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Planting coins: 04/2024
Management Summary
- Kaleido Digital Asset Core Strategy achieved a strong...
Previous Cycle
THE era of exuberance
Over the past decade, the private equity market more than tripled in size and demonstrated itself to be a substantive and compelling alternative asset class as returns outperformed public markets by a considerable margin. During this time, general partners (GPs) raised ever-growing funds and returned to market for the next fund at a more rapid pace and larger size. At the same time, investors poured more money into the asset class.
The majority of private equity growth has been in a long, low interest rate environment. Even the pandemic did not hold it back. The industry was setting new annual records for exits and entries. Fundraising topped $1 trillion in 2021, another high-water mark.
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Upcoming Cycle
a new period of uncertainty
Record inflation, surging interest rates and a foggy economic forecast put the brakes on private equity dealmaking. As credit headwinds continue, private equity is preparing investment strategies for an even longer investment cycle as continuation funds are on the rise. Longer investment cycles mean that private equity firms have more time to play out their value-creation strategies with portfolio companies.
Conventional wisdom in private equity is that economic downturns produce some of the industry's best vintages. Corporate valuations dip, allowing private equity to enter new investments at a discount. With any luck, the economic cycle will have shifted when it comes time to exit after private equity's typical three- to five-year hold period for portfolio companies.
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