Apex Group's Private Equity 2022 Outlook

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An outlook for the Private Equity industry in 2022 from Srikumar T.E., Global Head of Fund Solutions at global financial services provider Apex Group.

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“The popularity of alternatives is set to continue in 2022 – and it won't just be institutional allocators seeking out these attractive returns. Retail and HNW investors are increasingly looking to Private Equity for returns which outperform the public markets. According to PitchBook's Global Fund Performance Report, PE funds have posted a 15-year IRR horizon of 12.5%, reaching 21.3% in 2020, whilst the S&P 500 has returned roughly 9.7% annually.

Wealth managers are increasingly seeking innovative ways for these investor groups to access private markets, with fund structuring enabling a more diverse base of investors to allocate capital to alternative asset classes. We expect to see an increase in evergreen and hybrid fund structures that enable investors to access the long-term growth potential of Private Equity, with the liquidity options more typically seen in open-ended funds.

The diversification of investor types in private markets will create both challenges and opportunities for funds and their service providers. Technology must be fit for purpose in order to meet the growing investor reporting and accounting requirements. The application of distributed ledger technologies is an exciting area for private markets funds, with their use in 2022 set to skyrocket, rendering manual processes redundant and enabling the more efficient servicing of high volume, high touch funds. The journey of digitalization of data flows, accessibility and process transparency in a block-chain-like design will make big advances to shape the future of the industry. As such, we expect technology solutions and their adoption to evolve more rapidly than ever before in 2022, changing the way in which various aspects of fund management is conducted.

Of course, investor demand for impact funds will continue, which when paired with growing regulatory pressure, requires rigorous ESG data collection and reporting in the private markets. There will be a continued increase in allocation to cross border alternative Investment funds, especially in Real Estate, as well as Private Debt and Credit sub-strategies. We anticipate there may be some evolution of regulations to factor in the possibility of prolonged pandemic situation.

Clients will need to renew their expectations of service providers to ensure they benefit from the wide range of services available, beyond traditional fund administration.”

Updated on Jan 17, 2022, 11:37 am

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