On July 19th, Schroders Global published an article stating that by 2023, global private equity investment and financing activities will recover to pre-pandemic levels, creating a favorable environment for private equity (PE). Schroders Global found that capital is heavily concentrated in larger private equity buyouts, with record high financing amounts for large funds. The institution believes that a 5% increase in interest rates in 2022/2023 will pose challenges for large leveraged buyout markets, while the performance of mergers and acquisitions in the mid to small-sized market is more stable and attractive. Currently, the Chinese private equity market is mainly dominated by the Renminbi. The rapid growth of small and medium-sized enterprises, as well as government efforts to drive innovation and upgrade local consumption, are supporting the robust development of China's domestic private equity investment market. In the prevailing low-trading environment, the institution believes that excessive financing activities have led to increased competition for large transactions, with entry barriers increasing exponentially. These large buyout activities reflect a common perception of private equity, but in reality, they are just part of the private equity market. Mergers and acquisitions of mid-sized private equity and growth capital projects are an important part of the private equity market and an area where the institution sees more investment value and opportunities. The institution defines companies with a value of less than $1 billion as mid-sized and growth companies, which can provide higher potential returns and transformational growth potential, making their market valuations more attractive. Small mergers and acquisitions in Europe and the United States offer attractive acquisition prices. In the past 20 years, the size of large funds has increased tenfold, leading to intense competition for capital in a limited investment environment. In contrast, smaller funds in the private equity market have less funds and more stable trading volume. Recent trends in the market include the impact of the COVID-19 pandemic and the significant participation of the wealth management industry, which have led to a significant flow of funds into larger funds in the private equity market. Restricted travel during the pandemic has made due diligence on small funds seem more difficult, leading investors to gradually prefer investing in large funds. At the same time, wealth management firms are encouraging clients to enter the private equity market through larger funds. On the other hand, mid-sized companies are less affected by financial market cycles, especially due to lower levels of business leverage. In Europe and the United States, the gap in entry prices between mid-sized and large mergers and acquisitions has continued to widen in recent years, making smaller companies with growth and transformation potential very attractive. The institution particularly favors family-owned companies or businesses owned by founders that have strong fundamentals and growth potential. Overall, a 5% increase in interest rates in 2022/2023 will pose challenges for large leveraged buyout markets, while the performance of mergers and acquisitions in the mid-sized market is more stable and attractive. Mid-sized mergers and acquisitions create a more favorable actual investable capital environment (dry-powder environment), with valuations at a discount, at around 6 times the enterprise value multiple (EV/EBITDA). They truly enable diversification in investments and are a key part of covering all ranges of private equity. Growth capital (especially in Asia), as well as investment opportunities in artificial intelligence (AI) and biotechnology In Asia, China and India are particularly attractive due to their population structure and continuing growth of the middle class. Mid-sized enterprises are the engine of these large economies. Initially, international institutions mainly invested in Chinese private equity in US dollars, but have since expanded into Renminbi. Now, the Chinese private equity market is mainly dominated by Renminbi. The rapid growth of small and medium-sized enterprises and strong government support for innovation and local consumption upgrades are driving the vibrant development of China's domestic private equity investment market. According to data from Schroders Global Capital, mid-sized enterprises in China currently account for about 60% of their Gross Domestic Product (GDP). In India, the institution sees an increasing number of controlling transactions, but growth equity investments are also attractive as they align with the return goals of entrepreneurs. From the perspectives of India's economic growth prospects, a large and young population structure, and the relatively small size of the private equity market compared to its GDP, the Indian private equity market seems to have strong long-term development potential. Innovative technologies, especially in industries such as artificial intelligence (AI) and biotechnology, are rapidly advancing and will continue to be driven by seed and early-stage venture capital. Early-stage investments benefit from a more rigorous financing environment and provide ongoing opportunities for innovation. It is expected that by 2024, generative AI will account for nearly 15% of total venture capital, making it the most disruptive innovation concept at present.