startup that made the first 3D printed rocket to enter space. (Reality's 110-foot Terran 1 was the largest metal object 3D printed.) “Most of my friends are engineers, but I'm friends with tons of artists and tons of people in fashion and other industries. That's the kind of innovation and mentality that it would take to do something as crazy as put a million people (on) Mars,” he said during a 2022 interview with Bloomberg News.

Ellis, who grew up in Plano, Texas, and holds bachelors and masters degrees in aerospace engineering from the University of Southern California, is a lodestar for Dee Dee Myers, a senior advisor to California Governor Gavin Newsom and director of the Governor's Office of Business and Economic Development. “We have the most highly-skilled workforce, we have more engineers, more Nobel laureates, more patents and all of that continues to turn the wheel of the economy,” Myers said last month in an interview at the Los Angeles bureau of Bloomberg News.

Since she became Los Angeles's 43rd mayor last December, Karen Bass is all too familiar with “prominent business CEOs” talking “about the dire situation in our city and state. If it was such a terrible business environment, why would you have all this data” suggesting success for the city’s biggest companies, she said during a Zoom interview earlier this month. Sure enough, more than 10,500 new businesses were launched since Bass took office.

As “a born and raised Angeleno,” she said, “you don't think about how large we are until you interact on the national level,” where she served in Congress as the 26th chair of the Congressional Black Caucus, “and there are many state populations as well as economies that could fit inside our state. That gives me the confidence that when we hit speedbumps, we will not only survive but thrive.”

-With assistance from Shin Pei.

Matthew A Winkler, Editor-in-Chief Emeritus of Bloomberg News, writes about markets. Views are personal and do not represent the stand of this publication.