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The private capital industry’s ‘dry powder’ has hit $4tn

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Financial markets are full of duck-rabbits, where you can show some lines, a pie chart or scatter plot to two smart people and they will see two radically different things.

So what do you think when you see this chart, lifted from BlackRock’s 2024 private markets outlook that was released today?

Yep, based on data from Preqin and its own information, BlackRock estimates that the private capital industry’s “dry powder” has now touched the $4tn mark.

That is enough to acquire Apple and still have change left for Berkshire Hathaway or Tesla. That $4tn would comfortably buy you every listed company in the UK. It is nearly what Chelsea have spent on a mid-table squad. You could extinguish the entire global high yield bond market (ok one of these isn’t true).

In fact, it’s almost a third of the entire private capital industry’s overall $13tn of assets under management (zoomable version).

So when you look at the dry powder chart do you think: “There’s clearly still a lot of money on the sidelines that will eventually have to be deployed. This is going to reinvigorate M&A, stimulate capital markets activity and stoke the bull run”?

Or do you think: “Investors must still be high on those smooth, backward-looking historical returns. That’s a lot of money that GPs desperate to generate fees are going to be shovelling into some wonderfully dumb stuff”?

Like the duck-rabbit illusion, both are simultaneously true.

Anyway, the full report has a lot of other stuff on private equity valuations, infrastructure, real estate woes, and — of course — private debt, which BlackRock forecasts will double in size to $3.5tn by 2028.

Further reading:

Keeping the powder dry (FTAV)

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