Mar’ 2024

CAPZA's vision on 2024 market outlook

Christophe Karvelis-Senn, President of CAPZA, Maxence Radix, Benoit Choppin and Guillaume de Jongh, Managing Partners of CAPZA, share their vision for 2024.

In 2023, the Euro area had a mixed year economically. Although initially resilient to the energy crisis, growth faltered due to high energy prices, tight monetary policy, and weak foreign demand.


While short-term indicators remain weak, some forward-looking indicators suggest potential growth in the future.

Can you share your perspective on the state of the economy in 2024?


Christophe Karvelis-Senn, President, CAPZA:“In 2024, economic activity is expected to rebound mildly driven by three factors.


First, real disposable income is set for a boost as headline inflation slows sharply and nominal wage growth remains firm, supporting consumer spending.


Second, investments are projected to increase further, supported by solid corporate balance sheets and adaptation to high-interest rates. Infrastructure investments are also set to grow, benefiting from public spending and funding from the Recovery and Resilience Facility (RRF) and cohesion policy funds.


Third, as inflation has cooled down in 2023, interest rates are expected to decrease in Q2 or Q3. However, considering the large budget deficit in most Western countries, that might not imply a significant decrease in long-term rates.”

Where do you anticipate potential difficulties may arise?


Maxence Radix, Managing Partner, CAPZA: “Two factors could jeopardise the gradual recovery.


First, external demand, which has provided little support to the economy in 2023, is forecast to continue to inch down in 2024 as global goods trade continues contracting, impacted by geopolitical tensions, increased protectionism, and the slowdown of the Chinese economy. A potential extension of the conflict in the Middle East could cause disruptions to energy supplies and have a powerful impact on energy prices and global output. In addition, national elections in 60-plus countries this year may curb capital expenditures and spending as economic agents may take a wait-and-see approach.


Second, the EU faces significant structural challenges, including low productivity growth, green and digital transitions, pressure to increase defence spending, ageing, and social inclusion. These issues must be tackled despite record high sovereign debt levels, in the context of re-introducing fiscal rules.”

Though some known headwinds may not vanish overnight, we are cautiously optimistic for 2024.
Benoit Choppin, Managing Partner at CAPZA

What is your outlook on the private equity market for 2024 after a challenging year in 2023?


Benoit Choppin, Managing Partner, CAPZA:“Though some known headwinds may not vanish overnight, we are cautiously optimistic for 2024. This is mainly based on the following factors: 


First, the expected rate reduction by the ECB later this year should loosen the restrictive bank lending practices experienced in recent times and bolster access to acquisition financing.


Second, fewer PE sponsors can comfortably continue in a “wait and see” mode. GPs have experienced increasing pressure from their investors to deploy the near-record high levels of dry powder they still have in their hands. In parallel, LPs are pushing the GPs to return money upstream to the investors by realising investments.


Third, PE sponsors may increasingly benefit from the continued transformation of many European industry sectors (such as automotive, chemical, energy, industrial manufacturing, etc.), often involving selling assets deemed not core to buyout funds.

What about private debt markets?


Guillaume de Jongh, Managing Partner, CAPZA: “Since 2022, private credit funds have benefitted from the bank retrenchment, which has limited competition in a higher interest-rate environment. Double-digit yields come with lower leverage multiples, higher equity contributions, and tighter documentation.


In 2024, credit markets should gradually return to normality with more appetite from banks and CLOs against a backdrop offering more stability and visibility. This liquidity should enable both private equity and private debt funds to gradually resume their portfolio rotation, spurring the pipeline of new opportunities. However, credit selection remains pivotal when defaults are likely to creep higher, and the lagged effect of policy tightening may be most acute.”

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