Private equity buyouts nosedive

In today’s newsletter:

• Private equity buyouts slump in first quarter

• Fund managers snap up bonds on growth threat

• Nelson Peltz sparks asset manager consolidation

Private equity buyouts slump in first quarter

Proponents of AI have promised plenty of transformative disruption, including a golden age of greater efficiency and productivity. Tell that to private equity dealmakers who might have seen a bit too much tumult in the technology sector recently.

The value of buyouts by private equity groups fell by more than a third in the first quarter of the year, writes Alexandra Heal. Dealmakers warn that fears over AI’s impact on software businesses and war in the Middle East risk fuelling a further decline.

Private equity groups agreed acquisitions worth $172bn in the three months to March. That marked a 36 per cent fall from the previous quarter, according to Dealogic, and an 8 per cent drop from the same period last year.

Several buyout executives and advisers said some firms were now holding off on signing any deals because of market turmoil sparked by the Gulf conflict, which began at the end of February.

Rising concerns about the effect of AI on software groups — one of the buyout industry’s most lucrative sectors in recent years — have also punctured hopes that private equity was turning a corner after a prolonged downturn.

“We’re in one of the most turbulent periods I can remember,” said the head of a large European buyout group. “Things are grinding down quite quickly now in terms of activity.”

The buyout sector has struggled since 2022, with firms having bought swaths of companies during the previous decade of low interest rates that they have since been unable to sell in the face of higher borrowing costs and geopolitical ructions.

Private equity funds raised $86bn globally in the first three months of 2026, just less than the same quarter last year, according to PitchBook, whose data shows that 2025 was the industry’s weakest year for fundraising since 2018.

Fund managers snap up bonds on growth threat

Fund managers have been hunting for bargains among government bonds after a brutal sell-off triggered by the Iran war, write Emily Herbert and Ian Smith. They expect that the market’s focus will shift from inflation fears to the expected hit to economic growth from the conflict.

Big investment firms including Schroders, M&G Investments and JPMorgan Asset Management have added to their holdings of debt as yields hit multiyear highs, in the belief the returns now on offer do not account for a probable weakening of growth that could require future interest rate cuts and trigger a bond rally.

“We think the market is underpricing the probability that central banks will have to cut interest rates further out, in order to offset the growth shock,” said Ben Nicholl, a senior fund manager at Royal London Asset Management, which has been buying three-to-seven-year gilts in recent days.

A surge in the price of Brent crude from just over $72 a barrel to almost $120 sparked a rout in government bonds in the early weeks of the Iran conflict, as traders bet a sharp pick-up in inflation would prevent central bankers from cutting interest rates and could force some to raise them.

However, yields have since come off their conflict highs — despite another burst of volatility on Thursday following US President Donald Trump’s threats to escalate attacks on Iran — as some managers point to the start of a shift in investor focus towards growth concerns.

“The growth risks are real,” said Andrew Sheets, global head of fixed income research at Morgan Stanley, which moved to a bullish recommendation on US Treasuries at the end of last week “on the belief that the market previously had been overly focused on inflation risks” and was not reflecting the hit to demand.

Not everyone agrees. “We’re watchful, but not yet ready to say this is a great opportunity to buy,” said Jamie Searle, European rates strategist at Citi. “The risk is that we get a headline that prompts oil prices to jump sharply higher and yields follow.”

Peltz bid sparks fund manager consolidation

A quest for scale has put global money manager tie-ups on pace to crush last year’s deal total as the industry’s costs and competition mount. Nelson Peltz’s win in the bidding war for Janus Henderson reveals the drive for change, write Harriet Clarfelt and Emma Dunkley.

When Peltz’s Trian made a $7.4bn takeover bid for Janus Henderson late last year, few in the market expected Victory Capital to swoop in and try to hijack the deal. 

After weeks of wrangling, an improved all-cash $8bn bid from Trian and investors led by venture firm General Catalyst beat the Texas-based investment group’s $8.6bn cash-and-share offer.

The intense bidding war, however, was the clearest sign yet of a wave of consolidation sweeping the asset management industry, as fund houses rush to scale up globally and private equity firms pick off transatlantic businesses with growth potential.

Despite the volatile market environment, there have been nearly $25bn worth of global money manager mergers and acquisitions in the first three months of the year — more than half of the total for all of 2025, according to data from Dealogic.

Mounting costs and competition from cheap index-tracking funds are turning the screws on traditional investment houses beyond the industry’s multi-trillion-dollar heavyweights, just as active managers must also navigate rising market volatility.

In the US, the number of deals agreed over the past three months has already reached almost a third of last year’s total deal count, although the value of deals is lower.

The trend is most pronounced in Europe, where 61 asset managers have been snapped up or merged this year already, totalling $19bn — compared with $14.3bn for the whole of 2025, according to Dealogic.

But one banker noted that BNP Paribas’ acquisition of Axa Investment Managers last year for €5.1bn sparked a flurry of calls from asset managers looking to make larger deals. 

Advisers believe more American managers will look beyond US borders in a bid to shore up their capital as geopolitics puts dollar assets under pressure.

Turbulent markets have fuelled a record year for Alex Gerko’s XTX Markets trading business. The British billionaire’s business reported profits after tax in 2025 of £1.7bn, up 33 per cent on the previous year.

Credit investors have piled into defensive positions by shifting out of riskier areas of the debt markets over the past month, as worries over AI disruption and the war in the Middle East persist, according to JPMorgan.

A years-long feud between the founders of a $70bn quant hedge fund, Two Sigma, has got worse. John Overdeck and David Siegel still cannot agree on who will run the business.

The newsflow has not improved either for Blue Owl Capital. Its investors keep asking for their money back. For the Blue Owl Technology Income Corp fund it’s the equivalent of almost 41 per cent of its value.

The world’s biggest energy traders, including Vitol and Trafigura, struggled to capitalise on the market turbulence in the early days of the Iran war, as they grappled with fuel tankers set ablaze, missile attacks at oil terminals and vessels stuck in the Gulf.

And finally

It’s 1873 and Ursula’s modest boarding house is thrown into chaos by the unexpected arrival of a young lodger named Vincent van Gogh. The Orange Tree Theatre in Richmond has produced a hit with the first major revival of Nicholas Wright’s Olivier Award-winning Vincent in Brixton, starring Niamh Cusack and the outstanding debutant Jeroen Frank Kales.