What industries are private equity funds investing in?

David Harvey our consultant managing the role

Private equity fund finance and investment has always been an interesting space. With a focus on being the first to identify the latest and greatest opportunities, businesses and professionals that operate within fund finance analyse and work with forward-thinking organisations that are operating at the cutting edge of their industry.

In this article, we explore what might be next for fund finance in 2023. 

The industries that see the most significant interest from private equity funds are those that offer a level of security whilst providing big areas of opportunity for growth. With this in mind, there will be little surprise that three of the most sought-after industries in private equity in 2023 will include real estate, fintech and energy & utilities.

Real estate

Real estate has seen explosive growth in the past few years. Although this growth has slowed, from $104 billion of funds raised globally in H2 2021 to $63 billion in H1 of 2022, there are still signs that this is a huge area of growth and opportunity for private equity fund investment. With returns levelling back at typical levels, real estate remains a ‘safe bet’ and a hedge against inflation.

Fintech 

Financial technology, or fintech, has been someone what of an exciting area for private equity funding over the past years. Yet with more turbulent economic times on the horizon, whether it will continue to see this level of popularity is uncertain. Some experts suggest that Fintech will indeed continue to see a rise in investment, but with a move away from higher-risk start-ups and a shift towards those in the maturing sub-sectors that are rolling out solutions to widely accepted market trends.

Energy & utilities 

With widespread media coverage of the cost of energy and utilities and concerns over carbon emissions, it will come as little surprise that this is likely to be a popular and exciting area for private equity investment in the coming year. The major focus of investment in this area will focus on start-ups and other businesses that are finding ways to reduce carbon emissions. In fact, it is reported that carbon and emission tech start-ups have raised $10.7 billion in VC investments across 517 deals in Q3. This is a trend that is likely to continue as concerns around global climate change rise.

Influencing forces in fund finance 

There are many factors and trends from 2022 that are likely to continue making an impact on private equity in 2023 and beyond. Some of the most prevalent of these include the growth of funds with transparent ESG practices, the need to attract talent into funds and a potential slowdown of PE firms.

ESG 

Environmental, Social and Governance (ESG) plays a part in all funds. Yet in recent years the proactive consideration and management of these areas have been identified as a key way to improve businesses. Those that openly disclose ESG as part of their strategy of transparency and accountability see big benefits. In fact, one study found that ESG disclosure was linked to a 4.9% increase in the net IRR of a fund.

High-quality talent 

Funds have always needed talent to help them achieve the very best results for their clients. However, recent shifts in the markets have made attracting and retaining this talent more challenging. Reports have shown that the pandemic, large-scale resignations and a shift towards remote working have made it more difficult for funds to hire quality employees. Yet the same reports suggest that building stronger cultures, aligning company purpose and facilitating more modern ways of working can help them resolve this challenge. 

Slowdown in hiring 

2023 could likely be a slower year for many funds. However, this doesn't necessarily mean there will be redundancies. Although reports suggest that 13% of firms will freeze hiring due to a potential recession in 2023, it is likely that most firms will simply slow down their hiring in the coming months.

2023: Your Future in Fund Finance

We can see that 2023 is set to be a challenging, yet exciting year for fund finance. With more businesses looking to attract talent, it is a great time to start or progress your career in the space. You can find our latest finance and accounting opportunities here, or if you are a business looking for talent and want to tap into our expertise, you can submit a brief here.



30/01/23
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