Over the past decade, private equity benefited from a generally supportive exit environment. Low interest rates, accessible financing, and steadily rising valuations made it possible to bring strong portfolio companies to market with relatively little friction. Firms could crystallize gains, return capital to investors, and redeploy quickly into new opportunities. Today, the environment is different. Higher financing costs, tighter credit, and a prolonged slowdown in IPO markets have reduced overall ex ...

Core Insights - The article discusses the rise of "directs" in private equity, a model where investors select individual companies rather than investing in pooled funds, driven by the increasing wealth of family offices [2][6][31] - Matt Swain, CEO of Triago, has been pivotal in transforming the directs sector into a significant business, raising substantial capital and attracting attention from major investment firms [5][12][30] Company Overview - Triago, under Swain's leadership, has become a leader in the directs space, raising $3 billion in equity capital for 35 deals, which supported over $10 billion in purchases [12][30] - Houlihan Lokey, a mid-tier investment bank, acquired Triago and has since leveraged its resources to enhance the directs model, aiming to expand into new areas like continuation vehicles and co-investments [23][24][30] Market Dynamics - The directs market is projected to grow significantly, with estimates suggesting it could reach around $200 billion this year, a substantial increase from previous years [6][30] - Institutional investors, including pension funds, are beginning to show interest in directs, indicating a potential shift in investment strategies towards more direct equity investments [31][32] Investment Strategy - The directs model offers higher potential returns compared to traditional private equity, with investors seeking returns of 3x or more, contrasting with the typical 2x returns from conventional PE funds [13][31] - Directs sponsors typically do not charge fees unless they achieve significant returns, aligning their interests closely with those of their investors [14][19] Competitive Landscape - While the directs model is gaining traction, it still faces challenges in achieving mass adoption among traditional private equity investors, who prefer pooled investments for quicker capital deployment [7][31] - The success of the directs model has attracted competition, which could lead to increased prices and reduced profit margins for existing players [7][30] Future Outlook - Swain envisions a future where directs will revolutionize private equity, making it more liquid and accessible, akin to public markets [31][32] - The increasing interest from large pension funds in directs co-investments indicates a growing acceptance of this model within institutional investment strategies [32]