First decline in private investment market in 10 years — Reasons
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For the first time in a decade, private equity fund assets under management began to decline. Even during the financial crisis of 2008, the industry continued to grow.
This was reported by the Financial Times.
Why the PE industry is shrinking
According to a report by Bain & Co, the total assets under management of buyout funds amounted to $4.7 trillion in June 2023. This is 2% less than the previous year.
The main reason for the decline was the accumulation of $3 trillion of stale and unrealized deals, which forced investors to abandon new investments in the sector. This is the first decline in assets since 2005, the year Bain began tracking the market.
Currently, the process of raising capital has slowed significantly due to difficulties in selling assets and returning funds to investors. In 2024, the amount of new funds raised decreased by 23%, reaching $401 billion, the lowest level since 2020.
Reduced payments to investors and weakened cash flows put additional pressure on pension funds that need stable contributions. According to Bain, in 2024, private equity fund payouts reached their lowest level in a decade, amounting to only 11%.
As a reminder, the crypto market has started to revive after the latest news from the White House. The value of bitcoin has risen sharply after US President Donald Trump's high-profile announcement of the creation of the US Strategic Crypto Reserve.
In addition, fintech startup Stripe is rapidly increasing its value. Thanks to investments in machine learning and artificial intelligence, the American tech company is now worth more than $90 billion.
