SVB – PE VC Trends

In this report, SVB analyzes the trends in the private equity and venture capital market, specifically focusing on how managers are adapting to an environment of higher interest rates. One area of concern for chief financial officers is the management of capital call lines of credit (CCLOCs) under these conditions. SVB has built a model to understand the impact of interest rates, payoff structures, and hurdle rates on a fund's internal rate of return (IRR), and the results show that CCLOCs generally have a positive impact on returns even as interest rates rise. Another trend highlighted in the report is the increased use of CCLOCs for portfolio company notes as a means to provide capital in a period of constrained liquidity. Despite a slower investment and fundraising environment, funds have been able to focus on improving their internal operations, such as implementing enterprise resource planning (ERP) systems and enhancing cybersecurity controls. The report concludes by acknowledging the adaptability and resiliency of private fund managers in navigating a challenging macro environment. SVB remains committed to serving the industry and expects a stronger year in 2024.