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Capital Allocators – Inside the Institutional Investment Industry
WTT: When Will Private Markets Normalize?
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.
03:48
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Quick takeaways
- Private equity fund flows are unlikely to normalize before 2025 due to trapped capital and slower GP exits since 2021.
- Emerging interest from private wealth and sovereign funds presents new fundraising opportunities for GPs amidst traditional LP portfolio challenges.
Deep dives
Current Challenges in Private Equity Markets
Private equity fund flows are currently out of balance, with normalization not expected until after 2025. This imbalance stems from several factors that began around 2019, including aggressive fundraising by private equity managers who accelerated capital raises and deployed investments. The slowdown in general partner (GP) exits since 2021 has led to trapped capital, further complicating investor portfolios. Additionally, weaker public market returns have increased private allocations through a denominator effect, necessitating substantial distributions for limited partners (LPs) to rebalance their investments.
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