With the best years of PE behind, what is the consensus among your firm about how PE as an asset class will evolve and the ease in finding investment opportunities (1-5 years form hereon)?
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Special sits is where it’s at
More competition and headwinds, less alpha to be found, suboptimal returns except for a minority of shops, and the same applies to fundraising, generally harder except for a few high performers. Retail money, particularly retirement accounts, will be a major engine, and Blackstone is leading the pack with BXPE. Secondaries has room to grow though. It will be bigger than it is now, that’s for sure.
Bear until QE begins again.
Sure, there's an argument to be made about "picking up assets for cheap" in the current market condition, but the reality is that ICs are spooked and deal activity is really slow.
There's also a counterargument to be made on good assets being priced more expensively (e.g., in the public markets, the S&P7 is probably up 5x what the rest of S&P493 were this year) because there's a flight to quality.
That's the issue here, asset prices haven't come down yet in broad auction processes (for good assets) but we still have to deal with the challenging financing environment. Folks just aren't selling - funds would rather hold for an extra year or two and give up some IRR points, but pray that rates come back down and still achieve their target MOICs. Eventually, people will just have to start selling, and that could create an interesting buying opportunity. Wouldn't be shocked to see 2018-2021 vintage funds really struggle, but '24-25 funds may actually crush if next year is the "trough". that is of course the question
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