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Bailey McCann, Opalesque New York: Outside of venture capital (VC) and infrastructure where mean fees are above their historical averages, mean management fees for private equity, private debt, and real estate are close to the low end of their 20-year ranges owing to fundraising pressures in 2024, according to new data from Preqin.
After private market fundraising peaked at nearly $1.5tn in 2021, fundraising fell 20% to under $1.1tn in 2023. For instance, while infrastructure fundraising outcomes improved by this year, private debt fundraising is not forecast to see an upswing until 2026 and private equity until 2027*. A long stretch of fundraising headwinds - variable by asset class and region - have affected fund fees and terms.
"Fundraising headwinds can be traced to interest rate hikes and the current higher-for-longer environment," says Brigid Connor, lead author of the report, Research Insights, at Preqin. "The higher rates are linked to lowered valuations and a slower exit environment, which has put pressure on distributions. In turn, the distribution drought means that investors have less capital to commit to new funds while fund managers find themselves making concessions in fees and terms to meet fundraising targets."
In private equity, for vintages 2024 and raising funds, mean management fee rates look more favorable for investors, reaching 1.74% for buyout and 1.93% for growth equity compared to 1.85% and 1.97% in 2023, respectively. This ...................... To view our full article Click here
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