So far this year, there have been 28 initial public offerings (IPOs). Of these, seven are already up at least 20%. In fact, one IPO — Chinese Internet company Qihoo 360 (NYSE: QIHU) — surged 100%.

The problem is that you probably weren’t able to get in on any of them. The reason is that IPOs are hot commodities on Wall Street and go to top clients such as wealthy investors and institutions.

However, there is actually a clever way to participate in the upside. How? By investing in the top private equity firms that help bring many of these companies public. Essentially, private equity shops look for companies with strong cash flow and substantial barriers to entry. They will use lots of debt to buy the companies — hopefully at low valuations. A few years later, the private equity firms will take these companies public and often reap big returns.

Take a look at the largest hospital operator in the United States, HCA (NYSE: HCA), which pulled off a $3.79 billion IPO in early March. The private equity backers behind the deal made a return of more than 250% from when they took HCA private in 2006.

Keep in mind that a private equity firm gets a cut of the profits from these IPOs, which can range from 20% to 25%. In light of the large transactions, the fees can add up. And yes, it looks like the IPO market is ripe for more deals.

The good news is that investors can participate in this trend — that is, by purchasing shares of private equity firms.

Let’s take a look at the top shops out there and see which looks like the best investment…

1. KKR (NYSE: KKR)
KKR is a pioneer in the private equity business, with roots going back to 1976. The original founders, Henry Kravis and George Roberts, are still leading the operation. In all, KKR has $61 billion in assets under management and a market cap of $3.8 billion.

About $46 billion of KKR’s portfolio is in private equity interests. The rest? Well, it has positions in public investments, debt securities and hedge funds. As a testament to its investing prowess, KKR has generated net average annual returns of 20% since its inception.

For its current portfolio, KKR has 62 companies that span 15 industries. Total revenue is roughly $200 billion.

2. Fortress Investment Group (NYSE: FIG)
Launched in 1998, Fortress Investment Group has nearly $45 billion in assets under management and a market cap of $2.6 billion. Fortress came perilously close to failing because of the financial crisis, as the stock price fell from $31 in early 2007 to $1.08 in March 2009. Since then, the firm has regained its footing and has aggressively pared down its debt load (the stock price is now near $5.60).

Only about a third of the firm’s assets are in private equity. The remaining is among a variety of sophisticated hedge funds, which cover areas like credit investments, Asian securities, currencies and even commodities. In fact, last year Fortress purchased Logan Circle Partners, which focuses on fixed-income investments.

In 2010, Fortress’ earnings came to $372 million, which was a big improvement since 2008, when the firm lost $162 million.

3. Blackstone Group (NYSE: BX)
Back in the “deal decade” of the 1980s, Stephen Schwarzman was one of the top players. In 1985, he founded the Blackstone Group. It took two years to raise a fund, but the timing was perfect. It came right after the stock market crash of 1987, when valuations were much more reasonable.

Now Blackstone, which has an $8.3 billion market cap, is the largest private equity firm in the world, with a staggering $128.1 billion in assets under management. If you combined its portfolio companies into one entity, it would rank No. 12 on the Fortune 500 list.

Blackstone is also one of the largest real estate investors in the world. Holdings include top office properties, hotels, student housing, health care facilities and leisure parks. There is also a group of thriving hedge funds in Blackstone’s portfolio. Blackstone even has a division that provides advisory services for mergers & acquisitions and restructurings.

Action to Take –> Of the three, my favorite is Blackstone. It has a diversified platform in key alternative asset classes. Already this year, Blackstone has had two successful IPOs: media ratings firm Nielsen (NYSE: NLSN) and BankUnited (NYSE: BKU), a consumer and commercial bank. If history is an indication, the returns from future deals should be strong. After all, Blackstone’s average returns have been 25% for both its private equity and real estate portfolios since inception.

While it is tough to predict what companies will be next to hit the IPO markets, there are some good prospects for the upcoming year. In other words, a healthy pipeline of future deals can be a big driver for earnings. 

And Blackstone’ valuation is certainly attractive at six times its economic net income (ENI), which is a standard calculation for the earnings of private equity firms that makes adjustments for the special tax treatment of the corporate structure, as well as recognition of profits and losses on the portfolios.

Consider that other top investment firms like Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) have price-to-earnings (P/E) ratios of 12 and 10, respectively. True, it’s not inevitable that the multiple will catch-up to these companies. But if the IPO market continues to show strength and valuations generally improve, investors should be interested. 

P.S. — Few investors realize that a 20-year energy agreement between the United States and Russia is about to expire. This deal supplies 10% of America’s electricity. As broke as our government is, the situation is so serious that President Obama is asking for $36 billion to avert this crisis. And Republicans support him. Here’s what’s going on…