BlackRock just published 2024 Private Markets Outlook. The Newnex team has parsed the key-takeaways from the report.

There is a rapidly growing perception that the next decade of value creation is happening in private markets. We've seen reports including Family Offices pushing into private investments despite the good performing public equity. This timely report throws some more light into how private markets are expected to evolve in the coming years. Long-story short, private markets are set to soar. AI will be a game-changer.

To begin with, there is no one-type of "private asset". Investors have to choose among the available assets to choose what's best for them. Private markets for the purpose of this report is a) Private Equity b) Private debt c) Infrastructure d) Real Estate. Our focus below is on PE.

The Key take-aways for Private Markets with a focus on PE:

Broad shifts in the economy and financial markets are positioning private markets to grow.
What are those broad shifts?
Tightening lending standards resulting in banks reducing lending. Boom time for private debt and increasing reliability on equity financing.
Companies are staying private longer, requiring a prominent place for private financing. Faster and flexible financing will drive growth.
Fundraising in 2023 have been subdued, and as a result, less capital chasing investments. Hence more selective investments and good vintages.
Mega forces that are reshaping the world are:
digital disruption and AI (private equity)
the low-carbon transition (Infrastructure)
the future of finance (private debt)
demographic divergence (real estate)
geographical fragmentation
Dry-powder, Capital calls and Distributions
Private markets dry-powder set to touch $4tn, with the mega share with private equity ($2.5 tn).
Capital calls increasing and outpacing distributions
Private Equity
Rising interest rate, inflationary pressure, geopolitical and economic uncertainty, and correction in public markets drove slower PE activity.
Valuations have declined from 11.9x EBITDA (2022) to 11.2x EBITDA (2023)
Public-to-private transactions increased to 21% of deal value (compared to 15% the last 5 years)
Less availability of debt has increased equity contributions in deal making
Quality assets attract investments (industry leading companies, stable cash flow and return on capital)
Good time to buy: Shortage of exit opportunities have left 75% of companies net cash-flow negative. Great secondary opportunity because (a) Sellers are motivated (b) Debt is hard to come by (c) innovative deal structuring including minority sales (d) corporate divestitures (e) moderated valuations

BlackRock identifies that Artificial Intelligence will be a mega force having a horizontal and profound across industries.

Access the Full Report here

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