Recent Trends In U.S. Private Funds

As institutional investors and fund sponsors endure the ongoing slowdown in exit activity and its effect on fundraising and liquidity, we have observed the following trends and opportunities in the U.S. private funds market.

1. Fundraising

The U.S. private funds market continues to experience a slowdown in portfolio company exits, which has made it more difficult for sponsors to return distributions to investors, who in turn have less available capital to commit to new funds. The ability to deploy new capital has been particularly difficult for certain institutional investors that are subject to asset allocation targets, as many continue to remain overweighted in the private markets. This phenomenon is referred to in the market as the "numerator effect" (standing in contrast to the "denominator effect" felt in 2022 after investors found themselves overweighted to private equity following the decline in their exposure to public market securities).