Five private equity predictions for 2024 (2024)

FAQs

What is the outlook for private equity in 2024? ›

In 2024, PE firms are increasingly targeting retail investors who are drawn to the resilience of the asset class, the diversification it offers, and its performance compared to public markets. It's particularly attractive to high-net-worth individuals and quasi-retail investors.

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.

How big is the private equity industry? The global private equity market size is expected to increase USD 1,246.08 billion by 2033 from USD 492.82 billion in 2023.

15.2% – The private equity median annualized return over a 10-year period, higher than all other asset classes including public equity, real estate, and fixed income.

PE is showing the most growth potential among private assets and will very likely account for nearly 70% of alternatives AUM by 2025, according to Preqin. As it is, PE fundraising has been strong thanks to the asset class's exceptionally robust performance over the past decade.

Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025. Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization.

Private equity deal values seem to be rebounding in the past few months, fundraising remains robust and secondaries have entered what could be a golden age.

Private equity (PE) activity saw its strongest quarter in two years in Q2 2024. Firms announced 122 deals valued at US$196b, nearly double the US$100b announced in Q1, making it the strongest period for capital deployment since the downturn began in the third quarter of 2022.

EBITDA is useful in considering the value of a company because it: Normalizes capital structure. EBITDA removes the impact of a company's capital structure by adding back interest expense.

Private equity can be a very well-performing asset class during a recession.

What is private equity looking for? ›

Private equity firms want to see an ambitious and realistic business plan before investing in a company. Good sales and profitability prospects are essential, and the target company's facts and figures must support those forecasts.

Many private equity companies have continued to deliver strong earnings, in areas of secular growth in the economy. In the ICG Enterprise Trust (ICGT) portfolio, for example, we hold companies that tap into the strong growth of a variety of sectors, such as tech-enabled business services, consumer and healthcare.

The third private equity boom and the "Golden Age" of private equity (2003–2007) As 2002 ended and 2003 began, the private equity sector, had spent the previous two and a half years reeling from major losses in telecommunications and technology companies and had been severely constrained by tight credit markets.

This is also known as the “2 and 20” fee structure and it's a common fee arrangement in private equity funds. It means that the GP's management fee is 2% of the investment and the incentive fee is 20% of the profits. Both components of the GPs fees are clearly detailed in the partnership's investment agreement.

For example, 80% of wealth is owned by 20% of the population. The same is true of investment costs: if 20% of assets are invested in private markets (private equity, private debt, infrastructure, real estate etc) they may well account for 80% of total costs.

Analysts project 11.5% earnings growth and 5.5% revenue growth for S&P 500 companies in 2024. Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year.

The Mortgage Bankers Association didn't include mortgage rate predictions in its August 2024 Economic Forecast, but its latest forecast in May 2024 showed rates falling from 6.4% in January to 5.9% in December.