How Investor Appetite Can Shape Private Equity Investment Opportunities
Investor appetite is a directing force of how private equity investment opportunities are shaped. This appetite can be influenced by macroeconomics, expected returns and risk tolerance, sifting sectoral preferences. As investor demand grows, so do the investment opportunities. But how does investor appetite impact private equity investment opportunities across several dimensions? Appetite Drives Capital Deployments: Investor appetite can impact how quickly and aggressively capital is deployed. This means, large capital chasing a limited number of deals. This causes intense competition among private equity firms and driving up valuations. As a result, the deal flow is active but the pricing of assets becomes more aggressive. For investors this means lower entry yields and potentially compressed returns. On the other hand, when investor appetite is slowed down, valuations become more reasonable and open up attractive private equity investment opportuni...