Confidence of a better year surges among private equity execs

The private equity industry is set for a rebound in 2024 and investors are ready to increase their allocations to the assets, according to new research.

A global survey of PE executives shows that 60% are expecting deal activity to improve this year, a sharp rise from the 36% who felt the same a year ago. The S&P Global Market Intelligence report also found that optimism is strongest among smaller and mid-tier PE firms compared to larger peers.

There’s good news too for fundraising with just 15% of general partners feeling that things to be worse this year, one third of the percentage that said that last year. But venture capital professionals are concerned that limited partners may reduce their allocations, while 68% of these respondents expect deal activity to improve in 2024.

Investors are showing strong interest in private credit with 61% of LPs stating that they will increase allocations to the asset class this year. Among private equity GPs, in the past year 37% reported expanding their use of private credit in deal financing, with larger PE firms in particular making more use of private credit over bank loans.

The report also highlights mixed opinion about the potential of AI in the PE industry with little more than half (54%) of GP investment professionals foreseeing AI influencing deal sourcing and target selection in the future.

"This year's survey revealed more optimism among both general partners and investors as they are racing for a return to increased deal activity with increasing valuations allowing them to exit their backlog of investments and return cashflows to limited partners,” said Thomas Mercieca, associate director and lead author for the report, at S&P Global Market Intelligence. "We are pleased to see that despite macroeconomic challenges still lingering, the industry remains adaptable and poised for growth throughout 2024."