Whitepaper | Cash Flow Forecasting for LPs in 2023 & Beyond
Private equity (PE) firms have enjoyed a period of strong performance and growth over the past decade, with record levels of fundraising and robust buyout activity. However, the PE industry is facing a number of challenges, including rising interest rates and economic headwinds that are expected to slow down the distribution from buyout funds from 2023 onwards. This paper explores the expected impact of these challenges on the PE industry, specifically on buyout distributions and the impact on cash pacing for LPs.
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Whitepaper summary
The PE industry is facing a number of challenges that are expected to impact the distribution of buyout funds from 2023. Rising interest rates and global economic headwinds are expected to slow down the pace of buyout distributions, leading to a longer j-curve breakeven for funds raised in recent years. While the PE industry has been largely resilient during economic downturns, the severity and duration of the upcoming headwinds could impact the ability of PE firms to generate returns from their investments. Investors in these funds need to accurately forecast their cash flows, NAVs and returns on their investments or facing liquidity issues in the near future.