- PE already under massive strain from 2020 - 2021 vintage - max leverage and overpaid on businesses
- Inability to exit due to the above, and higher rate environment
- LPs demanding DPI back and refusing to contribute to new fundraises absent DPI - but cannot send DPI back due to over-valued / marked assets
- Many funds unwinding / closing down-funds last 12-months
- With tariffs - now these are over-levered companies, some with extensive global exposure (i.e., cheaper sourcing from Asia / Europe / China) that overnight had a 25-100% increase in COGS (the more exposed ones)
- Most of these companies have no real pricing power - particularly not in this economy with a fatigued consumer
- Recession risks rising significantly while also confronting potential tariff-driven inflation - combined with unwinding of levered Treasury bets raising cost of capital across the Board
- Game over PE - many blow-ups imminent
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PE isn't dead but the generic (large portion of PE, let's be real) portion of PE will bleed to death in the coming 5-10 years. Tariffs and all of the current economic issues aside this was going to happen because of the 2017-2021 vintages paying goofy multiples for companies that grew at 3% a year.
Small/nimble firms who want to remain small/nimble have the best chance of actually still producing returns for LPs.
Agree but there was a lot of hope that a strong economy / lower rate environment would unlock and finally save these extended vintages. Looks like that dream is dead and 6-ft underground. Even without a recession timelines are going to get further extended and no one is selling these assets for anywhere close to what they were paid on (multiples wise) - but now with a potential recession + tariffs we're going to see an even faster acceleration of BK / LMEs and fund wind-downs.
2-3 years of fun times for distressed PE, thx orange man
Are you kidding? A recession is exactly what we needed. Now we get to point to this exogenous event as the core reason for portco blow ups, largely escaping direct responsibility.
Cheers to another decade of easy money, chimps.
Not quite, champ, but nice try
There are still a ton of funds doing just fine. Not everyone was deploying top dollar and the height of the last cycle peak. PE is never going away lol
What are some notable PEs that have wound down?
See below for exhaustive list.
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I am LT slightly bearish PE, but that doesn't mean the asset class is going anywhere. Taking the other side of the coin, volatile stocks make for more actionable take private targets, and the eventual reshoring of some manufacturing and supply chains means that there will be winners, not just losers.
This is valuable insight, thanks for sharing …
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