This shift and its impact on the dynamics of the funding landscape is analyzed in the new research paper, A new equilibrium: PE‘s growing role in capital formation and the critical implications for investors, a joint collaboration between EY and the Institute for Private Capital.
Outlook for private capital
The research highlights the evolution of PE funds in the last two decades, from commingled buyout and venture funds, and their innovation into a wide array of vehicles that have opened the investible universe, to entirely new types of businesses. As a result of the changing dynamics, the report raises questions and analyses a number of important drivers of this shift including: the growing investible universe for private equity, current and new sources of capital, new segments of growth and impacts associated with the shift in methods of funding, and the factors driving the decline in number of public companies.
The report finds there is still room for growth in the traditional markets of US and Europe. Additionally, emerging markets represent a high potential growth opportunity, as the penetration levels of private capital are much lower. Further growth opportunities lie in areas that have traditionally been outside the purview of PE funds, such as private credit and real assets.
Commenting on the research findings, Stelios Demetriou, Partner and Head of Transactions Advisory Services of EY Cyprus, said: “As public markets are increasingly dominated by larger, more mature companies, new private capital vehicles and investment models are emerging, which can provide funding to a broader range of companies. The implications of this shift in the funding landscape are significant, not only for PE firms, but also for corporations which may now have wider access to capital at nearly all stages of their life cycles. This trend is also manifesting in Cyprus, owing to the growing interest from PE firms with dry powder available for investments, and at the same time the declining use of the local stock exchange. These two in combination are also gradually leading to the emergence of local private capital vehicles”