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-

The DFM fell 0.8% yesterday on turnover of AED 658.1 mn. The index is up 3% YTD.

In the green: Emirates Islamic Bank (+11.6%), National International Holding Company (+9.2%) and Ekttitab Holding Company (+3.6%).

In the red: Naeem Holding for Investments (-9.6%), Agility The Public Warehousing Company (-7.9%) and International Financial Advisors (-6.6%).

Over on the ADX, the index fell 0.4% on turnover of AED 1.1 bn. Nasdaq Dubai was down 1.1%, and up 5% YTD.

CORPORATE ACTIONS-

#1- Alef Education’s board has proposed a dividend of AED 199.2 mn for 2024, bringing total distributions for the year to AED 402.8 mn — equivalent to 575.4% of paid-up share capital, according to an ADX disclosure (pdf).

REMEMBER- Alef Education is committed to a minimum dividend payout of AED 135 mn (AED 0.09 per share), according to its IPO prospectus.

#3- The Commercial Bank of Dubai has approved distributing AED 1.5 bn in dividends, equal to 50.7% of its paid-up capital as of the end of last year, according to disclosures to the DFM (pdf) and Nasdaq Dubai (pdf). It also approved the update of its USD 3 bn Euro Medium Term Note program and the issuance of non-convertible bonds.

#4- Emirates NBD is calling its USD 1 bn perpetual additional Tier 1 capital securities issuance from 20 March 2019, according to a disclosure (pdf) to Nasdaq Dubai. Outstanding capital securities will be redeemed on 20 March 2025.

#5- Orient Ins. will distribute AED 400 mn in dividends, equivalent to 80% of its share capital, to its shareholders, after its board of directors approved the move, it said in a disclosure (pdf) to the DFM.