This publication provides our latest views on the state of the private capital markets and our perspective on potential opportunities for investors. Please contact your Truist advisor to learn more, and for guidance on how our views may help shape your portfolio.
Private equity market update
The fundraising environment has become crowded. More general partners have been returning to market seeking capital following a record-shattering deployment year in 2021.
- Global private equity (PE) fundraising maintained its pace in the second quarter of 2022 and is inching closer to last year’s total despite heightened volatility and uncertain economic forecasts. The trend of growing private market allocation targets is proving to be more durable than predicted based on historical fluctuations as it will likely still surpass the 5-year low reached in 2020.
- Emerging managers—those who have raised three or fewer funds—have accounted for 38% of total commitments this year demonstrating an increasing volume of options for investors, and an eagerness to search for alpha outside of crowded mega-funds with $5 billion or more in commitments to deploy.
Private equity is set to experience a stern test over the coming quarters as financial market conditions deteriorate on higher interest rates and waning risk appetite.
We provide perspective on prospects in opportunistic investments in infrastructure, qualified opportunity zones, and secondaries in the following sections.
Economic headwinds affect IPO and exit activity
The initial public offerings (IPO) market has slowed dramatically in 2022. Global IPO volume this year saw only 630 IPOs raise $95.4 billion, reflecting a decrease of 46% year over year. The backdrop for this weakness has been:
- Heightened volatility caused by geopolitical tensions and the global economic slowdown
- And declining valuations and poor post-IPO share price performance following a record-breaking year for IPOs in 2021
These headwinds have also affected PE exit activity resulting in a 37% decline year-to-date. However, when IPOs and dealmaking stalls, the volume of public-to-private buyouts typically increase as valuations are pressured. Through August 2022, 32 take-private deals have been completed, totalling more than $87 billion in value.
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