Time Pressure Mounts on Trillions in Dry Powder

Money market funds have surged to record highs of $6.56 trillion, prompting some including Morgan Stanley to believe that this capital — which factors in both institutional and retail investors — is “on the sidelines” waiting to be invested. The trigger, Morgan Stanley expects, will be when the Fed starts decreasing the interest rate.

Dry powder among VCs, PEs, hedge funds, buyout funds etc, has reached $4.5 trillion, or $9 trillion in buying power with leverage. And they really need to start investing because, as Morgan Stanley says:

Given large fundraises in 2020-21, and limited deployment over the last 2-years, we now see an aging cash pile of private equity dry powder that in some cases may begin to no longer generate economics unless deployed, hence driving an urge to transact. Further, muted realization activity and limited distributions back to LP clients is straining the fundraising backdrop, hence driving an urge to find liquidity solutions for LPs. Combined, we see a growing urge to transact in the context of favorable macro and financing conditions that should see Alts put money to work in the coming months.