A look back at the private equity Class of 2021—and why so many tech investors are sweating their returns

Good morning. CFOs of private equity-backed companies are usually under pressure, but now it's the PE firms themselves, specifically those that invested in tech, feeling the heat.

The performances of firms that made big outlays in 2021—a year that saw a record number of deals, many at sky-high valuations—are coming back into focus, according to my colleague Luisa Beltran. In her new report, “From KKR to Thoma Bravo: How 10 top private equity firms are performing as sky-high tech prices from 2021 fall back to earth,” Beltran has compiled a list that shows that year's early winners—and early losers.

“The Golden Age of private equity is over,” Jeff Chang, a senior managing director and head of private equity at Guardian Life, told Beltran. “The strong returns generated from 2010 to 2020 driven by zero interest rates, a strong economy, and technology adoption is over for now.” He added that only the best private equity firms, those with differentiated skill sets, will be able to produce the returns that have "spoiled the industry for the past 10 years."

Beltran provides some background: “In late 2021, the tech-heavy Nasdaq composite hit its all-time high of 16,057.44, on Nov. 19 of that year,” Beltran writes. “The M&A market was also setting records during this time: Roughly 50,000 global announced mergers were valued at $6 trillion in 2021, according to Dealogic. The number of U.S. deals soared by 41% year-over-year to 14,776, totaling $2.7 trillion, up 75% from 2020.” So this was a busy time for PE firms, which took part in over $400 billion worth of announced tech deals in the U.S. in 2021, according to the law firm Watchtell, Lipton, Rosen & Katz.

As mergers and IPOs have plunged since 2021, “private equity hasn’t been able to exit many of their investments, so they’re not returning capital to their investors, or limited partners, Beltran writes. “The LPs aren’t getting their money back, so they don’t have the capital to allocate to new funds, making fundraising much more difficult.”

For this report, Beltran set out to determine how well the class of 2021 PE funds are faring, focusing on those that invested in tech. Firms are ranked by how much they invested that year, with Thoma Bravo the top PE acquirer of tech companies in 2021, with 25 announced deals valued at $58.2 billion, according to Dealogic. TPG came in second, with 22 deals totaling $28.3 billion, while Hellman & Friedman placed third.

You can read the complete report here.

Sheryl Estrada
sheryl.estrada@fortune.com

This story was originally featured on Fortune.com