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PE and VC investment expectations decline sharply, says Acuity survey

Private equity and venture capital fundraising is expected to decline this year, mainly due to concerns about macroeconomic factors such as supply-chain constraints, inflation and the war in Ukraine, according to the second edition of Acuity Knowledge Partners’s global Private Equity and Venture Capital Survey.

Private equity and venture capital fundraising is expected to decline this year, mainly due to concerns about macroeconomic factors such as supply-chain constraints, inflation and the war in Ukraine, according to the second edition of Acuity Knowledge Partners’ (Acuity) global Private Equity (PE) and Venture Capital (VC) Survey.

Most respondents (55%) said they expect fundraising to decline in 2023, far more than 6% in 2022, while the proportion of respondents who are unsure whether they will raise new funds increased by 50%, to 30% in 2023 from 20% in 2022. As investing confidence deteriorates, the number of professionals who believe investment opportunities are increasing has declined substantially, to 41% from 67%.

“Rising interest rates dented fundraising expectations in Q2 2022, and expectations are likely to remain low until Q3 2023. However, the sector seems to believe this is a passing trend, as expectations for raising new funds beyond Q3 2023 remain strong. Against this backdrop, competition has increased, especially for smaller funds, while large funds remain favoured by limited partners (LPs),” said Sumit Chhabra, Managing Director, and Co-head of Global Delivery at Acuity. “The sector believes investing opportunities may decline in 2023, but the level of difficulty in raising funds is likely to remain the same as last year. As the effects of the pandemic wane, we observe a change in investing preferences, especially in tech areas, such as a recovery in investment in travel tech.”
 
Pratap Narayan Singh, Head of Private Markets at Acuity, added: “Sentiment towards fundraising took a dive this year, reflecting rising interest rates and geopolitical tensions. With a significant amount of dry powder already, the PE and VC sector is expected to at least maintain these levels, if not increase them, this year. The survey results confirm that LPs are more cautious, posing a challenge for the sector”, added Pratap Narayan Singh, Head of Private Markets at Acuity.
 

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