Private Markets Witness Rebound in Activity in Q2-2024

Most private capital asset classes have witnessed a rebound in fundraising, investment, and exit activity but while green shoots are visible, the market is not in full bloom, according to the latest quarterly updates from Preqin.

The update was authored by Head of News Grant Murgatroyd, and financial writer Laura Messchendorp, at Preqin, a privately held London-based investment data company that provides financial data and insight on the alternative assets market.

Victoria Chernykh, AVP in Preqin’s Research Insights team and lead author of “Private Equity Q2 2024: Preqin Quarterly Update,” said that although the poor performance by 2021 and 2022 vintage funds may impact future returns, investors were more positive towards the asset class than they were 12 months ago.

They said that the values have recovered strongly in key markets such as private equity, where the aggregate value of deals was up 46% and the aggregate value of exits up 47% in Q2 of 2024 compared with the preceding quarter.

“But this increase came from a smaller number of larger deals, with the number of new deals down 9% and exits up just 2%, indicating that a broad recovery of the deal-making market remains elusive while interest rates and inflation remain stubbornly high,” they said.

On the plus side, institutional investors surveyed for Preqin’s upcoming Investor Outlook are satisfied with the performance of their alternative investments, with the vast majority planning to either increase or maintain allocations over the next 12 months.

Private Equity

Global private equity fundraising reached $151.5 billion in Q2 of 2024, compared with $178 billion in the preceding quarter, a 6% decrease. North America-focused funds took the lion’s share of fundraising in the second quarter with $105.4 billion raised, a 24% increase on the previous quarter, they said.

On a more positive note, deal and exit value both increased. The number of exits was up just 2% at 505, but their aggregate value surged 47% to $88.7 billion. The pattern was the same for new investments, with a 46% increase in the value of deals to $120.1 billion, despite a 9% decrease in the number of deals to 1,733, Preqin said.

Venture Capital Deals

The aggregate value of Venture Capital (VC) deals in Q2 of 2024 globally increased 13% to $69.4 billion, up from $61.2 billion in the first quarter. This uptick was driven by the IT sector, where aggregate deal value rose from $24.5 billion to $34.8 billion in Q2 of 2024, registering a growth 42%, they said.

Exit activity also increased, with 223 exits generating an aggregate value of $41.6 billion. However, this is still well below the five-year quarterly average of $82.4 billion, as higher interest rates – especially in the US – continue to affect exits and fundraising.

Fundraising remains muted, with 200 VC funds closing globally in the second quarter and raising $25.6 billion, down from 255 and $26.2 billion in Q1 of 2024. Investor interest remains unchanged but high, with 83% of investors expecting to either increase or maintain their VC allocations over the coming 12 months, according to Preqin’s June 2024 Investor Survey.

Private Debt

North America-focused private debt funds raised $39.9 billion in the second quarter, representing 79% of total funds raised globally in the quarter. Direct lending continues to be private debt’s largest strategy, accounting for $44.5 billion (88%) of fundraising in the asset class in Q2 of 2024.

The average closed fund size hit $1.5 billion this quarter, a five-year high. However, the number of closed funds dropped to 33 in Q2 – the lowest in at least five years.

Infrastructure

Unlisted infrastructure’s fundraising softened in the second quarter, with a 14% drop to $33.8 billion compared with Q1. Final closes by infrastructure funds raised $18.4 billion at final close in Q2 – just 55% of the quarterly average of $33.7 billion since Q2 of 2019, the authors said.

According to them, North America and Europe-targeted capital accounted for over 90% of total funds raised in Q2, but long-term investor signals suggest this regional preference may shift.

The proportion of searches for APAC funds on Preqin Pro by infrastructure investors over the past 12 months jumped from 24% to 37%. North America and Europe both saw a drop in fund searches over this time, as higher interest rates make risk-adjusted returns less competitive in both regions, they said.

Deal-making rose during the latest quarter, with aggregate deal value reaching $61 billion over 410 deals, a slight increase from the five-year low in Q1 2024 when 520 deals had only $55.8 billion in aggregate deal value.

Dry powder as a proportion of infrastructure AUM is currently at a long-term low of 27%, down from 36% two years earlier. Although this is reflective of the tough fundraising environment, it also reflects growth in unrealised value in the asset class, as the $376 billion currently held in dry powder is the highest-ever amount.

Real Estate

Real estate fundraising trod water in the second quarter, with the value increasing slightly from $32.4 billion in Q1 of 2024 to $33 billion in Q2. Deal flow also saw an upward trend as total transaction value rose by 15.5% from $30.9 billion in Q1 to $35.7 billion in Q2.

In Europe, although deal volume contracted by 15.8% quarter-on-quarter, deal value more than doubled to $7.9 billion, the highest since Q2 of 2022. Globally, the most transacted property type in the second quarter was residential, which accounted for $7.5 billion, or 23%, of the total deal value.

Real estate debt recorded the strongest quarter-on-quarter growth in fundraising, which increased from $2.3 billion in Q1 of 2024 to $9.1 billion in Q2. Since the start of 2019, the proportion of capital raised by real estate debt funds has only been higher twice, in Q2 2020 and Q2 2022, reflecting current demand from investors, they added.