Capital Allocators – Inside the Institutional Investment Industry WTT: When Will Private Markets Normalize?
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Jan 22, 2025 Private equity fund flows are experiencing significant challenges. The supply-demand imbalance since 2019 is explored, revealing how rapid fundraising and slowed exits are affecting investors. The discussion highlights the critical need for portfolio rebalancing and the search for new capital sources. Predictions for a return to normalcy in 2025 are debated, with a consensus suggesting that the market is not quite ready for that shift.
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Imbalance in Private Equity
- Private equity fund flows remain unbalanced due to increased fundraising, slowed exits, and weak public market returns.
- These factors created a numerator effect by pulling forward future demand and trapping capital.
Market Strength and Portfolio Rebalancing
- Recent public market strength has reversed the denominator effect but hasn't resolved structural issues.
- Limited partners (LPs) need distributions to exceed contributions to rebalance portfolios.
Fundraising Reality and Expectations
- Private equity managers are adjusting expectations, considering maintaining fund size a win.
- Flat is the new up, and 2025 may offer better exit conditions, but expectations should be tempered.