Expected 2023 Private Equity Investment Trends

While managing current portfolios and engaging with investors can eat up the majority of a firm’s time, it’s equally important to stay up-to-date on private equity industry trends. 

In recent years, there has been a dramatic shift in the state of private equity. Between 2020 and 2021, the industry experienced a period of unprecedented growth, only to see a regression in 2022 due to delayed economic reactions to the COVID-19 pandemic – the global buyout value dropped nearly 35%

The war in Europe, supply chain disruptions, and rising inflation are just some of the private equity problems that have caused investors to move from riskier investments to safer havens. Buyers, sellers, and lenders are in uncharted territory, waiting for clarity around this economic uncertainty.

Let’s further break down the current state of private equity and identify the private equity trends 2023 may reveal. 

A Review of Private Equity Industry Trends

Disruption doesn’t quite begin to describe the experience of private equity investment trends in the last few years.

2020: Black Swan Moment 

Coronavirus, the black swan of 2020, had a significant impact on the private equity industry, causing uncertainty and volatility in financial markets, disrupting deal-making, and affecting portfolio companies across various sectors. Fund managers took different approaches during this time, some riding out the storm with cost cuts, “hibernating” businesses with sufficient reserves, and others simply handing over the keys of a few companies to banks so they can focus on the future.

2021: Private Equity Rebounds

Despite the sudden shuttering of global economies at the start of 2020, private equity investors enjoyed a resurgence at the end of 2020 and in early 2021. Global private equity transaction volume ended 2021 at approximately $1.2 trillion, representing a 111% increase over 2020. Low interest rates, ample dry powder, and a robust fundraising environment all contributed to record activity levels in 2021.

2022: Inflation Strikes Again 

In 2022, markets were hit by fast-rising interest rates as inflation crept up to 40-year records. The Fed’s moves to combat inflation put private equity firms in a tricky situation. Combined with geopolitical realities that continued to rock the markets, the whiplash of inflation caused some investors to flee, while others saw an opportunity in the new landscape. 

As the global economy continues to evolve and face new challenges, private equity firms will need to remain adaptable, focusing on sectors and strategies that demonstrate resilience and long-term growth potential. How will private equity during a recession bode if one occurs? Time will tell. 

Current Trends in Private Equity 2023 

In 2023, we see the challenges of 2022 continuing to impact the private equity industry. Inflation remains at record highs, and geopolitical risks are still a major factor in investors’ decisions. Here are some of the top private equity trends 2023 may bring:  

High Competition Due to Dry Powder 

The state of private equity is highly competitive due to the large amounts of “dry powder” sitting on the sidelines. According to KPMG, the PE industry is sitting on $2 trillion in cash, which is a new record high. This will bring about intense competition among firms for the best deals and may lead to a seller’s market.  

Fewer Large Leveraged Buyouts 

Tighter monetary policy and a more uncertain macroeconomic outlook make large lenders more hesitant to finance large leveraged buyouts. This could lead to a decrease in this type of buyout, as buyers may not be able to finance their acquisitions with debt. 

Focus on ESG Investing

Research indicates that there has been an increase in private equity funds with an environmental, social, and governance (ESG) focus over the past years. ESG funds are those that focus on investing in businesses that prioritize quality and sustainability as core principles. This trend has been significantly influenced by investors who want to ensure their money is invested responsibly. 

Move Toward Emerging Industries & Markets 

A variety of emerging industries are expected to see a surge in private equity investment in the coming years. This includes industries such as renewable energy, blockchain technology, and artificial intelligence (AI). Investing in these sectors can present lucrative opportunities for private equity firms, especially if they can identify companies with high growth potential early on. And these opportunities extend beyond Western markets, with some investors turning their attention to developing economies

Turn to AI-Driven Insights 

The adoption of advanced technologies, such as AI, machine learning, and data analytics, will continue to shape the PE space, enabling firms to improve their operations and gain a competitive edge. AI, in particular, is helping to drive this trend. Analyzing companies through AI-driven insights can help investors identify potential investments that have the highest growth potential, making it much easier to select portfolio companies before the competition does.  

Sectors That Could Offer Attractive PE Opportunities 

The current private equity industry trends point toward an uncertain yet opportunistic future. While there’s no single sector that stands out as especially attractive, certain sectors in emerging markets could hold potential:  


Technology continues to be a major driver of growth and disruption, with companies in the sector often receiving considerable funding. The venture capital space is particularly attractive for investors as companies in AI, machine learning, and emerging tech often have high growth potential.  


The healthcare sector is another attractive option for investors due to its resiliency, but competition is fierce. Ample dry powder and a track record of returns in 2022, despite the slowdown in deal flow, continue to draw healthcare-specific funds.

Renewable energy

With ESG being top of mind, renewable energy sources such as solar, wind, and hydroelectric power are becoming increasingly appealing for PE firms that want to tap into the market potential of this growing sector.  

Find New PE Opportunities in 2023 With udu 

At udu, we’re committed to helping private equity firms take advantage of current PE trends and opportunities.

Our proprietary technology uses AI-driven insights to help firms identify and analyze promising investments. With our data-driven platform, investors can easily filter private equity industry trends to find the best PE opportunities. Request a demo to learn more about how our technology can help you make faster, smarter investment decisions.

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