FT reports private equity (PE) is struggling to generate asset realizations to fund investor returns - see link and snipped below - and are still (unsuccessfully) seeking "2021 prices".
The reason they are seeking 2021 prices is they haven't yet taken their marks, wanting to pad performance and maintain the illusion of PE/alts generating high returns, low volatility, and "uncorrelated" performance (despite being high fee, levered-equity products).
But of course, all asset prices negatively correlate with tighter money, not just publicly-traded "liquid" assets. That's why they can't exit positions via IPO/trade sale in 2023 at 2021 prices, only at 2023 prices.
Investors and regulators should treat asset-shuffling efforts by PE such as continuation funds (rolling old assets into new funds), and margin loans etc to fund investor distributions, with extreme suspicion/skepticism, & clear evidence of PE overstating their NAVs/returns.
In my view, the whole PE/alts space is massively overallocated & due a meaningful clean out.
T.me/AlliesFin
https://on.ft.com/3FwPHxq via @FT
By: via Telegram.me/AlliesFin #StockMarket #india
