FUNDRAISING NEWS | November 20, 2024
Analysts expect economic challenges and the US Federal Reserve's monetary policy easing to drive new opportunities in private markets, according to T. Rowe Price's 2025 Global Market Outlook published November 19.
In it, T. Rowe Price Head of Private Equity David DiPietro and Oak Hill Advisors portfolio manager and Senior Partner Alan Schrager write that a challenging economy will fuel demand from borrowers, noting that the possibility of capturing alpha through complexity is more likely if the US economy slows substantially in 2025.
"If the broader economy continues to rally, these situational opportunities may be more limited and more conventionally performing private credit will take precedence," according to the report.
Meanwhile, additional rate cuts from the Fed are expected to set up conditions that will encourage firms to go public and/or consolidate. As observed in 2024, and projected to continue through 2025, the deployment of capital in private credit increased in line with the growth in mergers and acquisitions.
"Lower interest rates will help loosen up the M&A market by lowering the cost of capital for acquirers. If both IPOs and M&A activity pick up, existing investors in private companies would have two avenues to redeem their cash, potentially at better valuations," the authors added.
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