US private capital has grown nearly 300% since 2008, but rising interest rates and falling risk appetite have hit valuations hard
LONDON, August 22, 2022 /PRNewswire/ — Today, Preqin, the global leader in alternative asset data, tools and insights, released Alternatives in North America report 2022. The report examines the private equity industry in North America and how it has gone over the past year. At the end of December 2021the total assets under management (AUM) of private equity funds focused on North America stood at $5.56tn (excluding fund-of-funds and secondaries), according to Preqin Pro. In December 2008 industry AUM was approximately $1.41tn.
Signs from Q2 and early Q3 2022 suggest VC is bracing for a cold snap
The latest data from Preqin shows that North America-targeted venture capital (VC) fell by $43 billion in the first quarter of 2022 at $36 billion in the second quarter of 2022. Concerns about the high rate of start-up cash depletion and limited exit options caused by falling public equity markets have extended fund holding periods and slowed capital distributions – with ripple effect lower fundraising.
Rising interest rates and declining risk appetite have hit corporate valuations hard and made it harder for venture-backed companies to secure additional funding. Due to lower funding activity and lower earnings prospects, venture-backed companies have been pressured by their investors to preserve cash more proactively. Preqin expects venture capital to be the asset class most affected by the recent market turmoil.
Venture capital funds that have deployed capital in 2020 and 2021 are expected to see their valuations drop significantly. But those with large volumes of dry powder could see a happy hunting ground for new investments. There will be a balance between rolling out dry powder in new investments – creating a floor for valuations – and investing in existing assets, as they are supported by a potentially weaker market.
Sam MonfaredVice President, Research Insights at Preqin, says: “Clearly, the global economic outlook has changed over the past year. But the opportunities abound. What some investors see as a threat or a risk, others see as an opportunity. And given the large ecosystem of experienced managers and investors in North American markets, the eventual exit from the impending downturn will begin here. »
Notes to Editors
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Preqin is the home of alternativesMT, the leading provider of data, analysis and information on the alternatives industry. The company has pioneered rigorous methods of collecting private data for nearly 20 years, enabling more than 200,000 global professionals to streamline the way they raise capital, research deals and investments, understand performance and stay informed. Through close partnerships with its customers, Preqin is constantly building innovative tools and leveraging new insights, helping them make better decisions every day. For more information, visit www.preqin.com.