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May 27, 2024
PI Global Investments
Private Equity

Private Equity Braces for Tough 2024 as Interest Rates Stay High

For private equity, 2023 turned out to be a terrible, horrible, no good, very bad year, and the pain won’t likely end until it’s clear that central banks have truly decided to stop hiking rates. US private equity firms bought or sold $871 billion in assets last year, the lowest level since 2016, according to data provider PitchBook. And the projected rate of distributions to private equity investors was the second-smallest in a quarter century, investment bank Raymond James says.

Private equity firms have been grappling with higher borrowing costs, economic uncertainty and sluggish fundraising. And as they’ve been slow to return capital to pension funds and other key investors, once-reliable clients are maxed out on the cash they’re willing to allocate to such investments. “It’s going to be a slog,” says Andrea Auerbach, head of global private investments at Cambridge Associates LLC. Firms must “work on their portfolios to create assets that can be sold profitably.”

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