Ready for change!? — Private Capital Operations in the Digital Age

Hardly any industry has been spared from digitization in recent years. Substantial parts of the retail industry have migrated to the Internet, the music industry has had to reinvent its distribution model, and banks and insurers are facing increasingly successful FinTechs and InsurTechs. By contrast, the private capital industry remained¹ largely unaffected by disruptive change to date. The very investors who are massively driving change in other industries with their investments in tech startups or Industry 4.0 companies have so far hardly developed their own business model. But now private capital investors are also facing a variety of challenges.

Challenges for private capital investors

Private capital investors have benefited from stable structures and substantial returns for decades, but are now coming under increasing pressure. Three factors play a role:

Falling yields
The global overhang of capital with low returns is leading to a "battle" for the limited number of profitable investment opportunities. As a result, private capital funds now have around EUR 1,400 billion in "dry powder"², around 30% more than at the time shortly before the 2008 financial crisis. This means that the available investable funds mark a historic record level. At the same time, the number of deals is stagnating.