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March 2, 2024
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Private Equity

2023’s Private Equity Landscape: Declining Sales, Rising Valuations


Private Equity in 2023: A Year of Declining Sales and Rising Valuations

The landscape of private equity (PE) has been reshaped in 2023 as data reveals a sharp decline in the sale of PE assets, hitting a low unseen in over a decade. A 27% drop in total value from $783 billion in 2022 to $574 billion in 2023, as reported by Pitchbook, signals a seismic shift in the world of private equity, with consequences reverberating to public markets.

The Disparity Between Private and Public Equity

High valuations of private assets have made private equity a more alluring investment than public markets. This attractiveness, however, has led to a potential undervaluation of public shares. Despite private equity firms amassing a whopping $5.2 trillion of uncommitted capital, the sluggish pace of sales further widens the disparity between the high private equity valuations and the lower value of publicly traded assets.

The Impact on Listed Investment Trusts

With the true market value of privately held assets remaining obscure due to the dearth of sales, listed investment trusts, often investing in private equity, are in a precarious position. The discrepancies in valuations could inflate their net asset values (NAVs), casting a shadow of uncertainty over the sector.

Private Equity Fundraising in 2023

Despite the lull in sales, private equity fundraising took an upward trajectory in 2023, reaching a staggering $556 billion. This indicates a long-term shift towards private equity investments. The sustainability of this trend, however, hangs in the balance without robust sales to back the influx of capital.

Contrasting Fortunes in China and Technology Investment Sectors

2023 saw a stark difference in the fortunes of the China and technology investment sectors. China-oriented funds like abrdn’s China A Share Equity fund grappled with abysmal performance, generating a negative 29.2% return. On the flip side, technology sector portfolios proved to be profitable havens. The Nikko AM ARK Disruptive Innovation, steered by ARK’s founder Cathy Wood, emerged as the top performer. The tech sector’s resurgence can be credited to the ‘Magnificent Seven’ stocks, including giants like Microsoft, Apple, and Nvidia. The sector’s dominance is evident as the top 10 performers were almost exclusively tech-focused.



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