Private equity performance has thus far held up well in 2023 as the market landscape shifted and key trends emerged across the phases of the private equity cycle: fundraising, deal activity, debt financing and exit opportunities.

Key Takeaways:1

  • Returns: Private equity returns were positive in Q2 2023, but underperformed their public market counterparts. However, long-term outperformance remains robust.
  • Deal Activity: Deal volume is off its 2021 peak, but remains in line with healthy pre-Covid levels. Investors are focused on high-quality assets, take-private deals and smaller transactions, particularly add-on acquisitions.
  • Financing Conditions: Tighter lending standards and more expensive cost of capital remains a challenge to deal activity. Private credit continues to dominate market share versus the traditional broadly syndicated loan market.
  • Exit Activity: Exit activity has been muted across IPOs, corporate acquisitions, and even sponsor-to-sponsor transactions due to the uncertain macro environment, higher interest rates and limited access to new financing.
  • Fundraising: Capital raising has slowed, particularly for less-established managers, as investors face the denominator effect, the unintended increase in exposure to private investments as a percentage of the total portfolio as public stocks/bonds decreased in value and portfolios experienced slower return of capital from prior private equity vintages.