This year will be a strong one for the private equity market, according to the Private Equity Growth Capital Council (PEGCC), an advocacy and communications organization for the private equity and growth capital investment industry based in Washington, D.C.
Valuations will remain high and firms will stay in the private market with few initial public offerings, predicts PEGCC. Based on a survey of 26 private equity firms with a total of $276 billion in assets under management, the council made predictions on trends for the industry for 2016.
“The research shows an interplay of factors, including the current high-valuation landscape, the effects of an increased regulatory environment, and the divergence of investment strategies in the private equity industry,” says Bronwyn Bailey, PEGCC vice president of research.
“These are the key trends that will shape the dynamics impacting private equity investment in 2016,” adds James Maloney, PEGCC vice president of public affairs. “We polled top executives at both larger firms and smaller firms about their expectations, and these insights gave us a strong sense of where the industry is heading.”
Although valuations will remain high, they will stabilize or dip slightly at times during the year, the council says.
Smaller private equity firms will catch up with the larger ones in meeting regulatory requirements, says Maloney. At the same time, smaller firms will face more competition for limited partners’ dollars. The strong market for the private equity industry will create job and wage growth within the industry, the council predicts.
“Financial advisors and wealth managers can use our private equity trends report to more effectively engage with private equity fund managers,” says Maloney. “Understanding the current high-valuation landscape and the PE industry’s divergent investment strategies can focus advisors to ask key questions.
“Although private equity is a long-term investment, an advisor is smart to anticipate the activity of funds,” he adds.
