|
|
   |
| The Daily Pitch |
| VC, PE and M&A |
| Your edge on global private capital markets |
|
|
|
| Good morning. First up, due diligence has entered the chatbot. PitchBook is launching a new generative AI experience on its Platform—and our data is being integrated with ChatGPT. Here's how your work will change |
|
|
|
|
|
|
|
|
|
|
| |
| Pandemic-era overdeployment is triggering PE consolidation, KKR says |
|
 |
| (Cheng Xin/Getty Images) |
|
|
By Madeline Shi, Senior Private Equity Reporter
Many PE managers who went all in during the pandemic are now suffering the consequences, as the widening dispersion of fund performance drives more capital toward fewer managers, according to executives at KKR.
Scott Nuttall, co-chief executive officer of the $723 billion investment manager, said on the firm's Q3 earnings call Friday that some GPs deployed more capital than they should have at the market peak of 2021 and early 2022. This left them stuck with valuations that have since proved difficult to justify as markets adjusted to interest rate hikes and tariff shocks.
"Some firms deployed a five-year fund in 12 to 24 months during this period,” Nuttall said, adding that many of these deals will lose money or require managers to extend their hold periods in order to achieve their targeted exit multiples.
This divergence of fund performance is prompting LPs to back away from some funds and channel allocations toward a tighter group of managers, he said.
Nuttall added that KKR has learned the hard way about overdeployment when it made too many investments during the pre-global financial crisis peak.
That lesson was reinforced by the firm's second Asia-focused PE fund, which reached its final close in 2013.
The underperformance of that fund means KKR has to return $350 million of gross carry to investors during Q4. The firm expects a lower net realized performance income in the quarter due to the clawback.
KKR raised $43 billion in Q3, which marks the second-highest quarterly fundraising total in the firm's history. The bulk of that capital came from its credit business.
The firm's PE platform pulled in $5 billion in Q3, raised through its retail vehicles and the flagship buyout fund, North America Fund XIV. The firm's PE strategies have brought in a total of $22 billion this year through Q3.
KKR reported a record fee-related earnings in Q3, at $1.15 per share.
KKR's shares declined nearly 0.73% Friday afternoon. |
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Fundraising is back to pre-COVID levels |
|
82% of funds surveyed find the fundraising environment stable. But capital is flowing unevenly depending on fund profiles.
Read the report |
|
|
|
|
|
| |
|
|
• The fierce takeover battle for GLP-1 drugmaker Metsera was finally won by Pfizer late Friday. The $10 billion price tag makes it the largest VC-backed exit in the weight loss drug space. Check out the list
• VC funding for the supply chain tech industry surged in Q3—rising 26% quarter-over-quarter to $3 billion, as AI spurred investor confidence. See what else our analysts discovered
• Just out: Our Q3 valuations data for public companies in the healthtech sector sector. Get our analysts' report today |
|
|
|
|
|
| |
| European PE fund returns overtake US peers |
|
By Emily Lai, Private Equity Reporter
European PE funds recorded the best performance among all regions in the most-recent returns data, overtaking US vehicles.
According to PitchBook's latest Global Fund Performance Report, European PE funds recorded a 9.1% rolling one-year horizon IRR in Q1 2025, while the US reported 7.7%. |
|
The new data reversed the trend from the previous five quarters, during which US funds consistently outperformed their European counterparts. The largest disparity was seen in Q1 2024, when US funds posted a 9.4% IRR, while European funds achieved only a 5.5% return.
Part of the reason lies in the different pace of monetary easing in the two regions.
The European Central Bank has cut rates eight times since January 2024, while the Federal Reserve has lowered them five times over the period. The cheaper borrowing costs helped boost deal and exit activity, thereby improving PE returns.
The consistently lower valuations in Europe, compared with those in North America, also attracted investors to look across the pond.
Globally, vehicles that raised between $250 million and $500 million performed best in Q1, showing a 9.7% IRR. It was the only size bucket to see improved performance, due in part to the relative nimbleness of capital deployment and lower debt dependence.
This represents a shift from the previous three quarters, during which funds under $250 million performed better on average.
Overall, PE funds globally posted a 7.5% IRR in Q1. But a short-term negative return of -1% in Q2 is anticipated, as macroeconomic volatility remains a significant headwind. This could potentially be turned around by the strong dealmaking in Q3 and further rate-cut expectations from the Federal Reserve. |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Smart reads that caught our eye.
• OpenAI won't receive government funding to build its data centers. Though the company has spoken to the US government about federal loan guarantees for chip factories, CEO Sam Altman said OpenAI doesn't believe in taking taxpayer money for private data center projects. [Reuters]
• Starbucks' bear cup demonstrated the strength of "little treats" culture even during economic uncertainty. The unexpected drama over the "Bearista" cup showed consumers' desire to have special items despite the US heading toward a K-shaped economy. [Fortune]
• Samsung wants to enter the world of American consumer finance. The Korean company is working with Barclays to launch its first US credit card. [The Wall Street Journal] |
|
|
|
|
|
| |
|
| | | |
