Generative AI prompts GPs: Are you a disruptor or a disruptee?

Plus: Continuation funds exit at healthy clip, and PE middle market grows after plateau

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For investors, the conversation around generative AI has rapidly changed. Questions about the technology's impact that seemed abstract and distant 18 months ago—"Will AI impact the value of my portfolio?" or "How will it shape investment decisions?"—are now real and present.

For fund managers, particularly venture capitalists, the gen AI boom has surely created new investment opportunities. But it also has spawned a whole new set of risks for business models that face being upended by a radical wave of innovation, writes London bureau chief Andrew Woodman.

Narry Singh, a partner with consulting firm AlixPartners who advises clients on digital transformation, says that GPs approaching a potential deal are increasingly having to ask themselves whether they are buying a disruptor or a disruptee.

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Exits multiply for PE continuation funds, roughly doubling YoY in Q1

PE firms have leaned into continuation funds as their quarterly exit activity roughly doubled year-over-year in Q1. Although the structure provides liquidity benefits, PitchBook's Janelle Bradley reports that fund managers may still experience obstacles in constructing and exiting these deals.

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Out of the shadows: PE manages to sustain deal activity

Middle-market dealmaking continued to show year-over-year growth in Q1 despite plateauing from a burst of activity late last year, our latest US PE Middle Market Report shows. Factors including the recovery of deal multiples, improved borrowing costs and a continued focus on selling the best assets first have characterized middle-market dealmaking so far.

While below their historical average, middle-market funds continue to outperform mega-funds, with a one-year horizon return of 12.7% compared to the latter's 7.6%.

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