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2 min read . Updated: 10 Jan 2022, 06:27 PM IST Private markets, including venture capital, private equity and infrastructure, have experienced strong growth over the past year, thanks to relatively strong performance through the pandemic. Hugh MacArthur, head of the global private-equity practice at consulting firm Bain & Co., spoke to WSJ Pro Private Equity about some of the surprises of the past year and where he sees the biggest growth prospects in the months ahead. Responses have been edited for clarity.
WSJ Pro: What surprised you the most about private markets in 2021?
Mr. MacArthur: The rate at which growth equity exploded onto the scene caught everyone by surprise. We have seen a tripling of the size of the private-equity industry over the last 10 years in terms of deals, fundraising and the amount of dry powder available for investments. This industry has really grown up and has grown up very fast.
There is a huge amount of confidence going into the marketplace and returns have been strong even during the pandemic, those are driving the continued success of the private-equity industry. And it’s not only private-equity, but also growth equity, infrastructure, venture capital and secondaries that are growing very quickly as well.
WSJ Pro: What area of private markets do you expect to show the strongest growth?
Mr. MacArthur: Growth equity is the biggest thing in private equity, and I think that has a lot to do with the disruptive technologically-enabled business models that people are excited about and expect to grow to be the next $10 billion, $20 billion, $30 billion companies in our economy.
It’s because of the so-called unicorns. Investors have realized over the last decade that there is a space between pure venture and buyouts where you can finance growth-oriented businesses and disruptive businesses.
WSJ Pro: What potential challenges do you see in the months ahead?
Mr. MacArthur: I don’t hear or see negativity in the market. What I see is optimism [with investors] saying, “Well, prices are high, but as a share of the relative value we are buying into, there’s still so much value to be created from these businesses that we are buying that we can afford to pay a bigger number and actually generate great returns on the back of that number." There is a sense of resiliency about the market, which has proven to be pandemic-proof, at least so far.
But of course, inflation is not something this industry has had to deal with in the last 30-plus years. If interest rates go up, the prices of assets will decrease and the cost of financing them will increase and that will create a dislocation.
This story has been published from a wire agency feed without modifications to the text
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