“How’s the market?” Well, at the end of the first quarter, the picture is mixed. Private markets firms are prioritizing portfolio value creation over new deal work in anticipation of a market turn; recruitment remains candidate-led and employers must position themselves as the top choice to attract talent.

We hear news of occasional success stories in fundraising, some surprisingly large, though these successes seem to be outnumbered by those who are finding the process heavy going. There are occasional reports of new deals being signed, and even the odd exit, but at levels a long way below this time last year. Clearly, credit and special situations strategies are active. Large cap deals which, by their nature are more dependent on financing, are significantly rarer than mid-cap equivalents, but there are some sightings. In truth, many firms are more concerned with portfolio value creation than new deal work for now, as they plan for a turn in the market cycle.

Views diverge as to when this might happen. While some guess at 12-18 months, and some (smaller) firms suggest the corner may already have been turned, in my dialogues across the market nobody seems to believe this is likely to be a three year wait. This feels more like a short-term blip than a structural downturn. Of course, private markets businesses are built by people who are fundamentally confident and optimistic in their ability to invest profitably.

On the recruitment side, there is a lot of noise: with so many bank layoffs happening, there’s an assumption of a glut of newly available junior talent. Some of this may help the previous imbalance of supply and demand, but my expectation is not a huge amount. Only a small subset of the banking pool is ever suitable for investment roles and those who wanted to make the leap have done it already; a flood of less relevant CVs doesn’t move the dial much.

We have seen some client firms decide to slow or reduce hiring levels in recent months and also keep a very high bar right to the end of searches. We have also seen a number of candidates decide to stay where they are in the current climate rather than risk a move. This is especially true of those at mid to senior levels in investment teams, where a major carry vesting threshold is in front of them, which makes completing a process sometimes challenging.

Yet, there’s still a lot going on. If this is a blip rather than something more serious, logic suggests we’re still going to need to grow headcount. Given the scarcity of talent, if we sit out the next 12 months who knows what will be available when we return to the market? In the meantime, that portfolio value creation work still needs doing. Fundamentally, in a more mature and competitive environment, the job itself is more difficult than it used to be and needs more people than before to do it well.

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Rupert Bell
Some of the areas in which we are seeing big activity spikes currently include:

  • ESG topics – strategy, measurement, portfolio impact and dedicated investment teams
  • Financial controllers and top calibre IR professionals – now in more demand than ever; the critical importance of good information.
  • Secondaries – any dislocation is an opportunity.
  • Diversity – not just entry level women, (though this remains a super-hot topic) but how to engage and retain the female talent you have before, during and after parental leave, plus widening the agenda to include ethnic diversity, creating opportunities for those with disabilities, and wider interpretations.
  • Market entry plays – especially in my local DACH region, there remains a long line of firms building teams to join the market. This need not lead to saturation, as in fact the addressable primary market is expanding with more Mittelstand owners now willing to consider an exit to financial buyers. This rise in sales to financial buyers is attributable to the influence of next generation decision makers, changed investor behaviour and most of all higher valuations.
We still see this as a candidate-led market and those hiring successfully have adapted to recognise the need to position themselves as an employer of choice, shaping their process to communicate the attractions of the firm’s culture and career path first. Short lists remain very short!

If you would like to discuss trends or opportunities, please reach out.