Private equity industry facing challenges in selling off assets
The private equity industry is currently facing a significant challenge in selling off trillions of dollars in assets, according to Egyptian industrialist and billionaire investor Nassef Sawiris. Sawiris, who has invested parts of his fortune in funds at multiple buyout firms, expressed frustration with the lack of distributions in recent years. Firms have been struggling to exit investments amidst a post-pandemic slowdown in dealmaking and initial public offerings.
Sawiris highlighted the difficulty in exiting investments, stating, “Private equity has seen its best days… They can’t exit. Exits are so tough.” Investors have expressed their frustration at the lack of returns and cash distributions over the past five to six years. Sawiris also criticized the use of “continuation funds” as a way to recycle capital, calling it “the biggest scam ever.”
Continuation funds have become increasingly popular, with a record $76 billion in assets moved into such funds last year. Sawiris has been overseeing the break-up of his Dutch-listed chemicals and fertiliser empire OCI, with the group agreeing to several major disposals to return cash to shareholders.
Despite the challenges facing the private equity industry, Sawiris remains optimistic about the future. He believes that the groups best positioned to succeed are those that have grown large enough to challenge major lending banks, such as Blackstone. Sawiris emphasized the importance of operational performance within portfolio companies, criticizing private equity managers for focusing more on fundraising than managing businesses effectively.
The private equity industry’s assets under management shrank for the first time last year, signaling a shift in the market dynamics. As buyout groups continue to face challenges in selling assets acquired at high valuations, the industry is undergoing a period of transition. Sawiris’s insights shed light on the current state of the private equity market and the need for firms to adapt to changing economic conditions.
