5 Private Equity Trends to Watch in 2023

November 4, 2022

Even amid a muddled market outlook that is impacting private equity deals and exits, private equity will likely have another sought-after year in 2023. Read on for the top private equity trends we expect to play out in 2023. 

Fundraising in 2023

Midyear projections of private equity fundraising show that the asset class is on pace for another year of heavy investor interest and enough enthusiasm to carry over into 2023 for similar results. While fund count may stay flat and we may not see record-breaking fundraising levels as many investors tiptoe through this period of uncertainty, many asset owners are happy to trust in private equity even through a downturn after satisfying returns came out of the Global Financial Crisis era. 

Chart showing steady PE fundraising data 2012 to H1 2022

Deal market in 2023

In the second half of 2022, we’ve seen deal pipelines slow, and more of the same could be ahead for 2023. Amid inflation and rising interest rates, banks are taking on a new level of due diligence to all deals they oversee, slowing the process. With valuations low, managers may have trouble convincing sellers to move forward, as sellers hope for higher valuations than the market is willing to provide at the moment. 


Figure shushing above chart showing PE deals 2005-2022


Exit landscape in 2023

With inflation remaining stubbornly high and tech valuations down as of late, these elements naturally make for fewer exits, as sellers wait on more opportune times to sell or IPO. However, the secondaries market could help to pick up some slack from decreasing exits, in which case we’ll see GP-led exits continue to climb. 

Chart showing PE exits 2005-2022, with exits down in H1 2022


Dry powder in 2023

With the question of a recession still up in the air, high private equity dry powder levels can be viewed optimistically. By having enough capital reserved, managers can make it through a potential downturn. However, investors have reason to look to private equity as a solid investment option during a recession, as these deals tend to generate strong returns, as seen during the Global Financial Crisis. 


Chart showing rising dry powder levels 2007 to 2022; separate chart showing high IRR % post dot com bubble and 2008 recession

ESG in private equity 2023

Calls for private equity to lead the charge on ESG adoption are growing, including in the Harvard Business Review and at the World Economic Forum. Regulators are also turning increasing attention to how private equity managers account for ESG. As demonstrated by Allvue’s recent ESG in private equity survey, GPs seem to be taking the cue, as their sense of social and environmental responsibility takes priority over value creating in their grappling with ESG action. With growing attention on the asset class, we expect to see further ESG developments take form, especially among mid-sized and large private equity managers. 

ESG under a spotlight, with chart showing GPs leading drivers for following ESG measures -- societal responsibility and value creation

Want to know more about what to expect in the new year?  

Study up with the rest of our 2023 trend content: 

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