What LPs think will happen in private equity in 2024 (2024)

FAQs

What LPs think will happen in private equity in 2024? ›

“The next 10 years will be driven by different tailwinds. In 2024 and beyond, investment returns for private equity will rely more heavily on organic revenue growth and cashflow generation.

In 2024, PE firms are increasingly targeting retail investors who are drawn to the resilience of the asset class, the diversification it offers, and its performance compared to public markets. It's particularly attractive to high-net-worth individuals and quasi-retail investors.

Private equity firms will focus on five key trends in 2024. Deploying artificial intelligence will lead the way, followed by investment in infrastructure particularly related to energy projects. Value creation will also be a priority as firms seek to improve strategic and operational efficiency.

PE is showing the most growth potential among private assets and will very likely account for nearly 70% of alternatives AUM by 2025, according to Preqin.

In the first quarter of 2024, global private equity investments had an aggregate value of $144.8 billion, a 3% increase year-over-year. However, the number of deals dropped 17% year-over-year to 4,242 in Q1 2024 from 5,125 deals in the same period last year.

How big is the private equity industry? The global private equity market size is expected to increase USD 1,246.08 billion by 2033 from USD 492.82 billion in 2023.

Private equity deal values seem to be rebounding in the past few months, fundraising remains robust and secondaries have entered what could be a golden age.

2024 OUTLOOK. Heading into 2024, the private equity industry is faced with continuing uncertainty. Inflation, which steadily declined through most of 2023, ticked up in December 2023, adding hesitation to previously expected federal funds rate cuts.

The private equity market has grown substantially, and as of 2021, private equity firms manage roughly 20% of U.S. businesses. Private equity firms can access large amounts of capital, which is attractive to business owners, especially as bank loans are becoming harder to access.

Overall, it's just harder and more expensive to build a brand today than it was 15 years ago, which means many brands are seeking investment earlier on in their growth cycles, either from a private investor or venture capital.

Is private equity picking up? ›

PE sees its strongest quarter in two years.

Private equity (PE) activity saw its strongest quarter in two years in Q2 2024. Firms announced 122 deals valued at US$196b, nearly double the US$100b announced in Q1, making it the strongest period for capital deployment since the downturn began in the third quarter of 2022.

What is the minimum investment required for private equity? For PE funds, minimums generally range from $25,000 to several million alongside the requirements associated with being an accredited investor or qualified purchaser. Crowdfunding platforms tend to have lower minimums.

A role in private equity is a very competitive yet rewarding career path. Getting started in a profession in private equity (PE) requires strong analytical and networking skills to jumpstart a career at a PE firm.

Historical performance of private equity

Since the end of the year 2000, the global private equity index as measured by Preqin has delivered an annualized return of 10.5%, while a global public equity portfolio produced 7.0%, resulting in an average annual return premium of about 3.5%.

The large shortfall in private equity return for 2023 is due to a valuation spillover from the 2022 drawdown in public stock values. A two-year lookback shows private equity earning a 10.3% annual return compared to 0.2% for the public stock market equivalent.

Analysts project 11.5% earnings growth and 5.5% revenue growth for S&P 500 companies in 2024. Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year.

Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025. Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization.

The Mortgage Bankers Association didn't include mortgage rate predictions in its August 2024 Economic Forecast, but its latest forecast in May 2024 showed rates falling from 6.4% in January to 5.9% in December.

We believe the market environment in 2024 will continue to support private credit, through increased private equity activity, decreasing interest rates and capital structure optimization.