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Cerberus's $7.4 billion acquisition is plagued by retiree benefits and higher dependence on gas guzzlers.
2008 Rank: 15
2007 Rank: 9
Recent buyout fundraising: $7.5 billion

In hindsight, founder Steven Feinberg may have bitten off more buyouts than he could chew as he transformed his distressed hedge fund into a private equity shop. Cerberus's $7.4 billion acquisition of Chrysler is plagued by retiree burdens and higher dependence on gas-guzzling pickup trucks than any of the other Detroit Three.

The 2006 GMAC acquisition looked smart before car loan defaults began to rise (they hit a ten-year high at the beginning of the year) and mortgage delinquencies eviscerated the ResCap division. ResCap has been downgraded to junk, and GMAC bonds are trading below 90 cents.

Even so, the protean firm is finding ways to make money amid disaster by returning to core competencies. It has the cash and skill to make money buying distressed bonds, and its Ableco lending arm could thrive by servicing companies that can't get money from traditional banks. Should the need arise, these companies will include dented pieces of Cerberus's own portfolio.

How lucrative are these loan arrangements? The terms vary from deal to deal, but a typical $30 million three-year loan commands a 12% to 14% yield to maturity. If the borrower can't pay, Ableco gets its assets, a move that sometimes amounts to taking possession of the company itself.

Headwind issue: The rest of Cerberus's portfolio is clustered in sectors that currently face problems--banking, manufacturing, retail, and automotive. So companies including Tower Automotive, Guilford Mills and Rafaella, will all need some combination of clever management, lower energy prices, and a rebound in consumer spending to survive. For the firm that loved deals with hair on them, 2008 is going to be woolly.

Worth noting: Feinberg made a bet with a private equity competitor that he could run the New York City marathon in under four hours. He trained for a day and did it in 4:08.

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Last updated July 28 2008: 4:28 PM ET
Source: Rankings are based on a firm's most recently raised buyout fund(s). Fortune looked at data from Capital IQ, institutional investors, and the companies themselves to determine the size of the most recently raised buyout funds. For some firms that means a fund that was raised in 2007; for others it might be 2006. Whatever the date, the most recent fund was the one we counted. In the case of companies that raise multiple funds simultaneously as opposed to raising a single fund at a time, we chose to count only those private equity funds that were not raised in public markets and that were earmarked for buyouts (as opposed to investments in debt, venture capital, or other ventures).
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