Mark Hauser Highlights Challenges In Private Equity Investment Realm
It’s no secret that the private equity investment landscape has changed significantly over the past several years. While the positive impact of these changes is undeniable, it has also created unprecedented challenges for both LP investors and PE firms looking to raise capital. Regardless of your role in these challenging times, you have a stake in the future of this industry. As a result, you’ll want to know as much as possible about the underlying causes and implications of these changes. To understand the magnitude of these shifts, we’ll take a quick look at some of the critical factors that have shaped the current investment environment.
- Emerging Private Equity Trends for 2022
Mark Hauser, CEO of the Private Equity Growth Capital Council, recently discussed the current trends impacting private equity investments in his article “Emerging Trends in Private Equity Investment,” published by The Wall Street Journal. Mark Hauser points out that these emerging trends are causing a decrease in the number of new PE firms and an increase in exits. He predicts that by 2022, there will be fewer than half as many new PE firms as there were in 2013. He also expects that there will be more exits than new investments during this same period.
- More Emphasis on ESG Investments
According to Mark Hauser, PE firms prioritize ESG investments to enhance the long-term value of their portfolio companies. He writes: “The new focus on ESG investing is part of a broader shift in the industry toward longer-term, sustainable investment thinking. In the past decade, private equity firms have come under increasing pressure from investors and regulators to improve their environmental, social and governance (ESG) performance.”
- A Shift Toward Traditional PE Investments
Hauser notes that the current investment environment has also shifted away from growth investments in favor of traditional buyouts. He writes: “Investors are increasingly looking for companies with strong financial metrics and steady cash flows so they can invest more aggressively in existing businesses…In 2012, 72% of private equity funds invested in buyouts; by 2017, it was down to 54%, according to Morningstar Inc., a Chicago-based investment research firm.”
As you can see, the current investment environment is changing rapidly. The implications of these changes are far-reaching, and the best way to understand them is to keep up with developments in emerging trends.