Why invest in private equity now? (2024)

Why invest in private equity now?

Since private equity funds have far more control in the companies that they invest in, they can make more active decisions to react to market cycles, whether approaching a boom period or a recession. The result is that private equity funds are more likely to weather downturns.

Why invest in private equity today?

Potential for Higher Returns

One of the primary reasons investors are drawn to private equity is the potential for higher returns compared to public equity markets, given the higher risk. Private equity firms often target undervalued or undermanaged companies, presenting an opportunity for significant value creation.

Why do we invest in private equity?

The underlying reason for private equity investing is to achieve returns on investment that may not be achievable in the public market. Partners at PE firms raise and manage funds to yield favorable returns for shareholders, typically with an investment horizon of four to seven years.

Is it a good idea to invest in private equity?

As a complement to public equity investments or other alternative asset classes, private equity has the potential to reduce risk while maintaining or enhancing returns. As a result, we believe private equity can provide more consistency for investors with long-term financial goals such as retirement and long-term care.

Why do people want to go into private equity?

Examples of solid answers to the “why private equity” question: You want to work with companies over the long-term instead of just on a single deal. You want to get exposed to the operations of companies and understand all aspects rather than just the financial ones (note: “exposed to,” not “control” or “improve”).

Why invest in private equity in 2023?

Private Equity closes 2023 on a strong note.

PE remained resilient in 2023, as firms opportunistically deployed capital across a range of verticals, asset classes, and transaction types. Higher interest rates will continue to elevate the value of operational value-add.

What is the outlook for private equity in 2024?

The volume of private equity deals is poised to grow in 2024, along with an increased focus on AI to drive long-term value creation, according to the Franklin Templeton Global Private Equity team.

What are the cons of private equity?

What are the cons of private equity investing? Private equity investments are illiquid: Investor's funds are locked for a certain period. As such, investors in private equity must have a long-term investment horizon and be willing to hold their investments for a few years, if not more.

Why invest in private equity over public equity?

Key takeaways

Public equity refers to ownership in publicly traded companies, which are available to anyone with an investment account. Private equity has historically higher returns but isn't available to everyone and has downsides that include higher risk, higher fees, and lower liquidity.

Is BlackRock a private equity firm?

Private equity is a core pillar of BlackRock's alternatives platform. BlackRock's Private Equity teams manage USD$41.9 billion in capital commitments across direct, primary, secondary and co-investments.

Does private equity outperform the S&P 500?

Private equity produced average annual returns of 10.48% over the 20-year period ending on June 30, 2020. Between 2000 and 2020, private equity outperformed the Russell 2000, the S&P 500, and venture capital.

What is a good ROI for private equity?

Historical Performance: PE investments have historically delivered strong returns, often outperforming public markets over the long term. Average annual returns for PE can range from 10% to 20%, but this can differ significantly based on the fund's strategy, vintage year, and economic conditions.

How risky is investing in private equity?

Private equity investors also face greater market risk with their investments compared to traditional investments since there's no guarantee that any of the small companies in which private equity firms invest will grow at all.

Why not to go into private equity?

Private equity funds are illiquid and are risky because of their high use of debt; furthermore, once investors have turned their money over to the fund, they have no say in how it's managed. In compensation for these terms, investors should expect a high rate of return.

Why does private equity have a bad reputation?

Here are some reasons why some people view private equity in a negative light: Job Losses and Cost-Cutting:One common criticism is that private equity firms may focus on cost-cutting measures to boost short-term profitability, which can lead to layoffs and job losses.

What is cool about private equity?

Unlike public equity, private equity managers take an active and strategic role in the companies they invest in. They are far more in control of the directions and destinies of the companies in which they invest.

What is the future of private equity?

Private equity firms will focus on five key trends in 2024. Deploying artificial intelligence will lead the way, followed by investment in infrastructure particularly related to energy projects. Value creation will also be a priority as firms seek to improve strategic and operational efficiency.

Does private equity have a future?

As Private Equity (PE) houses and portfolio companies look ahead to 2024, they anticipate a changing exit landscape, continued hurdles in meeting their investment objectives and ongoing talent challenges. 2023 did not bring the dealmaking rebound many PE houses and portfolio companies had hoped for.

What is the average holding period for private equity?

Private equity investments are traditionally long-term investments with typical holding periods ranging between three and five years. Within this defined time period, the fund manager focuses on increasing the value of the portfolio company in order to sell it at a profit and distribute the proceeds to investors.

Will private equity survive a recession?

Private equity can be a very well-performing asset class during a recession. By understanding the risks and opportunities and having the right processes and technologies in place, your firm can punch above its weight and deliver high-quality returns to its LPs.

Is private equity still a good career?

The private equity space is one of the most competitive, but also offers some of the most lucrative careers in the world of finance.

What are the top industries for private equity?

Is private equity on the decline?

Private-equity deals in the U.S. fell in the just-ended period, with the aggregate value of deals dropping about 18% compared with the second quarter. The total value of U.S. private-equity deals was almost 55% lower than the peak reached in the 2021 fourth quarter.

Why is private equity so powerful?

Increased capital access: Private equity firms typically have access to large amounts of capital (also known as “dry powder”) that might otherwise be unavailable from conventional sources, such as banks, that they can use to finance businesses.

Why is private equity so hard?

Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.