Blackstone executive predicts weakness in recent vintages, opportunity ahead

'When you pay all-time high prices, it tends not to be a good thing,' Blackstone’s chief administrative officer told Virginia Retirement System board members.

Private equity funds investing in the years of high prices in 2021 and 2022 may produce only mediocre returns for limited partners, according to Blackstone’s chief administrative officer.

“When you pay all-time high prices, it tends not to be a good thing. I don’t think the 2021 and 2022 vintage years will be catastrophic. But they will be mediocre because prices will be too high,” Vik Sawhney, Blackstone’s chief administrative officer, told Virginia Retirement System members at their board retreat on March 21.

Buyouts viewed a broadcast of the board retreat.

Sawhney’s comment reflects what others in the industry have predicted about the past couple years, both before and after the pandemic shutdown. Valuations were high (save for a few quarters in 2020), and firms, especially those focused on growth tech investing, likely paid up for assets that will be tough to sell higher.

Still, once uncertainty eases, near-term vintages could be stronger as prices have come down. Though buyers and sellers in private markets still have to get on the same page around asset valuations and pricing.

“2023 will be a period of slower transaction volume. But as we get more visibility on interest rates, possible bank contagion and market uncertainty, we will see very attractive capital deployment. I wouldn’t expect transaction volume to pick up this year but it will take a little bit of time before buyers, sellers and providers of financing get together,” Sawhney said.