If PE is shrinking, what other asset class is growing?
I have heard/read so many posts about how PE's golden age is behind us and how the industry is consolidating/fundraising has become harder. But if LPs still need to allocate capital to generate returns, where are they diverting all this money to? Larger & more scaled Funds or another asset class?
Bump. Following
bump, followed
Secondaries and other tangential strategies that help GP/LP liquidity. There are a lot of assets in the market that won't move for the market price and are only accretive on paper, so LPs are willing to cell at 85-90 cents on the dollar. NAV financing is also hot now, not at much as it was last summer but I know a lot of funds that are venturing into this strategy. Rationale - direct lending is getting commoditized so you gotta be creative with your lending.
I think the above comment made a fair point but I find it hard to believe that people think these asset classes (i.e., secondaries and NAV lending) will continue to grow while PE shrinks. It makes sense in the short term, but this just highlights the cyclical nature of these asset classes. They ebb and flow. I see secondaries following a cycle similar to distressed investing and value investing, both of which were out of favor during the 10+ year bull run. For secondaries specifically, its future growth will depend on PE continuing to grow in some form.
Think it's always surprising to hear secondaries when this question is asked. If we accept the premise pe is in decline because of lower returns, secondaries might capture some value on the way down but at the end of the day you're still left holding essentially PE stakes. It's like trying to time a falling knife, not a great place to build a long-term career.
Bump
Credit/Infra
Secondaries, private credit, infrA
Seems Credit is almost the opposite of PE since it benefits pretty well from higher interest rates
Except the large players are all tied to either cyclical/industrial industries or tech. Both of which can't handle high rates (for different reasons). Some of the tech focused credit funds are dead IMO because there's no assets to recoup when default occurs.
Do you have any examples of this? (Failed tech credit investments)
Infra is pretty hot
Sit aut accusamus vitae nam omnis. Eaque eaque est qui iure enim architecto. Fuga ut corrupti omnis blanditiis. Nostrum omnis ut et saepe debitis harum. Illum quod enim et molestiae perspiciatis ducimus.
Alias eius et similique soluta. Qui quis et ullam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...