Are PE-owned firms a better choice for hard times?
Private equity-companies have some 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 of the 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-generating 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.
Recommended for you
Ethical super fund Australian Ethical has announced the appointment of Anthony Lane as chief operating officer.
The structural shift towards active ETFs will reshape the asset management industry, according to McKinsey, and financial advisers will be a key group for managers to focus their distribution.
ASIC has warned that practices across the $200 billion private credit market are inconsistent and, in some cases, require serious improvement.
A surge in electricity prices has driven the monthly Consumer Price Index to its highest level in a year, exceeding forecasts.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
225.31 3 y p.a(%)
2
Loftus Peak Global Disruption Fund Hedged
120.73 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
72.47 3 y p.a(%)
4
Paradice Australian Mid Cap A
69.09 3 y p.a(%)
5
Global X Ultra Long Nasdaq 100 Complex ETF
61.94 3 y p.a(%)
