Private capital investment value dips 29% in Q3, after record-high deal activity

The private capital investment value in the Global Private Capital Association's markets declined 29% from the second quarter to the third quarter of 2022 to $38.8 billion from $54.5 billion, following "record-high deal activity" from 2021 through the first half of 2022.

GPCA, a non-profit, independent membership organization representing private capital investors who manage more than $2 trillion in assets across Asia, Latin America, Africa, Central and Eastern Europe and the Middle East, released its latest quarterly report on Wednesday.

According to tables in GPCA's report, the total private capital investment value in GPCA markets plunged by 44% year over year to $38.8 billion from $69.8 billion.

Looking at the third quarter alone, all geographic regions showed declines in value, except China which saw a 2% increase. Central and Eastern Europe suffered the worst decline, a 59% drop in the quarter, with value in India plunging 58%.

On a year-over-year basis, the Middle East was the only region which showed a gain in value — of 32%. All other regions suffered declines, as India fared the worst, with a 78% plunge in year-over-year value.

However, the overall private equity and venture capital deal value still exceeded pre-pandemic levels in GPCA's markets, the report said.

Indeed, according to GPCA data, there were 3,597 global deals in 2020 (with total value of $171.5 billion) and 5,823 deals in 2021 ($268.1 billion in value.) Through the first three quarters of 2022, there have been 4,458 deals ($167.6 billion).

But in 2019 (prior to the pandemic), the number of global deals totaled 3,070 ($122.3 billion).

"The broader context is that deal activity is still above pre-pandemic levels, but we have had a correction from the tech boom of 2021," said a GPAC spokesman by email. "This was felt in markets like the U.S. earlier, and now can be seen in all geographies."

The slowdown in global investment encompassed all regions in the third quarter of 2022, with financial services, fintech and consumer-facing segments suffering the most, the report noted.

One of the few bright spots was in infrastructure, especially digital and renewable energy, which attracted $30.8 billion through the third quarter, "exceeding all prior annual totals."

In comparison, investments in infrastructure through the end of the third quarter of 2021 totaled $27.7 billion.

The report cited that the $2.7 billion buyout of digital infrastructure platform Cirion by private equity firm Stonepeak Infrastructure Partners from Lumen Technologies was the largest private capital investment recorded across GPCA's markets in the third quarter of 2022.

In addition, third quarter investments of $509 million in Poland's Rezolv Energy; $501 million in India-based Tata Power Renewables; and $450 million in India's Hero Future Energies, drove private capital investment in renewable energy infrastructure to $3 billion through the first nine months of the year.

Within technology, electric vehicles and automotive tech defied the general slowdown in the tech space, the report said.

The total investment in electric vehicles, autonomous vehicles and automotive tech reached a record $9.5 billion year to date, including investments of $4.2 billion in just the third quarter. China accounted for the largest deals in these market segments, including a $1.2 billion investment in Sunwoda Electric Vehicle Battery, the report noted.

Electric vehicles "have emerged as a centerpiece of (China's) industrial policy, and private capital investment in the space has followed," GPCA stated in the report.

The report also indicated that fund managers raised $74 billion for investment vehicles targeting GPCA markets in the first three quarters of 2022, led by Asia-focused funds, with Hong Kong's Baring Private Equity Asia closing the region's largest fund of the year at $11.2 billion.