What Does the Next Decade Look Like for Private Equity Investors?

January 10, 2020

For U.S. private equity investors, it has been a spectacular decade. Through September 2019, EV/ EBITDA¹ multiples, a standard for measuring private equity investment value, stood at 12.8x, just below the 2014 high of 12.9x. This figure marks an 82% increase from 2009, during which the U.S. economy was emerging from the Global Financial Crisis. In addition to revenue growth and EBITDA margin expansion, increasing multiples is a driver of private equity value creation and the most publicized metric on the state of the market.

A decade of increasing multiples has benefited private equity investors and managers. As investors saw the value of their private equity allocations grow, they rewarded managers with increasing amounts of capital. In 2019, global private equity raised $595 billion,² the second-largest sum ever.  A decades’ worth of prolific fundraising, like 2017’s record total of $628 billion, has created substantial amounts of dry powder, or uninvested capital. Today, private equity managers are sitting on $1.43 trillion of dry powder, waiting for investment opportunities to emerge.

These record-setting figures beg investors to ask very important questions regarding the next decade of private equity. Regardless of the past decade, we continue to see a tremendous amount of value in the private equity asset class as a return enhancer and diversifier for portfolios. Undoubtedly, investor scrutiny will increase as the asset class becomes more competitive, and manager differentiation will be paramount.

Print PDF > What Does the Next Decade Look Like for Private Equity Investors?

¹ Enterprise value / earnings before interest, taxes, depreciation, and amortization
² Cummings, C. “Fundraising Stumbled in 2019 From Decade’s Record Pace,”  9 Jan. 2020. The Wall Street Journal.

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

04.11.2024

First to Cut: The Fed or the ECB?

Based on implied probabilities derived from options markets, investors are currently forecasting an 82% chance that the European Central Bank…

04.10.2024

1Q 2024 Market Insights Webinar

— LIVE WEBINAR APRIL 25 — Please join Marquette’s research team for our 1Q 2024…

04.01.2024

Sweet and High Up

Chocolate eggs and bunnies may have appeared more expensive to shoppers this Easter weekend, as the price of cocoa futures…

03.27.2024

The Crystal Ball Has Clouded

Last month, Marquette published a Chart of the Week that highlighted the aberrational length of the current…

03.26.2024

Assessing the Likelihood of a Recession and Understanding the Impact on Portfolios

Is a recession coming to the U.S.? It’s a question that has been asked since 2022, as the Fed’s rapid…

03.21.2024

The Dynamic Duo

In 2023, investors were stunned by the robust performance of seven prominent mega-cap stocks deemed the “Magnificent Seven.” Largely beneficiaries…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >