Private Equity Industry Asks How Long the Boom Will Last

• Private equity dealmakers are descending on Berlin for their annual get-together, with their industry thriving and many of them wondering how long the good times will last.
• Armed with billions of dollars, buyout firms have already taken advantage of what has been a record year for mergers and acquisitions (M&A), selling some of their assets for top dollar.
• Private equity-backed M&A deals more than doubled to a record $818.4 billion in the first nine months of this year, up from $315.2 billion last year, according to Refinitiv.
• The S&P private equity index, meanwhile, is up 43% so far this year, compared with a 25% gain in the benchmark S&P 500. In addition, the private equity industry's median internal rate of return was 33% as of March 2021, the highest on record, according to data provider Pitchbook.
• Given the global trend, there exist opportunities locally for private investing, both from the fund and investor perspectives. There are opportunities for PE investors to acquire stakes in companies in growth sectors such as E-commerce, Information Technology, and Business Process Outsourcing, as well as in depressed sectors such as Entertainment and Tourism.
• Consequently, investors with a higher risk appetite looking to diversify their portfolio holdings may find value from private equity funds relative to traditional equity investments. Though private equity has its risks, as an investment asset it has the potential to provide strong returns, offer diversification, and could improve the resilience of investment portfolios.

(Sources: Reuters & NCBCM Research)