In 2024, the European the European private capital landscape is showing robust growth, maintaining its strength amidst global economic challenges. For Limited Partners (LPs), a detailed analysis of quantitative data, combined with adherence to strategic allocation principles, is essential to optimise returns. This analysis provides insights and strategies to navigate dynamic markets.
Robust Activity Forecasts:
Growth in Private Equity: Independent market forecasts indicate a significant 12.6% increase in PE deal value to €700 billion in 2024. This growth, notable for surpassing the decline in megamergers, reflects a solid deal pipeline and consistent investor interest.
Resurgence in Venture Capital Fundraising: VC fundraising is expected to at least match the 2023 record of €92 billion. Reports suggest this may even exceed the previous year's figures, driven by larger funds. This trend reflects LPs' focus on diversification and growth, particularly given public market volatility.
Prospects for PE Exits: Market analyses predict a 14.3% increase in PE exits, potentially reaching €400 billion. This offers LPs an opportunity for enhanced liquidity, supported by an anticipated increase in IPO activity for VC-backed companies later in the year.
Sectoral Focus:
Technology Sector: Technology remains a key sector in PE and VC activities. Analysis suggests focusing on high-potential subsectors like artificial intelligence or cybersecurity for strategic investment decisions.
Healthcare and Consumer Goods: These sectors, driven by long-term trends and consistent demand, present significant opportunities. In-depth due diligence is vital for identifying companies with strong return potential.
Data-Driven Investment Strategies: The growing reliance on data and analytics in PE due diligence and value creation suggests prioritising funds that utilise these methodologies. LPs should evaluate the data capabilities of funds for potential value creation.
Expanding Investment Horizons:
ESG Investment Growth: The rise in ESG investing offers new opportunities. LPs should identify fund managers committed to ESG principles, aligning with their sustainability goals.
Infrastructure and Real Estate as Alternatives: These sectors, offering diversification and potential lower correlation with public markets, are gaining traction. LPs should assess their suitability based on risk tolerance and diversification needs.
Strategic Asset Allocation:
Each LP's approach to the private capital landscape is influenced by their risk profile, investment objectives, and financial circumstances. Utilising data-driven insights for sector selection, conducting thorough due diligence on funds, and aligning portfolios with strategic objectives are key. Consideration of Separately Managed Accounts (SMAs) for targeted exposure to specific deals and strategies may be beneficial.
Author: Ethan Khatri. Managing Director, Private Equity & Venture Capital
Disclaimer: This document is intended for educational purposes only and should not be considered as investment advice.
References
Private Equity Flourishes:
Global M&A Trends in Private Capital by PwC, 2023
Preqin's 2023 Global Private Capital Activity Report
VC Fundraising Rebounds:
Global M&A Trends in Private Capital by PwC, 2023
Bain & Company's Global Private Equity Report 2023
Exit Bonanza on the Horizon:
EY's 2024 Private Capital Outlook
McKinsey & Company's Global Private M&A Outlook 2024
Sectoral Focus:
Technology Titans:
2024 Global Private Equity Outlook report by ION Analytics
PitchBook's 2024 Global Private Capital Report
Healthcare & Consumer Beacons:
McKinsey & Company report (specific date not provided)
Deloitte's 2024 Global Consumer Trends Report
Data-Driven Savvy:
Deloitte survey (specific date not provided)
Expanding Horizons:
ESG Imperative:
Morgan Stanley report (specific date not provided)
Alternative Anchors:
Preqin report (specific date not provided)
PWC's Real Estate Trends 2024
