Hello! I’m Michael, here to welcome you to AGM, a hub for private market enthusiasts. I’m thrilled to present my weekly slice of insights, the AGM Alts Weekly. Each Sunday, I delve into the latest happenings, emerging trends, and forward-thinking innovations in private markets. The newsletter is a blend of news highlights, expert commentary, an index of publicly listed alternative asset managers, available positions in private market companies, and noteworthy podcasts and articles from Alt Goes Mainstream.
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In New York, I’ve spent the past week engaging in podcast recordings and meetings. Every industry faces cycles, and private equity is no exception, as demonstrated by Bain & Company’s Global Private Equity Report 2025. Navigating this challenging cycle, especially in fundraising, feels almost like swimming against a tide.
Fundraising in 2024 witnessed a 24% decline compared to the previous year, compounded by a further 15% decrease from 2022. The primary cause? A significant factor is the imbalance between distributions and contributions.
Distributions took a hit during 2022 and 2023, with the distribution-to-contribution ratio stagnating at 0.8 in both years. This has led to increased hesitation in allocating to private equity.
Private equity finds itself at the low point of a wave, as illustrated by a decrease in the growth of global buyout assets under management in 2024 after experiencing a robust 14% annual growth rate from 2015 to 2023. Historically, similar growth challenges were seen before the global financial crisis, when liquidity issues hampered asset growth.
Is this a sign of upcoming trends? Possibly, but Bain’s report offers optimism, indicating that the exit market has improved since an earlier slump, with exit values rising above 2020 levels.
Driving this upturn are sponsor-to-sponsor exits, witnessing a 141% increase in exit value year-over-year and a 26% growth compared to the five-year average. Still, there are questions about the sustainability of these exits, given high deal multiples compared to previous years.
In 2024, median EV/EBITDA multiples rose across North America and Europe, staying above their five-year averages. This elevation, set against a backdrop of significant dry powder, poses questions about investment returns.
With dry powder at an all-time high—24% of which is aged four years or more—fundraising remains a lengthy endeavor for many buyout funds. The proportion of funds closing within six months has reached its lowest in the past decade, while most funds face an extended fundraising timeline of one to two years or more.
During tough times, private equity might resonate with Mr. Probz’s “Waves,” artistically capturing current challenges GPs face as they strive to maintain attractiveness for LPs in a demanding market.
Yet, not everything is bleak. Innovation and consolidation might steer the sector to brighter horizons. Generative AI (GenAI) presents a transformative opportunity for private equity firms and portfolio companies.
In a study conducted by Bain in September 2024, representing $3.2T in AUM, a large share of firms reported testing or using AI, with 20% operationalizing GenAI to tangible advantage. For instance, Vista Equity Partners is enforcing AI adoption in its portfolio, predicting it will drive revenue growth and margins to more aggressive targets than previously established.
Vista’s Robert Smith highlighted tangible benefits at the 2024 CXO Summit, where various portfolio companies, such as Mindbody, Quickbase, Avalara, and Pipedrive, have adopted AI to achieve operational efficiencies and cost savings.
AI’s introduction could position private equity optimally to reap the benefits of improved performance metrics and possibly more palatable valuations.
Looking at the strategic angle, today’s market conditions entail unpredictable exits, high levels of dry powder, and significant pressure to enhance firm initiatives around fundraising and post-deal value creation—all challenging against a backdrop of fee compression.
Traditional asset managers have faced similar scenarios, particularly the secular decline in fees following a period of robust growth.
Bain’s findings already hint toward noticeable fee compression in private markets. Since the global financial crisis, average management fees have reduced by up to 50%.
As more investors enter private markets, innovative structures emerge. Private credit and real asset classes have pioneered this trend, accommodating evergreen structures, with private equity starting to align similarly. Notably, KKR’s new Conglomerate LLC structure illustrates strategic innovation to tap into perpetual capital models.
The push towards perpetual capital sees industry leaders like Apollo and KKR maneuvering strategically by acquiring stakes in insurance companies to stabilize permanent capital inflows.
However, this flexibility is limited to certain larger firms with the required reach and capabilities to deploy these solutions efficiently, indicating that smaller firms might face substantial challenges aligning with these trends.
AGM provides insight through its Index, reflecting trends in publicly traded alternative asset managers. With major market players increasingly adopting perpetual structures, we witness a significant intersection of public and private spheres.
This convergence was captured memorably in a recent photo of BlackRock and Blackstone leadership, illustrating the liquid market’s transformation into a realm welcoming more bespoke, illiquid investments.
In closing, thank you for engaging with us on this journey. Your feedback ensures we continue delivering valuable insights in the ever-evolving private markets landscape. Subscribe to stay updated, and connect with us on LinkedIn or Twitter, where I frequently share thoughts on this exhilarating sector. Special gratitude to Michael Rutter and Nick Owens for their pivotal role in enriching this newsletter.
