This study from Intertrust Group reveals GPs’ views on the main challenges and opportunities the private equity industry is facing now and in the next 12-24 months. 57% of private equity fund manager respondents see the environment for private equity deteriorating over the next 12 months and of these, one in eight believes it’ll deteriorate “significantly.” The survey also indicates that ESG considerations will escalate in importance, in terms of how firms run themselves and the companies they invest in. The drive for greater transparency remains an absolute priority for firms and their stakeholders, particularly regarding portfolio performance. Additionally, GPs believe that smarter technologies and digitization will drive operational efficiencies and support the push for greater transparency, as well as investment opportunities.
The Wall Street Journal reports that investors continue to shower technology-focused private equity funds with cash, as the economic turbulence caused by the coronavirus pandemic makes the sector’s growth prospects and perceived resilience more appealing. A total of 33 private equity funds focused on these types of investments closed this year through July 6. Collectively, the funds raised $30.1 billion through July 6, a 21% drop from the same period a year ago, but still the third-highest sum on record during that period. The pandemic has bolstered the sector’s appeal by accelerating technology-driven trends, including a greater reliance on e-commerce and a shift to cloud computing (WSJ).
Referencing recent data from PwC, Private Equity International is reporting that US buyout multiples have risen to eye-watering levels during the pandemic as managers flock to hot sectors. Assets commanded a 15.2x enterprise multiple during Q2 2020, up from 12.9x in the previous quarter and 11.5x for the same period last year. The pricing spike was driven by opportunistic investing and certain sectors – such as technology, media, and telecommunications – experiencing a “sugar-rush” of sudden demand (PEI).
According to Secondaries Investor, the secondaries market is set for new heights with fundraising setting a record during the first half of the year, amid a pause in deal-making. $48.3 billion was raised in six months to June 30, compared with $29 billion raised in the previous record first-half of 2018. This figure exceeds all full-year totals apart from 2017, when $49.1 billion was raised. The figure is a 455% rise on the $8.7 billion raised in the first half of 2019 (SI).
The fundraising effects of the crisis have been particularly intense for emerging managers, with LPs tending to prioritize existing relationships, as reported by Buyouts Insider in its latest Emerging Manager Survey. Overwhelmingly, LPs are citing the logistical obstacles to due diligence as a barrier to making new investments. Despite the global economic shock caused by the coronavirus, 79% of investors say their allocation to emerging managers has not changed. By and large, LPs with defined emerging manager programs remain convinced by the benefits of bringing fresh blood into their portfolios (BI).