1. Inflation slows, room for lower interest rates
In 2024, the IMF expects a gradual decline in global inflation, albeit with regional differences. Importantly for investors, central banks are expected to cut policy rates, which will make financing private equity transactions easier.
2. Exit climate recovers slightly
According to Pitchbook, just over 1,000 exits took place in the European private equity landscape in 2023 up until November, more than 30% less than in the same period the previous year. Investment companies that previously had a wait-and-see approach will step up their efforts to achieve exits in 2024, as the end of term for some funds is approaching.
3. Continued growth of continuation vehicles
Continuation vehicles remain popular with investment companies to secure exits. Due to increased supply, there will be a continued flight to quality, with only the most attractive vehicles closing at the desired size.
4. Increase in private equity acquisitions
Private equity acquisitions are expected to increase, partly driven by still relatively abundant capital, which keeps company valuations supported. Investment companies that raised funds before the Covid pandemic remain under pressure to deploy capital towards the end of their investment period, resulting in a significant amount of available capital for 2024 and 2025.
5. Creativity remains crucial for successful dealmaking
Despite expected increased market stability compared to 2023, a creative approach remains key when closing deals. This may result in a higher number of carve-out transactions, where investment companies can often add significant value.
6. Slight recovery of fundraising market
With improving macroeconomic prospects and greater stability in public markets, established investment companies are expected to find more opportunities to raise capital for new funds.
New and relatively young investment companies may also benefit, although investors will continue to assess critically the quality, experience and professionalism of teams.
7. Further democratisation of private markets
Demand from entrepreneurs and private investors for private markets investments will continue to grow in 2024, driven by the need for diversification and higher returns. According to Goldman Sachs, European family offices allocated an average of 30% of their assets to private markets in 2023, with this share expected to increase further.
8. Increased supply of co-investments
Despite slightly improved fundraising conditions, investment companies will continue to offer co-investments to attract investors. Co-investments also enable better diversification with less capital at the fund level.
9. Further growth of the secondaries market
The average discount on secondaries transactions is gradually increasing, driven by investors’ continued willingness to sell fund positions. This is partly due to increased investment pace and resulting capital calls. As a result, the secondaries market is expected to grow further, with 2024 potentially becoming a record year in transaction volume.
10. Expansion of NAV loans
Despite concerns among investors, the NAV loan market is expected to continue expanding, driven by ongoing demand for liquidity.
