Chris Manfre, Ph.D.’s Post

From what I’ve observed, PE holdings are almost always sold in the secondary market with a haircut, typically 10%, rarely at NAV, and even more rarely if ever at a premium. The news here isn't the selling of PE positions at discounts but rather the scope of institutional investors selling PE positions today, driving sale prices even lower than usual, thus creating attractive entry points for (courageous and liquid) buyers. (Insert overused Warren Buffett "blood in the streets" quote here.) If the secondary market grows and becomes more robust, one would hope that the sale prices move closer to NAV, but that also probably means erosion of the illiquidity premium of PE relative to public markets.

Halfway through 2024, there was already $72 billion in total closed transaction volume and that number is projected to top $140 billion before 2025, according to a midyear report by BlackRock. Read more in Institutional Investor: https://lnkd.in/e_prPtN6 #assetmanagement #alternativeinvestments #secondaries

No big surprise here but further validation that PE exits have slowed and will remain very selective until rates drop and earnings grow. With a large base of companies (28,000) available for sale and trillions in dry powder awaiting to be put to work pressure is building fast. Uncertainty remains intact in this election year with rate cuts still a bit of a jump ball. I’m counting on an improvement in liquidity in 2025-26.

"A proposal to increase the $483bn fund’s positions in assets such as private equity and private credit from 33 per cent of the plan to 40 per cent was approved on Monday, according to an announcement by the fund and notes from its board meeting. [ ] According to analysis published by Calpers alongside its board notes, private equity was the top-performing asset class in the decade to June 30 2023, with annualised returns of 11.8 per cent. That compares with 8.9 per cent from public equities and 2.4 per cent from fixed income. [ ] As part of the move, Calpers will increase its bet on private equity from 13 per cent to 17 per cent of its portfolio, although this could potentially rise as high as 22 per cent. At the same time, it is pulling back from investing in stock markets, with its allocation to equities set to fall from 42 per cent to 37 per cent of its portfolio. It will also trim its allocation to fixed income from 30 per cent to 28 per cent."

Private equity is on track to more than double its current assets, reaching an estimated $12 trillion globally within the next six years, according to Preqin. This growth will be driven largely by individual investors, as wealth managers, family offices, and private banks increasingly step into the space. Historically, private equity has been dominated by institutional investors like banks and pension funds, but the landscape is changing. Key drivers of this shift include: - High returns with lower volatility - Diversification from public markets - Increased participation in private companies as IPOs slow Full article linked below ⬇️ https://lnkd.in/dA72PCA2

The Deep Freeze in Private Equity This article is an excellent summary of the Private Equity situation, largely based on a Bain 2024 Private Equity update. The article touches on many of the themes I've posted on in the last year and going back to 2020. The most jarring takeaway is that despite the deep freeze in sales/exits (implying dropping valuations), 70% of PE companies are marked at invested capital and $3.2T unsold companies are piling up in the system. The fact that 70% of investments haven't been marked down is the clearest sign of pervasive, systemic overvaluation of PE assets. PEs can claim lack of liquidity as an explanation for deal exit sclerosis, but at the same time they brag about an embarrassment of riches in dry powder. There is only one way to square the circle: PE sponsors are refusing to get real about the value decline and so cling to the fiction, like grim death, that valuations haven't changed. Returns and valuations therefore remain inflated and the investors and their end-customers (eg pensioners) will face a day of reckoning. Key Takeaway: "Exit channels are “in deep freeze”, and there are 28,000 unsold companies marked at $3.2tn piling up in buyout portfolios, 46 per cent of which are four years old or older. The backlog is four times larger by value than it was during the global financial crisis. Not all these unsold companies will be duds. Only 30 per cent are marked at a value less than invested capital, although we’ll have to wait until they’re sold to see how firm that figure is." #privateequity #leveragedloans #privatecredit #pensions https://lnkd.in/dFVsGTWW

Why Invest in Private Markets? #ThoughtLeadership from Scott McClatchey @ Ballast Rock Private Wealth "It’s certainly an exciting time for accredited investors wishing to implement institutional-style portfolios, now that many of the largest and most respected private firms are democratizing some of their flagship funds, providing accredited retail investors access to private asset classes heretofore unavailable." #PrivateWealth #WealthManagement #RealAssets #PrivateMarkets #AlternativeInvestments #Alts #UHNW #HNW #FamilyOffices #IBD #RIA #PrivateCredit #PrivateDebt #PrivateInvestments #AdvocatesforRealAssets

There has been a notable shift in the PE landscape, with a significant decline observed in the number of fund closings. This downturn, while raising eyebrows among industry insiders, prompts a deeper examination of the factors contributing to this trend and its potential implications for the broader investment landscape. Private equity funds play a pivotal role in the global economy, channelling capital into a diverse array of industries and ventures, from startups to established enterprises. Read more in this article: https://bit.ly/3WG0krE #PrivateEquityWire #PEFund #Pensions #Investments

Investing in mutual funds offers a diversified and professionally managed approach to growing wealth, making it an attractive option for both novice and experienced investors. #MutualFunds #InvestmentGuide #WealthBuilding #FinancialGoals #Diversification https://lnkd.in/d5arnK5s

𝐓𝐡𝐞 𝐂𝐚𝐬𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐌𝐢𝐬𝐬𝐢𝐧𝐠 $18 𝐁𝐢𝐥𝐥𝐢𝐨𝐧➡️https://lnkd.in/gHSjRRXT iCapital takes a dive into how diversification into alternative asset classes could help investors and financial advisors build more resilient portfolios. This is sponsored content. #Alternatives #Alts