According to McKinsey, private equity has been the highest-returning asset class in private markets since 2006 and that’s expected to continue as PE firms make deals, find exits and raise capital at a pace. Limited partners (LPs) remain highly enthusiastic and have continued to flood the market with fresh capital.
Keeping the momentum going, however, has hardly been easy. Chronically heavy competition has driven deal multiples to historic highs with lower margins—which affects decision making, from diligence to exit planning. Today, successful investors are seeking to digitize data management to reduce the inherent risk associated with relying on older, often incompatible, systems. LPs are also demanding more transparency from GPs to gain a better understanding of sector and climate risk exposure.
Key problem areas private equity investors are looking to solve include: