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PE and VC fundraising to increase despite limited exit opportunities

Nearly two-thirds of PE and VC firms are planning to raise funds in 2024, with the sector anticipating future interest rate cuts from central banks, according to a new survey by Acuity Knowledge Partners (Acuity) canvassing the opinions of 128 private markets firms.

The figure is a big increase on the 22% of respondents who planned to raise funds in the last survey.

In addition, private credit strategies are on the increase with GPs considering funds that can generate high returns (above 10%) within a short period of five years, with direct lending being the most preferred sub-strategy.

The primary hurdles for successful fundraising remain fierce competition and convincing limited partners to commit. Two-thirds of the respondents feel that exits could be challenging, slightly fewer than last year, while preferences in terms of the method of exit remain the same, with a few more respondents favouring secondary sales.

“Amid this increasing optimism about fundraising, an important shift is emerging with respect to competition for funds,” said Chanakya Dissanayake, Managing Director – Co-Head of Global Delivery Operations at Acuity. “While expectations relating to competition remain elevated and constant, the number expecting a decline in competition has doubled from 2022. Large players are confident in their ability to out-manoeuvre smaller funds in 2023, but firms of all sizes expect competition for funds to decline in 2024.”

Buyout and venture funds represented 45% of the survey respondents with over 60% of the respondents holding leadership roles at their firms. Some 92% have over five years of experience in the industry while more than half have over a decade or more of experience.

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