Bain & Company released its annual private equity report, which arrives with an unpleasant statistic: Private equity assets under management fell to $4.7 trillion as of mid-2024, down 2 percent from the prior year in the first contraction since Bain began tracking the data in 2005 (which, of course, includes the 2008 financial crisis).
Distributions from buyout funds as a percentage of net asset value fell to 11 percent in 2024, less than half the historical average and the lowest level in over a decade. The resulting lack of liquidity hit limited partners, who pulled back on new commitments to avoid overallocating. In all, private capital fundraising dropped 23 percent to $401 billion in 2024, below the $468 billion outflow from the year’s exits.
“It won’t all be better in 2025,” warns Hugh MacArthur, chair of Bain’s global private equity practice, speaking to the Financial Times. “It’s a three- or four-year problem.”
Buyout funds now hold almost twice the assets they did in 2019, while annual exit values remain largely unchanged.
The data also shows why portfolio liquidity solutions have been in the headlines this year. Nearly a third of portfolio companies have undergone partial liquidity events, including the sale of minority stakes, dividend recapitalizations, secondaries, and NAV loans.
For the 2019 vintage, the last with a five-year record, full exits account for only 20 percent of total realizations, down from the 44 percent average seen in the 2014-2016 vintages.
It’s similar to the pattern seen coming out of the global financial crisis.
Rapid pre-crisis AUM growth, followed by an exit slowdown and negative distribution-to-contribution ratios, caused AUM growth to stall for eight years before recovering its upward trajectory.
This time, Covid-era funds from 2020-2022 are leading the way. After unusually rapid initial drawdowns during the height of the market, followed by the interest rate-induced exit slowdown, their J-curves now resemble the 2005-06 fund vintages launched just before the financial crisis. On average, those funds took over nine years to return capital.
For the capital that is still flowing into new funds, consolidation among top performers has become even more pronounced. The top 10 funds took 36 percent of all capital raised in 2024, with 40 percent flowing to funds raising $5 billion or more.
Despite the choppy conditions, buyout funds do still outperform public markets across time horizons longer than five years. But the trend has weakened, with 10-year returns falling 3 percentage points in North America, while public markets enjoyed a particularly strong 2024.