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Laxman Pai, Opalesque Asia: Private equity (PE) fundraising is on the decline and may slow further in coming quarters as institutional investors digest the impact of market sell-off, said a study.
According to Q2 2022 Private Equity Report by Preqin, private equity fundraising was $119bn and a decline of 50.5% in Q2 2022, compared to the same period last year.
Meanwhile, the deal value was $131.2bn in Q2 2022, a 44% year-on-year decline, the report added.
"The virtuous circle that has been driving private equity returns higher over the last several years is at risk of unwinding. Higher financing costs and the underperformance of technology in the new macro-economic environment may make it more challenging for private equity to continue its outperformance of public equity markets. Having said that, shorter-term performance will appear more insulated from the market turmoil," the report pointed out.
With the exit environment expected to continue to weaken, fund lives are expected to extend going forward as distributions continue to slow. Exit value was $150.7bn in Q2 2022, representing a 51.7% decline year-on-year.
Continuation vehicles will continue to prove attractive to GPs given the flexibility they provide. Preqin analysts anticipate an increase in appetite for private equity secondaries investment as some LPs look to manage allocations, and increase the supply of fund interests available in the market, potentially at discounts to net asset values.
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