Confidence in fundraising for Private Equity and Venture Capital despite limited exit opportunities, reveals survey

Private Markets sector sees recovery amidst rising interest rates and challenges in the investing environment.

Bangalore, 26 March 2024 Acuity Knowledge Partners (Acuity), a leading provider of bespoke research, analytics, staffing, and technology solutions to the financial services sector, today released findings from the third edition of its global private markets survey. Respondents representing 128 private markets firms spanning the globe, including North America, Europe, and Asia, gave their views on the outlook for private markets in 2024.

The key insight from the survey is that fundraising is expected to recover, with the sector assuming future interest rate cuts from central banks. As a result, fundraising plans are being revisited, with nearly two-thirds of respondents planning to raise funds in 2024; far more than the 22% of respondents who planned to raise funds in the last survey. In addition, private credit strategies are growing and are considering funds that can generate high returns (above 10%) within a short period of five years, with direct lending being the most preferred sub-strategy.

The primary hurdles for successful fundraising remain fierce competition and convincing limited partners. Two-thirds of the respondents feel that exits could be challenging, slightly fewer than last year. Preferences in terms of method of exit remain the same, with a few more respondents favouring secondary sales.

“Amid this increasing optimism about fundraising, an important shift is emerging with respect to competition for funds,” said Chanakya Dissanayake, Managing Director – Co-Head of Global Delivery Operations at Acuity. “While expectations relating to competition remain elevated and constant, the number expecting a decline in competition has doubled from 2022. Large players are confident in their ability to out-manoeuvre smaller funds in 2023, but firms of all sizes expect competition for funds to decline in 2024.”

Key Findings from PE and VC Firms:

  • Economic conditions and interest rates are expected to be the key factors in determining valuations and influencing fundraising in 2024.

  • Nearly 66% of survey respondents are gearing up to raise funds in 2024, a significant improvement from the previous year, with a focus on diversification, especially in emerging markets.

  • Over 53% of senior management cite limited investment and exit opportunities as a top concern, indicating ongoing challenges in capital deployment and returns.

  • 79% of respondents overall derive value from outsourcing, and 70% of private-market firms are considering outsourcing for greater operational efficiency, as portfolio monitoring and deal-related activities remain time-intensive, accounting for over half of professionals' time.

Pratap Narayan Singh, Senior Director, Head, Private Markets, Acuity Knowledge Partners added, “The respondents expect investing opportunities to improve this year; more than half of them expect this, versus 40% of them last year. All tech sectors seem to have attracted investor attention, but fintech appears to be losing steam.”

Buyout and venture funds represent 45% of the survey respondents. Over 60% of the respondents have leadership roles at their firms, with 92% having over five years of experience in the industry and over half relying on a decade or more of industry knowledge to prepare their responses.

To read the full survey report, click here.

About Acuity Knowledge Partners

Acuity Knowledge Partners (Acuity) is a leading provider of bespoke research, analytics and technology solutions to the financial services sector, including asset managers, corporate and investment banks, private equity and venture capital firms, hedge funds and consulting firms. Its global network of over 6,000 analysts and industry experts, combined with proprietary technology, supports more than 500 financial institutions and consulting companies to operate more efficiently and unlock their human capital, driving revenue higher and transforming operations. Acuity is headquartered in London and operates from 10 locations worldwide. Acuity was established as a separate business from Moody’s Corporation in 2019, following its acquisition by Equistone Partners Europe (Equistone). In January 2023, funds advised by global private equity firm Permira acquired a majority stake in the business from Equistone, which remains invested as a minority shareholder.

Media contact:
Stuti Das
Global Head of Communications and PR
Acuity Knowledge Partners
stuti.das@acuitykp.com

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