Private equity investors are struggling to make new commitments to funds because they’ve found themselves already over-allocated to the asset class and with less available capital on their hands, according to Blackstone’s Verdun Perry.
Last year’s declines in public markets have “almost artificially” pushed up their portfolio allocations to private equity, making it harder and less likely that they’ll put in additional money, Perry, global head of strategic partners at the firm, said at the Bloomberg Invest conference. Investors with a 10 percent target for the asset class might have found themselves at 17 percent or 20 percent allocations, he said.
“It’s hard to keep doing new deals, new commitments, when you’re already over-allocated to private equity and over your targets,” Perry said.
At the same time, distributions were down 40 percent or 50 percent in 2022 compared with 2021, he said.
“What we’re having is large investors in private equity funds that want to commit to new funds but they don’t have the capital available,” Perry said. “A lot of investors that are overallocated are trying to stay the course, they’re slowing down, they’re selling on the secondary market, they’re making smaller commitments to fewer managers.”