Asset managers and institutional investors have been quick to announce their divestment from Russia in response to the country’s invasion of Ukraine – some to comply with ESG standards, others to avoid sanctions.

For many institutional investors, having a solid ESG profile is a requirement.  Most have committed to one or more international initiatives, such as the Principles for Responsible Investment or the Net-Zero Asset Owner Alliance, and thus must invest in or finance companies that adhere to those commitments.  The ripple effect extends to middle-market private equity and private credit firms and their present and prospective portfolio companies.

Private equity dealmaking and fundraising is forecasted to remain robust in 2022, while midmarket managers in the United States and Europe are wary of high valuations and inflationary pressures as they deploy record amounts of capital.

Individual LPs (investors) can only exit early their private equity interests through the secondary market. In brief, secondaries allow investors to sell their positions in private equity funds and hence liquidate equity stakes in private companies. Due to the illiquid nature of private equity, the establishment of a secondary market was necessary and perhaps inevitable.

The private equity game has become more complex and competitive.  Increased capital has flooded the market, driving up prices for fewer transactions. Global assets under management (AUM) are currently just shy of $5 trillion, and companies are acquiring more than they are selling.

Private equity will likely have a solid 2022, as money managers and the well-off continue to seek performance and diversification, Shanu Sherwani, a private equity analyst, writes in this guest column.  More secondary investors are expected to enter the market, while use of DLTs (the technology also known as the blockchain) could also pick up.