By Kristina West – There is no doubt that the fallout from volatility from last year’s pandemic continues to impact markets, but it doesn’t always translate into a negative outlook. Indeed, for the private equity markets, it will probably be a banner year.
With momentum building in late 2020, the first five months of 2021 saw volumes increase by 21.9% compared to the same period last year, with 2,346 transactions, according to a PwC study.
Protect the disadvantages
LEM Capital was one of the companies well positioned to take advantage of exciting opportunities. âWe’ve always focused on protecting the downside, which has made us very disciplined investors,â says Jay Eisner, co-founder and managing partner of LEM Capital, winner of the award for best property manager (up to $ 1 billion. dollars).
Focused on real estate, the company noticed that an imbalance between growing demand and a limited new supply of Class B apartments worsened during the pandemic, underscoring the need for safe, clean and affordable housing.
Harrison Street, winner of the Best Property Manager Award (over $ 1 billion), has also positioned itself to resist the events of the Black Swan. Christopher Merrill, Co-Founder, Chairman and CEO of Harrison Street, said: âWhile we know that no asset is immune to recession, we believe our assets are more resilient than those that are more correlated to the recession. broad economic market. ”
A difficult secondary market
Despite opportunities elsewhere, not all market sectors achieved the same performance. Among the companies to face and overcome difficult market conditions was Setter Capital, winner of the best secondary platform, which increased both its research capabilities and its execution team in order to add value. to customers.
Focusing only on the difficult secondary market, the company “fine-tuned our approach to seize opportunities offered during the bear market, such as helping LPs with heavily unfunded exposure and GPs exploit the secondary market for capital.” , according to Secondaries Advisor at Setter Capitale, AJ Patel.
Covid19 accelerates industry trends
A number of market and industry trends have emerged over the past year. According to Kelly Meldrum, CFA, Partner and Head of Primary Investments at Adams Street Partners: âOur portfolio has historically been overweighted in software and technology-based services, healthcare, changing consumer preferences and industry. These sector trends have accelerated since the Covid-19. ”
Meldrum notes that the company – this year’s winner for Best Fund of Fund Manager (above $ 500 million) – will continue to focus on these four themes, as well as funds and companies with the operational resources to develop the activity in order to build on this performance of the year.
Ares Management also notes a significant level of dry PE powder globally, which has led to an increase in M&A activity and larger transactions, with PE companies writing significant equity controls in companies. large companies. “More and more mega-transactions are coming back to the market,” says Mitch Goldstein, partner and co-head of the Ares credit group.
With ESG also having an impact on the market as the COP26 summit draws to a close, there is no doubt that 2022 is shaping up to be as exciting – and as difficult – as 2021 has been so far.