The 9.4 percent increase in private equity’s assets-under-management to roughly $3 trillion at the end of 2011 – an event that has been reported with fanfare in the media – demonstrates the complexity of the asset class, not it’s recovery from the credit bubble hangover. Breaking the $3 trillion barrier also indicates that the toughest challenges lie ahead for both general partners and limited partners.

First of all, some context. Twenty years ago, some 300 to 400 private equity fund managers, almost all of them investing exclusively in the United States, managed some $30 billion in assets, according to data compiled by Palico. Ten years ago private equity had expanded to some 2,000 fund managers holding $1 trillion in assets, with about 95 percent of that either invested in, or earmarked for, companies in North America and Western Europe. Today, a bit more than 4,500 general partners ply their trade around the globe, overseeing assets three times greater than a decade ago and up 100-fold since 1992.

While the ranks of LPs has grown to between 4,000 and 5,000 over the past twenty years, the size of investor teams has hardly expanded. Some family offices have the same number of people that they did twenty years ago, and though there are exceptions, public pension sector teams have shown relatively little growth.

What breaking the $3 trillion barrier in private equity net asset value really underlines is the incredible fragmentation of investment opportunity in private equity by geography, specialization and structure over the last two decades. At the same time, it brings home the time-lag between crisis and its fallout in an asset class where investors typically lock their money up for ten years or more.

Some $230 billion was invested globally in private equity funds last year, less than half the annual average raised during the 2005 to 2008 credit bubble. With about two-thirds of LPs at or above current allocations to private equity, and the number of new investors entering the asset class slowing considerably in recent years, annual fundraising is likely to remain relatively close to last year’s level for several years, with little prospect of returning anytime soon to the heights of the credit bubble.

A record of more than 1,900 GPs are currently in the fundraising market, with many struggling with reduced fee and carry levels for the first time. With returns no longer driven by leverage, LPs are finding their jobs tougher than ever, as they are forced to scour new geographies, sectors and structures for investment opportunity.

These pressures will lead some GPs to close up shop and will oblige LPs to become more imaginative in where and how they invest. Both groups clearly need to connect more effectively in a resource-stretched market place, a fact neatly hidden by that $3 trillion-in-assets number.