Private Equity will Continue to Shine in 2020

February 05, 2020 • Author: Howard Taylor
private-equity-will-continue-to-shine

Like hedge funds and mutual funds, private equity funds pool together resources from many different investors. But what makes private equity so much shinier than other investment vehicles? Two explanations: risks are spread out more evenly and buying power is magnified. In addition, private equity funds’ investments that are narrower and longer term.

PE funds are not for one-off investors or those who are novice players in the investing arena; so those interested in getting a piece of the pie, should do so cautiously. Because private equity funds reap enormous returns and help to launch innovative companies, one can easily picture why these investments would eventually yield lucrative returns. Whether used to finance a promising startup or to restructure a failing company, private equity funds will continue to increase during 2020.

“We believe private equity fund activity in commercial real estate is only going to increase during and throughout the coming year,” John Carrick, a co-founder at a private equity firm, tells GlobeSt.com. “Although public markets have certainly performed well recently, the lack of underlying fundamentals has eroded investor confidence over the medium to long term.”

Today, private equity is the recipient of a bevy of eager investors looking for a fruitful asset class. According to Bloomberg, PE firms have $2.58 trillion in global assets under management [1]. Firms are able to keep a ton of cash on hand for the right opportunity because their investment options are expanding. By having deep pockets, PE groups are expected to provide the financial resources to fuel growth.

The total invested in private markets hit all-time highs last year and continues to break multi-decade records this year. In the first half of the year, total investments in venture capital hit a 19-year high of $53.3 billion, according to data from Refinitiv published last week. That marked a 21% increase by total dollar amount compared to the first half of 2018 [2].

“In a world where big institutional investors find themselves starved for returns, it’s not surprising that they have steadily increased allocations to private markets and you’ve seen capital continuing to flow into the asset class,” Bryce Klempner, a private equity partner, told CNBC in a phone interview. “Private equity has, on average, managed to outperform public markets over the last couple of decades.”

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Sources:

[1] Blumenthal, Adam. (2017, September 15). How Does Private Equity Create Value? Retrieved January 13, 2020.

[2] Rooney, Kate. (2019, August 12). Investors, ‘Starved for Returns,’ Flood Private Markets in Search of High-Growth Opportunities. Retrieved January 13, 2020 from .