Global Private Equity Market Anticipates Revival in 2024, Fueled by UHNW Investors

After a lackluster 2023, the global private equity (PE) sector is showing signs of resurgence in 2024, particularly driven by the interests of ultra-high-net-worth (UHNW) individuals and family offices. Despite the challenges in 2023, including a slowdown in mergers and acquisitions (M&A) and private equity funds, there is renewed optimism for the coming year.

UHNWs and family offices are increasingly directing their investments towards private equity, often in deals ranging from £10 to £200 million. These investors are less reliant on debt-financing, making them less susceptible to high interest rates and economic uncertainties. Veteran M&A adviser Jim Keeling from Corbett Keeling suggests that 2024 could be a record year for his firm, noting a revival in interest from UHNW entrepreneurs looking to exit their businesses.

The sector faced challenges in 2023, with a disconnect in valuation expectations between buyers and sellers contributing to one of the worst years since the global financial crisis. However, there was a late surge in activity, as evidenced by notable acquisitions such as KKR’s £1.4 billion purchase of Smart Metering Systems and Mars’s acquisition of Hotel Chocolat for £534 million.

HSBC Global Private Banking anticipates a thriving private equity sector in 2024, forecasting a competitive buyer’s market with increased dealmaking and a rise in mature assets. Robert Kalff, leading family office coverage in London at HSBC, emphasizes private equity’s continued significance in UHNW portfolios, with a growing interest in open-ended private equity solutions offering more flexibility.

The importance of manager selection is heightened in this new economic environment. Additionally, secondary private market funds are gaining traction, with institutions looking to monetize their holdings due to low distributions.

On the buyer’s side, UHNWs and family offices are showing robust interest in both direct private equity investments and private debt. The UBS Billionaire Survey 2023 revealed that 59% of family office investors aim to increase their direct private equity investments, more than any other asset class.

Many wealth and investment managers are expanding their private market offerings for HNW and UHNW investors. For example, HarbourVest launched a new private equity offering for HNW investors in partnership with AP7, a Swedish government pension fund. Similarly, Lombard Odier’s managing partner Jean-Pascal Porcherot reported a significant expansion of their private debt, equity stakes, and venture capital investment team.

The private equity sector is sitting on substantial amounts of uninvested capital, ready to be deployed. As of December last year, PE firms globally had a record $2.59 trillion in available funds for investments, according to S&P Global Market Intelligence.

The next decade is expected to witness a ‘democratisation’ of private equity investing. Regulatory changes are gradually lowering entry barriers, allowing investors to make PE investments with significantly smaller sums. Sachin Khajuria, a former partner at Apollo Global Management, predicts that wealthy individuals will increasingly allocate a substantial portion of their portfolios to private markets.

In summary, the global private equity sector is poised for a significant rebound in 2024, buoyed by the growing interest and investment from UHNW individuals and family offices. This resurgence is expected to bring a democratization in the sector, making it more accessible to a wider range of investors.