Which of the following can affect the valuation of private equity investments?

The valuation of private equity investments is significantly influenced by prevailing economic conditions. Economic conditions encompass factors such as GDP growth rates, unemployment levels, consumer confidence, and overall market stability. These elements can impact the financial performance of portfolio companies, as they affect revenue growth, cost structures, and market opportunities. When economic conditions are favorable, companies are likely to perform better, leading to higher valuations. Conversely, during economic downturns, valuations may decrease due to lower revenues and higher risks.

Interest rates set by the central bank can also affect valuations, as they influence the cost of capital and investment decisions. However, the primary driver for valuation in private equity is often the economic environment where the investments are made. The personal preferences of the investment manager may play a role in decision-making, yet they are less impactful on the intrinsic value of the investments compared to economic conditions. Historical performance of the fund can provide context but does not directly determine the valuation in the current market climate.