{"text":[[{"start":7.96,"text":"Private equity executives have warned that most of the funds launched during the industry’s era of peak exuberance will fail to deliver the returns they originally promised investors."}],[{"start":18.24,"text":"Between two-thirds and 90 per cent of funds that started buying companies between 2019 and 2021 would ultimately fall short of the returns targeted at the outset, according to estimates from five senior dealmakers and buyout fund investors."}],[{"start":33.08,"text":"Buyout firms paid high prices for companies during a dealmaking boom amid the Covid-19 pandemic, fuelled by Panglossian growth forecasts and record-low interest rates."}],[{"start":43.96,"text":"“Particularly 2021 was such an exuberant year, and a lot of people really invested a lot of money in that year, at very high multiples. So it’s very hard to see in the current environment that they will meet their targets,” said James Brocklebank, a managing partner of Advent."}],[{"start":60.82,"text":"After a four-year downturn, many are still holding off selling assets bought during that period to avoid taking a hit, according to executives at the sector’s annual IPEM conference in Paris."}],[{"start":72.24,"text":"“Very few” of the funds across the wider industry which started buying assets in the three years before 2022 were likely to achieve their targeted internal rates of return, Brocklebank said. IRR is a metric favoured by the sector, which measures investment returns based on how quickly they are delivered — so both delayed sales and lower prices can hurt."}],[{"start":93.32,"text":"One top executive predicted that funds which started to deploy their capital between 2019 and 2021 would eventually achieve an average IRR of just 7 to 8 per cent. Two other fund investors predicted that funds of these vintages would muster IRRs in the low double-digits — well below the typical target of high-teens returns after fees."}],[{"start":114.16,"text":"The lack of exits from investments by private equity firms has weighed on distributions to investors in their funds. Buyout funds exited about $386bn of holdings in the first half of this year, consultancy Bain & Company estimates — less than the same period last year."}],[{"start":131.16,"text":"The year 2025 was already the fourth consecutive one in which the sector returned less than 15 per cent of its net assets to investors. In the previous decade, the average was 25 per cent."}],[{"start":142.76,"text":"“Fund investors are clamouring for liquidity, but they are also telling managers they won’t accept a discount to current marks,” said Roger Vincent, founder of Summation Capital and formerly head of private equity at Cornell University’s endowment. “If they see that discount, they will assume the valuation methodology is flawed.”"}],[{"start":162.22,"text":"Scott Kleinman, co-president of Apollo Global Management, suggested that investors would eventually receive a reasonable multiple of the capital they invested back from funds."}],[{"start":172.64,"text":"The companies private equity firms bought between 2018 and 2022 were generally “good companies bought at too-high prices”, Kleinman said, but their earnings would grow over time “to a point where sponsors can exit at reasonable total value”."}],[{"start":187.88,"text":"But while that would help funds achieve a respectable multiple of invested capital — another of the industry’s favoured metrics — Kleinman was less optimistic about IRRs, which worsen over time."}],[{"start":198.84,"text":"They “will be below expectations”, he said."}],[{"start":205.6,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789281497_1650.mp3"}