Private Equity Investment Trends in 2023

Private equity (PE) investment is a popular form of alternative investment that has been gaining momentum in recent years. The trend for PE investment in 2023 is predicted to continue to be strong, driven by various factors such as favorable economic conditions, increased investor demand, and a surge in mergers and acquisitions (M&A) activity.

The Global Private Equity Report 2023 by Bain & Company, a leading global consultancy firm, predicts that the PE industry will continue to grow in the coming years. According to the report, the total assets under management (AUM) for PE firms are expected to reach $7.6 trillion by 2026, up from $4.7 trillion in 2020. This represents a compound annual growth rate (CAGR) of 8% over the next five years.


Favorable Economic Conditions

The global economy is expected to continue to recover from the COVID-19 pandemic, with the International Monetary Fund (IMF) forecasting global GDP growth of 4.9% in 2022. This condition is able to create a conducive environment for PE investment as investors seek higher returns in a low-interest-rate environment.


Increasing Demand from Institutional Investors

In recent years, institutional investors such as pension funds, endowments, and sovereign wealth funds have been increasingly allocating funds to the PE asset class. It is due to the higher returns that PE investments offer compared to traditional asset classes such as equities and bonds. According to Preqin, a leading alternative asset data provider, institutional investors allocated a record $891 billion to the PE asset class in 2021, up from $846 billion in 2020. 


M&A activity is projected to keep driving the trend for PE investment in 2023. In 2021, global M&A activity reached an all-time high of $4.1 trillion, according to data from Refinitiv. This surge in M&A activity fueled by a combination of factors such as low interest rates, excess liquidity, and the need for companies to adapt to the changing business landscape. PE firms were active participants in this M&A activity, with many taking advantage of the opportunities presented by distressed companies or those looking to divest non-core assets.


ESG Focus & Technology Sectors Continue to Grow

ESG investing has become a mainstream topic in the investment world, with investors increasingly looking for opportunities to invest in companies that are committed to sustainable practices. According to a survey by Preqin, 69% of investors believe that ESG factors will become more important in their investment decisions in the coming years. This trend will possibly continue in 2023, with PE firms increasingly taking investment decisions with ESG considerations into account. 


In terms of sectors, the technology sector is expected to continue to be a key focus for PE investment in 2023. The COVID-19 pandemic has accelerated the adoption of digital technologies. PE firms projected to capitalize on this trend by investing in technology-enabled businesses. According to PitchBook, the technology sector accounted for 27% of all PE deal value in 2021, up from 21% in 2020.


In conclusion, the trend for PE investment in 2023 is expected to continue to be strong, driven by favorable economic conditions, increased investor demand, and a surge in M&A activity. PE firms would likely continue to focus on ESG considerations and the technology sectors as they look for opportunities to generate higher returns for their investors. As the PE industry evolves, it will be interesting to see how it adapts to changing market dynamics and investor preferences.


One potential challenge for the industry could be increased regulatory scrutiny as governments look to ensure that PE firms are acting in the best interests of their investors and the wider economy. However, with the industry’s track record of innovation and adaptation, it is likely that PE firms will continue to find new ways to create value for their investors and drive economic growth in the years to come. Overall, the outlook for the PE industry in 2023 is positive, and investors can expect to see continued strong performance from this important asset class.

S'pore's Gunung Capital to invest $500m to decarbonise asset
credits to