Private equity and venture capital investors in the coming year will face a mix of challenges and risks, including the potential for a prolonged recession, high inflation and rising interest rates. Andrea Lennon writes

Despite these short-term challenges, there are several long-term trends that suggest optimism for private equity and venture capital, including climate change and decarbonisation, the technological revolution, sustainable lifestyles, demographics and the growth of emerging and frontier markets.

To weather the short-term challenges, institutional and High Net Worth Investors are expected to focus on maintaining a steady investment pace, choosing less correlated strategies and diversifying across asset classes. This provides opportunities to fund managers looking to raise assets, new funds or provide co-investment opportunities. Additionally, the transition to the retailisation of private equity is expected to continue, with improved access for previously excluded investors through the development of “democratised” solutions, namely retail investors. This provides a brand new set of opportunities for fund managers who were previously unable to access this market.

Despite facing challenges such as inflation, the higher costs of leverage and supply chain disruptions, the real estate sector is still viewed as a hedge against inflation, which may attract some investors next year. In fact, the possibility of falling values could present a good buying opportunity for investors who are under-allocated to the sector.

Advances in technology and changing consumer habits are also leading to a blurring of distinctions between different property types, which may create new opportunities for investors and developers. In PwC’s recent survey, Emerging Trends in Real Estate Europe, the investment and development prospects for the 30 major cities covered by the report have declined compared to the previous year, due to the possibility of a recession across Europe. However, those real estate managers who can adapt to the new financial realities and socio-political factors will still be able to find opportunities in the market. Overall, the real estate sector is expected to continue evolving and adapting to new challenges in 2023, offering potential opportunities for those who are able to navigate the changing landscape.

Andrea Lennon is the head of Fund Services, Ireland for Crestbridge.

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