The next twelve months is likely to present a combination of challenging headwinds and supportive tailwinds for global private markets, requiring GPs to further sharpen, and refine, the way they seek out new investments. The spectacular failure of FTX has left some prominent investors like Sequoia Capital promising to do better next time. Venture Capital has always been a higher risk strategy as it relies on backing un-proven companies it hopes will become future successes.
Does VC need to learn anything new in how it approaches ODD from its bigger PE brother? Or will both ramp up their due diligence processes even further in 2023, as the risk environment prevails? There will surely need to be continued dialogue between GPs and LPs on deal sourcing – especially if they are co-investors – as dry powder is put to work.
The role of AI and data analytics could well become more prominent as private equity funds improve the way they analyse pre-investment risk and ongoing portfolio management risks. Doing so will bring an extra layer of protection to PE funds, arming deal partners with a greater array of data-driven insights on how companies are performing, and where they need to improve.
Investors understand the importance of adding private market funds to their wider investment programmes. Against today’s inflationary backdrop, Asia Pacific family offices have adopted mitigation strategies including increasing their exposure to real estate. Indeed, 54% of APAC family offices are looking for new investment opportunities that would add diversification, with 42% indicating a preference for alternative assets.