For cash-strapped LPs, DPI (distributed to paid-in capital) is becoming new the IRR (internal rate of return). While investments were down, exits fell more sharply during the first half of the year, with 2023 annualized global buyout-backed exits on pace to drop by 54% versus 2022, and exit count is tracking toward a 30% decline. While there are challenges to getting deals done, particularly large deals, private credit is stepping in as commercial bank lending becomes tighter.īuyout funds alone are sitting on a record $2.8 trillion in unexited assets-over 4 times the level held during the global financial crisis. "Unwarranted" concerns about too much dry powderīain's study shows that concerns about "too much dry powder" appear unwarranted, as the volume is holding steady at $3.7 trillion across all private asset class strategies, with about 75% of that defined as "fresh," meaning less than three years into the investment period. The global private equity market is hopefully stabilizing." And while investors need confidence in the five-year outlook for an industry and a company, a clearer picture is finally emerging.
"Past cycles have shown that for dealmaking to rebound and continue, buyers and sellers need a reasonably stable economic environment – not necessarily an attractive one. "Sitting around because the market is down has never been a particularly effective strategy in private equity," said Hugh MacArthur, chairman of the global Private Equity practice at Bain & Company. This suggests that the industry's primary focus in the months ahead will be restarting the capital flywheel by increasing distributions to LPs-whether through exits, general partner (GP)-led secondaries, recaps, or other liquidity solutions. A recent survey revealed that most LPs are more inclined to choose liquidity today rather than hold out for incremental gains.
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