\n<\/p>\n
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Simply sign up to the Private equity myFT Digest — delivered directly to your inbox.<\/span><\/p>\n Eighty per cent of all private capital groups could be zombie firms within the next decade, according to one of the industry\u2019s most senior executives, surviving only to manage existing investments because they cannot raise fresh capital.<\/p>\n Only about 5,000 of the 15,000 or more private capital firms that exist today had successfully raised funds in the past seven years, Per Franz\u00e9n, chief executive of Sweden\u2019s EQT, told the Financial Times.<\/p>\n \u201cHow many of these firms will have a successful fundraising also in the next five to 10 years?\u2009.\u2009.\u2009.\u2009Probably less than half,\u201d he said. \u201cThe number of zombie firms will increase by an additional couple of thousand.\u201d<\/p>\n Private equity groups have struggled to raise funds in recent years after finding it difficult to return cash to their backers because of a dealmaking drought.<\/p>\n Instead, private equity firms have sought to increase the amount of fees they can generate from existing funds, as well as leaning more heavily on continuation vehicles, a tool that buyout firms use to hang on to some assets by selling them to themselves. <\/p>\n Continuation vehicles have exploded in popularity in recent years and enable firms to generate new management fees on assets that they might have otherwise sold to outside buyers. <\/p>\n These structures could help compensate for a lack of fees from new funds. However Franz\u00e9n said continuation vehicles were not a long-term solution.<\/p>\n \u201cIt\u2019s not a sustainable business model to squeeze out fees out of\u2009.\u2009.\u2009.\u2009existing funds and to opportunistically raise continuation vehicles,\u201d he said.<\/p>\n \u201cThat\u2019s not going to help you attract and retain the best people in the industry,\u201d he added. \u201cAt some point, these firms will cease to exist.\u201d<\/em><\/p>\n Just 50 to 100 globally diversified firms would capture around 90 per cent of capital flowing into private markets in the next fundraising cycle, the Swedish executive predicted.<\/p>\n As of October, the number of private equity funds to reach \u201cfinal close\u201d this year was on track to be the lowest in at least nine years, according to Preqin data. <\/p>\n But Rob Lucas, chief executive of private capital group CVC, said that despite the fundraising difficulties the industry faced, there was nonetheless likely to be an influx of capital.<\/p>\n \u201cIf you look at the real headlines of the demand for private capital over the next decade or two, it is immense,\u201d he said. <\/p>\n Recommended<\/p>\n Private capital groups have set their eyes on the US retirement market, where the Trump administration earlier this year issued an executive order that enables 401k saving plans to invest in a range of alternative assets. <\/p>\n Firms are also increasingly targeting wealthy individuals as a new source of cash, including through semi-liquid structures listed on public markets. <\/p>\n \u201cThere will be firms that regenerate,\u201d said Lucas. \u201cI do think there\u2019s real scope in the market for new firms to form and for the smaller firms to develop.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" Stay informed with free updates Simply sign up to the Private equity myFT Digest — delivered directly to your inbox. Eighty per cent of all private capital groups could be zombie firms within the next decade, according to one of the industry\u2019s most senior executives, surviving only to manage existing investments because they cannot raise<\/p>\n","protected":false},"author":1,"featured_media":31979,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[3044,689,2312,18534,661,18533,1877,1420],"class_list":{"0":"post-31978","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-capital","9":"tag-chief","10":"tag-decade","11":"tag-eqt","12":"tag-firms","13":"tag-pile","14":"tag-private","15":"tag-zombie"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/31978","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31978"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/31978\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/31979"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31978"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31978"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31978"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}