POWERED BY MOMENTUM MEDIA
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
The Australian Retirement Trust is adopting a “healthy level of conservatism” towards the US as the end of the 90-day tariff pause approaches, with “anything possible”.
Uncertainty around tariffs and subdued growth may lead to some short-term constraints in relation to the private credit market, the fund manager has said.
Just three active asset managers are expected to attract net inflows over the coming year, according to Morningstar, with those specialising in fixed income or private markets best positioned to benefit.
Taking a purely passive investment approach is leaving many investors at risk of heightened valuation risks, Allan Gray and Orbis Investments have cautioned.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
92.15 3 y p.a(%)
2
Global X 21Shares Bitcoin ETF
53.24 3 y p.a(%)
3
Global X GlobalX FANG+ ETF
43.15 3 y p.a(%)
4
DomaCom Shoreline North Coogee
36.26 3 y p.a(%)
5
GAM LSA Private Shares AU I
35.87 3 y p.a(%)
