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Photo: Richard Levine/Corbis via Getty Images

It is too early to know if we're in the midst of a public equities correction, or if the bears have finally arrived. Either way, private markets tend to follow the public lead.

Why it matters: For private equity that likely means a decrease in traditional fundraising, but also new deal-making opportunities and newfound interest in special situations and distressed debt funds.

  • Buyout firms have spent much of the bull market in "harvesting" mode, and have plenty of dry powder to do new deals as prices fall and strategic buyers conserve cash. So long as we don't have a replay of the 2008/2009 credit crunch, don't be surprised to see an increase in PE deals, at least as a percentage of overall M&A.
  • There could be at least a mild "denominator effect" for fundraising, as falling public equity values result in a decrease in real dollars available for new private equity funds. For example, imagine an institutional investor with a $10 billion portfolio back in January, and a 10% allocation to alternatives. In other words, $1 billion available. Now, however, if that same portfolio is slashed to just $8 billion, the alternatives allocation is $200 million smaller.
  • One caveat, per Kelly DePonte of Probitas Partners, is that "a number of LPs have added flexibility to their allocations so they are set within a range, and not a single hard number."

For venture capital, it means that many firms will go "back to basics" and face a lot of very hard choices when it comes to existing portfolio companies. Also, don't be surprised to see corporate VC pullbacks.

  • Venture capital always responds to bull markets with bigger funds and bigger deals. And befitting the longest bull run in American history, this time we've seen the biggest funds and the biggest deals. But there still isn't too much evidence that venture capital really scales — at least not on an IRR basis — and veteran firms will make a lot of noise about picking up their old knitting. Just like there was in 2002 and 2009.
  • This also would mean smaller fund sizes, largely offsetting denominator effects.
  • There could be a reckoning for startups whose growth has been almost entirely fueled by venture dollars. Either because they can't get large new rounds or because they'll come at discounts that erode employee morale. Particularly if the IPO window significantly narrows. Welcome to the expansion-stage dessert.

Yes, but: I must reiterate that no one knows what's around the corner, and even consensus projections of slowed economic growth are just that — projections. It's impossible to guarantee the end to something that has been unprecedented.

Go deeper

Updated 3 hours ago - World

UK government: Kremlin has plan "to install pro-Russian leadership" in Ukraine

British Foreign Secretary Elizabeth Truss. Photo: Gints Ivuskans / AFP via Getty Images

The United Kingdom's Foreign Secretary on Saturday night said the government has "information that indicates the Russian Government is looking to install a pro-Russian leader in Kyiv as it considers whether to invade and occupy Ukraine."

Driving the news: U.S. National Security Council spokeswoman Emily Horne called the intelligence "deeply concerning" in a statement to Axios. The Biden administration has said Russia is actively manufacturing a pretext for invasion and warned that Putin could use joint military exercises in Belarus as cover to invade from the north.

Updated 4 hours ago - Science

This powerful new accelerator looks for keys to the center of atoms

Illustration: Eniola Odetunde/Axios

Nuclear physicists trying to piece together how atoms are built are about to get a powerful new tool.

Why it matters: When the Facility for Rare Isotope Beams begins experiments later this spring, physicists from around the world will use the particle accelerator to better understand the inner workings of atoms that make up all the matter that can be seen in the universe.

Updated 4 hours ago - Politics & Policy

Omicron dashboard

Illustration: Aïda Amer/Axios

  1. Health: FDA OKs antiviral drug remdesivir for non-hospitalized COVID patients — Walensky: CDC language "pivoting" on "fully vaccinated" — Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations, CDC finds.
  2. Vaccines: The case for Operation Warp Speed 2.0 — Teens and adults missed 37 million vaccinations during COVID — Team USA 100% vaccinated against COVID ahead of Beijing Olympics — Kids' COVID vaccination rates are particularly low in rural America — Annual COVID vaccine preferable to boosters, says Pfizer CEO.
  3. Politics: Arizona governor sues Biden administration over COVID funds tied to mandates — Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" by Biden on anti-mask school policies.
  4. World: American Airlines flight to London forced to turn around over mask dispute — WHO: COVID health emergency could end this year — Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults — Beijing officials urge COVID-19 "emergency mode" before Winter Olympics.
  5. Variant tracker

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