Sponsors sit out M&A recovery in Q3 results
The start of earnings season saw strong overall results for Wall Street, but a muted performance for private markets. While AI capex is providing a meaningful boost, public market instability could be a sign of challenges to come.
The M&A recovery has been progressing, but private markets have yet to see the benefits. Goldman Sachs CEO David Solomon highlighted that the sponsor share of announced M&A remains below historical averages for the year to date. Despite a record $1.65bn in advisory fees, Solomon did not see renewed interest rate rises as a significant headwind.
Private equity firms are taking their time to return capital, as their investments are still marked higher than their market value, according to Solomon. LPs remain hesitant to commit to further private-equity activities, preferring infrastructure and private credit instead. BlackRock reported $15.3bn in quarterly net inflows into private markets, with $7.6bn and $5bn going to infrastructure and private credit, respectively.
EQT reported €10.9bn in net inflows into its key funds, but a significant portion, €10.3bn, came from its acquisition of secondaries investor Coller Capital. EQT continues to consolidate with recent acquisition of US real estate manager Stockbridge. Man Group's private markets holding remained flat, with total AUM decreasing from $17.6bn to $17.4bn.
Despite the challenges, banks remain committed to the growth of their alternatives platforms. Wells Fargo saw a 30% increase in alternative product offerings on its platform this year. State Street reported a double-digit growth rate in alternative servicing fees YoY, mainly driven by private markets and strong client activity. Higher rates could potentially erode returns on individual projects, while significant leverage used in AI infrastructure finance could also be a cause for concern as investors reassess the returns' justifiability.
Written by urgent.news from Private Equity Wire's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
