Defined Benefit
Insurance Assets
Nonprofit

Where Do Private Equity Investors Go From Here?

Where Do Private Equity Investors Go From Here?
clock
1 min 38 sec

Posted by

Private equity had a slower but still active 1Q22. The unsettling shift in the geopolitical and economic environment is creating murkiness regarding the future direction of private equity activity volumes. Fundraising remained strong, with venture capital dominating new commitments and buyouts paling by comparison. This an unusual shift not seen since the late 1990s, which was the last time that venture capital and technology-related investments gained outsized popularity after producing several years of outsized relative returns—particularly bolstered by an exuberant IPO market. Company-level private transactions fell on average about 23% by dollar volume and 24% by new deal count. Exits declined more than new investments. IPOs faced continuing challenges.

1Q22 Private Equity Activity in Detail

Fundraising: Based on preliminary data, 1Q22 private equity partnerships holding final closes totaled $216 billion, up 16% from 4Q21. New partnerships formed dropped 34% to 497, with larger funds remaining dominant. European commitments fell to a markedly low 16% of the total in 1Q. New buyout fund commitments were surprisingly low given its 44% share of commitments for the full year 2021. (Unless otherwise noted, all data come from PitchBook.)

private equity

Buyouts: Funds closed 2,667 investments with $200 billion in disclosed deal value, a 31% decline in count and a 16% drop in dollar value from 4Q. The largest investment was the $17.0 billion sponsor-to-sponsor sale of electronic medical records company Athenahealth by Veritas and Elliott to Bain and Hellman & Friedman.

VC Investments: New investments in venture capital companies totaled 11,495 rounds of financing, down 6%, with $154 billion of announced value, down 20%. The largest investment was the $3.0 billion mega 2nd round in Altos Labs, which focuses on cellular rejuvenation, by Foresite.

Exits: There were 540 private M&A exits of private equity-backed companies, a drop of 41%. Disclosed values declined 33% to $140 billion. There were 41 private equity-backed IPOs, down 66%, which raised an aggregate $7 billion, down 76%.

Venture-backed M&A exits totaled 693 with disclosed value of $46 billion. The number of sales fell 18% from 4Q, and announced value fell 22%. There were 69 VC-backed IPOs, down 60%, and the combined float totaled $7 billion, an 83% decrease.

private equity
Private Equity Returns: Tremendous 2021

The year 2021 produced a 37% increase in private equity returns, about 10 percentage points higher than the publicly traded equity indices. While distributions remained strong, most of the gains constituted unrealized mark-ups.

The strong 4Q21 public market rally bested private equity, which rose by only about half as much.

The Refinitiv/Cambridge private equity database shows strong outperformance over broad public equity indices over all other horizons. If the increased downside volatility that started to appear in 3Q21 persists, private equity is expected to widen its current robust margin of long-term outperformance.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Private Markets

2024 Private Equity Fees and Terms Study: Lessons for Institutional Investors

Ashley Kahn
This study analyzes private equity fees and terms to help institutional investors.
Private Markets

Nonprofits: Same Mission, but New Approach to Allocations

Tony Lissuzzo
Callan expert discusses changes in nonprofit allocation trends over the last 20 years.
Private Markets

Some Early Signs of a Rebound, but Challenges Remain

Ashley Kahn
Callan expert analyzes private equity activity in 2Q24, from fundraising to exits.
Operations

A Deeper Look at How We Did With Our Capital Markets Assumptions

Julia Moriarty
An analysis of how Callan's Capital Markets Assumptions performed over time by asset class.
Private Markets

Significant Drops in Private Equity Activity From Peak Years of 2021-22

Ashley Kahn
Callan expert analyzes private equity activity in 1Q24, from fundraising to exits.
Private Markets

Sector-Specialist Strategies: What Institutional Investors Need to Know

Chrissy Mehnert
A look at sector-specialist strategies and how institutional investors can analyze them.
Private Markets

Private Equity Sees a Big Slowdown After Frenzy of 2021

Ashley Kahn
An update on private equity performance in 4Q23 and for the year.
Private Markets

Private Equity Investors Focus on Exits as Activity Drops

Alternatives Consulting Group
The Alternatives Consulting Group provides an update on private equity performance in 3Q23.
Operations

What Investors Need to Know About the SEC’s 2023 Private Funds Rules

Alternatives Consulting Group
The Alternatives Consulting Group analyzes the new SEC rules on unregistered private funds.
Private Markets

Private Equity Headwinds Slow Liquidity

Alternatives Consulting Group
Gary Robertson provides an update on private equity activity in 2Q23, from fundraising to exits.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.