Economic Outlook for the Private Equity Market in 2023

Jan 17, 2023

2022 was a mixed year for the private equity market in the United States, strongly resisting the context of higher interest rates, tighter financial conditions and a visible economic slowdown. For 2023, a year with greater trade and positive agreements for the industry is expected.

Different experts have predicted that the US private equity market will grow by 14% in 2023, reaching a total of 5 trillion dollars within the market. This growth is driven by a number of factors, including:

– Stronger economic growth, which will lead to increased M&A activity and more opportunities for private equity firms to make profitable investments.

– An increase in the number of institutional investors who wish to invest in private equity funds as part of their overall portfolio allocation strategy.

– Greater interest from international investors seeking to diversify their portfolios with assets not listed in the US.

Chances of recession by 2023?

Although inflation has shown signs of moderation in recent months, fears of recession have persisted in the private capital market.

Amid the prospect of slowing economic growth and aggressive interest rate hikes by the Fed, the probability that the US economy will enter a recession in late 2023 or early 2024 is 65%, according to the model Quantitative Recession Report.

Macroeconomic headwinds have created a number of challenges for private equity this year, including a tougher debt environment.

The leveraged loan market, which is typically the main source of debt financing to support acquisitions, took a hit. In the six months from May to October, total leveraged loan finance purchase issuance dropped to just $22.3 billion, the lowest level since 2020.

Predictions for development in 2023

Despite the weakness in the syndicated loan market, private equity investors still did a fair amount of buying in the first three quarters of 2022 as they avoided bank syndications and borrowed from direct lenders. As a result, private debt funds have expanded their share of the buying debt market amid the pullback from banks.

Uncertainty surrounding the economy and monetary policy is expected to dampen purchase transaction activity in the coming quarters. The report forecasts purchase deal volume in the four quarters through September 2023 to be around 10% lower than the previous four quarters.

However, there is likely to be a slight pick-up in outflow activity, with secondary buying continuing to grow proportionately across all private equity outflows.

Investing in BAI Capital is investing in the United States

With a presence in the real estate sector in the states of Florida, Texas and New York, BAI Capital specializes in generating value from the acquisition of land to the development of mixed-use projects. Such as residences for the elderly, student residences, multifamily buildings for rentals and mixed use that include condos and retail.

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You already know the economic outlook for the private equity market in 2023. If you are looking to protect your capital from inflation through investments within Florida, or invest in projects that qualify for the EB-5 investor visa to get a Green Card, complete our form and an agent will contact you.

 

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