Are PE-owned firms better choice for hard times?
Private equity companies have structural advantages that allow them to navigate crises better as they have access to equity and debt capital from their sponsors, expertise from managers and active owners, according to Willis Towers Watson.
The firm, which surveyed several private equity managers at the end of Q1 2020 to understand how their businesses were performing and what their expectations were for the next 2-3 months, found that while the first half of the year saw market volatility and a subdued environment for exit deals, investors should not forget that managers maintained significant flexibility over the timing and terms of company exits.
“So far, we have seen little evidence of forced exits into a depressed market and long-term investors who are patient can ride out any short-term volatility,” the firm said in a note.
“Strong, cash-generative businesses are typically favoured by our managers and we focus on those with strong operational skill as this is a key tool to add value.”
As far as sectors were concerned, technology, healthcare and consumer staples were the areas still worth capital deployment, despite the short-term dislocation.
At the same time, long-term PE investors should remain disciplined and continue to deploy capital in line with their programmes and investors considering the asset class could be facing one of the better periods to invest in the past decade.
AUTHOR
Oksana Patron
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
