Through one lens, 2024 can be considered the year of the partial exhale.
Interest rates and inflation finally came down. Economic growth in many markets remained stable. In response, deal investment value increased by 37% and exit value moved 34% higher. Alas, fund-raising struck a discordant note, falling 23%. As we’ve mentioned before, fund-raising is a lagging indicator for deal activity.
The real culprit behind lackluster fund-raising is a persistent liquidity situation for global limited partners (LPs). While exit activity accelerated last year, distributions as a portion of net asset value sank to 11%, the lowest rate in over a decade.
Positive signs? Rates and inflation appear poised to remain stable or decrease in many markets. Dry powder is still mountainous and aging. General partners are finding new and creative ways to boost LP liquidity. More dollars should flow into the industry from sovereign wealth funds and private wealth. And most important, returns remain strong.
