Private Equity Earnings Calls Reflect Optimism in Q1’24

HFA Padded
HFA Staff
Published on
Private Equity

S&P Global Market Intelligence’s Quantamental Research and Solutions (QRS) team issued a first-of-its-kind analysis where Private equity (PE) sentiment was measured by using AI to assess what publicly-traded private equity (PE) firms’ executives are saying on earnings calls.

The analysis shows discussions of AI in PE earnings calls doubled in Q1’24 compared to the same period last year, with executives exploring AI applications ranging from customer service automation to predictive analytics for risk assessment.

Key findings reveal that despite a challenging M&A landscape and slower fundraising environment, PE executive sentiment surged to its second-highest level in over 13 years. This sentiment analysis not only highlights the resilience of the PE industry but also provides crucial insights into the factors driving this optimism.

Ilja Hauerhof, Director Quantamental Research & Solutions, Private Markets, S&P Global Market Intelligence said, “AI and natural language processing lets us quantify what we might intuitively know. The PE market conditions have materially improved in the last 2 years, and that’s manifest in the numbers. Executives are talking 74% less about volatility and sentiment just hit the second-highest level in 57 earnings seasons.”

Key research highlights:

  • Publicly-traded PE firms’ executives spoke less about inflation, interest rates, and liquidity on Q1’24 earnings calls than they have in 10 quarters, suggesting reduced tension (but ongoing importance) around these topics.
  • A secular increase in the focus on 'private wealth' and 'private credit' continued this quarter. PE firms are increasingly targeting high net worth individuals to fill fundraising gaps; private credit remains a focus for asset class diversification, despite an anticipated rise in defaults in 2024.
  • Discussions of artificial intelligence in PE earnings calls doubled, in Q1’24 vs Q1’23. Executives are focusing on AI's broader implementation for value creation within portfolio companies, including applications in customer service automation, predictive analytics for risk assessment, and investments in AI-driven companies and infrastructure.

Private Equity

Interesting tidbit: A portion of the paper, summarizing how private equity is talking about AI on earnings calls, was written entirely using ChatGPT (prompts included in the report).

HFA Padded

The post above is drafted by the collaboration of the Hedge Fund Alpha Team.