By Matt Wirz and Miriam Gottfried
April 17, 2025 8:00 pm ET
One of Wall Street’s most consistent profit engines is close to breaking down.
Even before President Trump’s tariff chaos, buyout firms had been struggling to sell their portfolio companies and return money to anxious investors. Now recession fears and market turmoil have brought dealmaking to a near standstill.
Shares of Apollo Global Management, Blackstone, KKR and other private-equity fund managers are down 20% or more this year, far worse than the S&P 500’s sharp losses.
The longer the deal logjam lasts, the harder it will be for firms to hand money back to clients such as pensions and endowments. The amount of unrealized value the funds owe their investors has hit record levels, according to an analysis by credit-ratings firm Moody’s Ratings. That makes it tougher for the firms to raise new funds.
“We aren’t even in a recession now, and we’re already at a point where things are incredibly challenging,” said Hugh MacArthur, chairman for private equity at Bain & Co.
Firms are sitting on a record 29,000 companies worth $3.6 trillion, half of which they have owned for five years or more, he said. Clients are becoming less willing to make new investments and buyout fundraising dropped by almost 25% last year, he said.
Even Blackstone is feeling the pain. The private-equity giant, which reported first-quarter earnings Thursday, said market volatility might lead North American institutional investors to “slow down decision-making” about allocating money due to expectations of lower payouts. The firm has other fast-growing businesses including private lending and private wealth.
Recent market volatility has deepened buyout firms’ struggles to sell portfolio companies and return money to investors. Photo: Seth Wenig/Associated Press
Some companies could become even more difficult to unload because of financial pressures.
Office-supply chain Staples, which Sycamore Partners bought for $7 billion in 2017, imports much of its inventory from Asia. Prices of some of the company’s bonds dropped to below 60 cents on the dollar in recent weeks. The firm has already returned some money to investors through dividends.
The extent of the tariffs is still unknown, and the political and economic uncertainty isn’t all bad for the industry. Big private-equity firms have pushed heavily into private credit, becoming a major source of lending for private-equity backed companies. That business typically grows in turbulent times when banks make fewer loans, though returns could suffer if existing borrowers become distressed.
Pensions and endowments are investing less with the biggest players and more with smaller and more focused ones that are delivering, said Neal Prunier, a managing director at the Institutional Limited Partners Association, a trade group.
“If distributions aren’t coming and performance isn’t generating the results that they’re looking for, [investors] have to go elsewhere,” Prunier said.
Private equity remains the biggest fee generator for the broader Wall Street ecosystem of banks and advisers, which was counting on a dealmaking recovery this year.
Trump’s sweeping “Liberation Day” tariffs were top of mind at a Bain Capital gathering earlier this month for leaders of the companies it owns and others. One keynote speaker encouraged the roughly 350 attendees to take a more granular look at how their supply chains might be affected, according to people in attendance.
The next day, Trump announced a 90-day pause on most of the so-called reciprocal tariffs.
The landscape has firms unwilling to move forward with new deals. Banks and debt investors have also stopped making new buyout loans. Some say financing is available but it would come at a steeper cost.
The amount of money firms have on hand, or “dry powder,” relative to the amount they have locked up in unsold companies is at a record low, according to Moody’s.
Many executives in the industry had been waiting for the Federal Reserve to further cut interest rates. Firms are reluctant to sell companies they bought when borrowing costs were lower. Some are breaking through. GTCR on Thursday announced a $24.3 billion deal to sell payments company Worldpay to Global Payments.
“We already thought 2025 was going to be a challenging year for distributions,” said Ian Charles, managing partner of Arctos Partners, which provides capital to asset managers, including private-equity firms. “It’s going to be even harder than we thought.”
Source (Archive)
April 17, 2025 8:00 pm ET
One of Wall Street’s most consistent profit engines is close to breaking down.
Even before President Trump’s tariff chaos, buyout firms had been struggling to sell their portfolio companies and return money to anxious investors. Now recession fears and market turmoil have brought dealmaking to a near standstill.
Shares of Apollo Global Management, Blackstone, KKR and other private-equity fund managers are down 20% or more this year, far worse than the S&P 500’s sharp losses.
The longer the deal logjam lasts, the harder it will be for firms to hand money back to clients such as pensions and endowments. The amount of unrealized value the funds owe their investors has hit record levels, according to an analysis by credit-ratings firm Moody’s Ratings. That makes it tougher for the firms to raise new funds.
“We aren’t even in a recession now, and we’re already at a point where things are incredibly challenging,” said Hugh MacArthur, chairman for private equity at Bain & Co.
Firms are sitting on a record 29,000 companies worth $3.6 trillion, half of which they have owned for five years or more, he said. Clients are becoming less willing to make new investments and buyout fundraising dropped by almost 25% last year, he said.
Even Blackstone is feeling the pain. The private-equity giant, which reported first-quarter earnings Thursday, said market volatility might lead North American institutional investors to “slow down decision-making” about allocating money due to expectations of lower payouts. The firm has other fast-growing businesses including private lending and private wealth.
Recent market volatility has deepened buyout firms’ struggles to sell portfolio companies and return money to investors. Photo: Seth Wenig/Associated Press
Some companies could become even more difficult to unload because of financial pressures.
Office-supply chain Staples, which Sycamore Partners bought for $7 billion in 2017, imports much of its inventory from Asia. Prices of some of the company’s bonds dropped to below 60 cents on the dollar in recent weeks. The firm has already returned some money to investors through dividends.
The extent of the tariffs is still unknown, and the political and economic uncertainty isn’t all bad for the industry. Big private-equity firms have pushed heavily into private credit, becoming a major source of lending for private-equity backed companies. That business typically grows in turbulent times when banks make fewer loans, though returns could suffer if existing borrowers become distressed.
Pensions and endowments are investing less with the biggest players and more with smaller and more focused ones that are delivering, said Neal Prunier, a managing director at the Institutional Limited Partners Association, a trade group.
“If distributions aren’t coming and performance isn’t generating the results that they’re looking for, [investors] have to go elsewhere,” Prunier said.
Private equity remains the biggest fee generator for the broader Wall Street ecosystem of banks and advisers, which was counting on a dealmaking recovery this year.
Trump’s sweeping “Liberation Day” tariffs were top of mind at a Bain Capital gathering earlier this month for leaders of the companies it owns and others. One keynote speaker encouraged the roughly 350 attendees to take a more granular look at how their supply chains might be affected, according to people in attendance.
The next day, Trump announced a 90-day pause on most of the so-called reciprocal tariffs.
The landscape has firms unwilling to move forward with new deals. Banks and debt investors have also stopped making new buyout loans. Some say financing is available but it would come at a steeper cost.
The amount of money firms have on hand, or “dry powder,” relative to the amount they have locked up in unsold companies is at a record low, according to Moody’s.
Many executives in the industry had been waiting for the Federal Reserve to further cut interest rates. Firms are reluctant to sell companies they bought when borrowing costs were lower. Some are breaking through. GTCR on Thursday announced a $24.3 billion deal to sell payments company Worldpay to Global Payments.
“We already thought 2025 was going to be a challenging year for distributions,” said Ian Charles, managing partner of Arctos Partners, which provides capital to asset managers, including private-equity firms. “It’s going to be even harder than we thought.”
Source (Archive)
