The private market industry has maybe 11,000 players, Partners Group CEO David Layton says.
Over the next decade, that number could fall to under 100.
In an interview with the Financial Times (FT) Sunday (Sept. 17), Layton predicted a “new phase of maturation and consolidation” due to rising interest rates, funding difficulties and increasing regulatory costs.
“It is really only the large players that can withstand the forces reshaping the private markets industry,” he told the FT. “We could see the current 11,000 or so industry participants shrink to as few as 100 next-generation platforms that matter over the next decade.”
The report, citing consultancy Preqin, said assets held in illiquid private market strategies stood at $12 trillion at the end of December, with total private markets fundraising falling 8.5% last year to $1.5 trillion. Net inflows into private equity managers fell 7.9% to $677 billion in 2022.
The FT added that many smaller private equity managers have found attracting new business increasingly tough, with the top 25 biggest competitors landing more than a third of the $506 billion of new capital allocated private thus far in 2023.
A tough funding and regulatory environment is driving mergers and acquisitions in other areas, as PYMNTS wrote last month.
According to a recent “FinTech Tracker® Series Report” published by PYMNTS, banks and FinTechs, once fierce rivals, are joining forces in mutually beneficial alliances and partnerships, with “some FinTechs are profiting substantially from acquisition by banks.”
A prime example is NatWest Bank’s acquisition of British workplace savings and pension firm Cushon earlier this year for $174 million. There was also a recent partnership deal between Citizens Bank, one of the largest financial institutions in the U.S., and FinTech Wisetack, to offer BNPL loans to small to midsize businesses.
“It has now become apparent to the FinTechs that the banks have opportunities to be the backbone of lending and/or financial services,” said Christine Roberts, president at Citizens Pay.
“And then [the FinTechs] get to be the front man. … That can be a very symbiotic relationship. We bring the capabilities of a massive institution of lending and regulatory control. They bring the creativity of FinTech and customer experience and technological connectivity together.”