Dry Powder: The Private Equity Podcast A Deep Dive into Private Equity’s Future
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Sep 26, 2024 Dive into the future of private equity as challenges loom for firms managing numerous portfolio companies. Discover the implications of extended holding periods on internal rates of return, where adaptability can spell success. Explore how secondary markets are unlocking liquidity and the shift towards direct-to-consumer strategies. Technology's impact is profound, with blockchain and AI reshaping investment strategies. Finally, learn about the democratization of private equity access, emphasizing the critical role of education in navigating this evolving landscape.
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Increased Portfolio Burden
- Private equity firms hold twice as many portfolio companies as they did a decade ago, straining resources.
- This requires more active management and expertise than simply flipping assets like houses.
Impact of Holding Periods on IRR
- Longer holding periods and slow exits decrease IRR, potentially impacting some firms' ability to reach their hurdle rate.
- While some firms might not re-raise funds, top performers will thrive and new players will enter the market.
Need for Larger Secondary Markets
- Secondary markets in private equity are unusually small compared to primary markets, limiting liquidity for investors.
- Growing secondary markets is crucial, and various players are interested in facilitating this growth.