Private equity industry’s AUM fell for the first time in decades amid liquidity crunch

Global private equity fundraising took a hit in 2024, with buyout funds securing 23% less capital than the previous year as the tighter rate environment and a slowdown in exits led to weaker capital distributions, prompting LPs to scale back new commitments, according to Bain & Company’s global private equity report (pdf). “While global buyout AUM has tripled over the past decade, distributions as a percentage of net asset value have fallen from an average of 29% from 2014 to 2017 to 11% today,” the report reads.

Global buyout assets under management (AUM) dipped for the first time on record — since Bain began tracking industry assets in 2005 — to USD 4.7 tn as of June 2024, down 2% y-o-y.

Still, 2024 saw higher buyouts, more exits: The total value of buyouts was up 37% y-o-y to USD 602 bn last year (excluding add-on transactions) with an increase in transaction count. Exits were also up 34% with transactions worth a total of USD 468 bn, with an increase in exit count over the same period, according to the report.

The number of closed funds dropped, and over a third of those that did close had been fundraising for two years or more. Limited partners (LPs) prioritized established firms with strong track records, making it tougher for smaller or newer funds to attract capital, Bain said.

The key takeaway: GPs will need to differentiate themselves through operational value creation rather than relying on financial engineering, Bain advised. Mega-funds and sector specialists are expected to lead in fundraising, while generalist strategies are more likely to face headwinds, according to the report.

“That spells a clear mandate for GPs: If you can’t offer investors a differentiated value proposition, raising your next fund is going to be a serious challenge,” according to the report.

GPs have already started to get creative, leveraging minority stake sales, dividend recaps, secondaries, and NAV loans — strategies that have already generated USD 360 bn last year without full divestments.

A bumpy year ahead: “It won’t all be better in 2025 [...] it's a three- or four-year problem,” Chair of Bain’s global private equity practice, Hugh MacArthur told the Financial Times, adding that “the pace of liquidity coming back to [fund investors] continues to be stressed.”

MARKETS THIS MORNING-

Asian markets opened higher this morning, tracking gains on Wall Street following US President Donald Trump’s decision to delay tariffs on some automakers. Japan’s Nikkei and the Topix were both up nearly 0.8%, while South Korea’s Kospi was up 0.6% and Hong Kong’s Hang Seng was up 2% on the back of rallying tech stocks.

Over on Wall Street, futures are dipping slightly as a volatile week of trading nears its end.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.3% yesterday on turnover of SAR 5.6 bn. The index is down 1.1% YTD.

In the green: Saudi German Health (+6.4%), Care (+4.5%) and Advanced (3.7%).

In the red: Walaa (-10.0%), Nice One (-9.9%) and Fakeeh Care (-9.7%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.1% yesterday on turnover of SAR 39.3 mn. The index is up 0.3% YTD.

In the green: Nofoth (+11.6%), Al Rasheed (+9.5%) and Al Modawit (+9.5%).

In the red: Knowledge Tower (-13.6%), Hkc (-9.2%) and Dar Al Markabah (-8.8%).

CORPORATE ACTIONS-

United Electronics Company (eXtra) is distributing SAR 240 mn in dividends for 2H 2024 at SAR 3 apiece, it said in a disclosure to Tadawul. Distribution is scheduled for Monday, 7 April.

Al Yamamah Steel Industries’ board approved the distribution of SAR 25.4 mn in dividends for 9M 2024 at SAR 0.5 per share, according to a regulatoryfiling (pdf). Distribution is scheduled for Thursday, 24 March.

Nofoth for Food Products’ board approved a 100% capital increase via bonus shares, doubling the company's capital to SAR 96 mn by issuing one bonus share for each owned share, it said in a disclosure to Tadawul. The increase is being funded through SAR 48 mn from retained earnings. The capital increase is pending regulatory and general assembly approval.