Partners Group CEO Says It's a Great Time to Invest in Private Markets

David Layton, CEO of Partners Group, indicates a significant shift in private markets. After two challenging years marked by rapid interest rate increases that stifled deal activity and fundraising, Layton observes a stabilization in valuations. This 'thawing' environment suggests that the bid-ask spread—the difference between what buyers are willing to pay and sellers are willing to accept—is finally narrowing, signaling renewed opportunities for investors in private equity and infrastructure. This development is crucial for investors because it implies a return to more favorable conditions. While the past period saw muted exit activity and slower fundraising, the sector's pivot towards 'thematically driven' investments in areas like digitization, decarbonization, and healthcare, alongside less reliance on pure financial leverage, underscores a more sustainable growth strategy. Layton's outlook reflects a broader industry sentiment that private credit and buyout markets are entering a 'normalization' phase, where fundamentals rather than just cheap capital will drive returns. Looking ahead, a key indicator for continued recovery will be 'distributions to paid-in capital' (DPI). As private equity firms successfully exit older investments and return capital to limited partners (LPs), it will unlock the necessary liquidity. This fresh capital can then be committed to new funds, potentially catalyzing a significant deployment cycle across 2024 and 2025. This return of capital is essential for reinvigorating the private markets ecosystem and attracting fresh commitments.