Morrison Cohen LLP’s Post

📈 Performance Trouble Spot: Private Equity 📉 The end of zero and negative interest-rate policies has presented new challenges for the private equity industry. Fund managers are under increasing pressure to deliver not just on paper but through actual capital distributions to investors. Institutional investors are re-evaluating their portfolio allocations to navigate this shifting landscape. 📊 Despite these challenges, the private equity industry remains resilient and creative, continually striving to maintain its reputation for high returns. This environment presents unique opportunities and risks, especially for private investors. 💡💼 👉 Discover more in the latest blog from Kaiser Partner Privatbank! #PrivateEquity #Investing #KaiserPartnerPrivatbank #Finance #CapitalMarkets

Private equity is still adjusting to the new environment of higher rates and market volatility. However, the future is bright since there are indications that near-term prospects may be appealing for buyers with access to capital. As we return to the "Old New Normal," Eisner Amper reviews several emerging themes in the private markets that influence deal volume, returns, valuations, and shareholder interest. #finance #privateequity #transactions #dealmaking https://lnkd.in/gtDKvMSE

In their recent conversation with Marie Kemplay, our portfolio managers explained how investing in ICG Enterprise Trust gives investors exposure to a wide range of private equity buyout funds. *Capital at risk This is something that is out of reach for many due to the high minimum investments typically required. Alongside the democratising effect of listed private equity, Oliver Gardey and Colm Walsh discussed ICG Enterprise Trust’s investment philosophy, evolving investor base, and outlook for the future. 🔗 Read the full article in PitchBook: https://lnkd.in/e-W3-JK6 #InvestmentTrusts #ListedPE #Investing   *Investments involve risks, including the risk of capital loss. Past performance is not a reliable indicator of future results.

Delighted to discuss with Christian Mayes Portfolio Advisers Limited on why we like global small caps. An asset class that has been in the shadows of the mega caps (especially Magnificent 7) for some time, but where valuations are attractive and underlying operations on the cusp of improvement as peak interest rates are past and cyclical activity shows signs of potential recovery. https://lnkd.in/dxe32Czy #SmallCap #CyclicalRecovery #Diversification For professional investors only

Deal value and deal count have fallen 60 percent and 35 percent, respectively, from their peaks in 2021. Exit value is down 66 percent, and the number of funds closing is off by nearly 55 percent. Short of interest rates being cut anytime soon, what changes in the PE industry need to happen to help improve cash flow back to the LPs?

Return dispersion in private equity has been large over the years, highlighting the importance of manager and asset selection. Learn more in our 2024 Alternatives Outlook: http://spr.ly/6049TNBuT

Back in 2019, Institutional Investor Magazine warned: The Faulty Metric at the Center of Private Equity’s Value Proposition: IRR - “Distorted.” “Manipulated.” “Inflated.” And yet, the private equity industry continues to rely on IRR as the performance measure of choice... When will that change? At Multiplicity Partners we suggest paying more attention to DPI, and focus on IRR only once all paid in capital has been returned. #privateequity #privatemarkets #secondaries https://lnkd.in/dGnip9Zp

The FT has a good summary of the current state of the PE industry, including insights and charts from a larger study by Bain. https://lnkd.in/dET777bv The PE boom of 2021 is now well in the rear-view mirror. Investor money committed to PE is down. Money actually deployed is down even more, which means dry powder sitting on the sidelines is up. The biggest problem though is not the entrance to the funnel but the exit. Selling to a larger firm has been the most popular exit strategy for decades (much more popular than an IPO), but at the moment large corporates have rather low appetite for taking over highly leveraged smaller companies. That isn’t a problem in its own as PE funds could just hold on to the companies they own for longer and make at least something from the profits trickling in. Unfortunately, the current level of interest rates is a problem for that plan. Firms who leveraged up in the low interest era will have to refinance at higher interest rates in the coming years, hitting the bottom line. In summary, running a PE find was a whole lot easier when leverage was cheap, hence the 2021 boom. Rates higher for longer is a real problem for the pipeline, and will reduce the profitability of leveraged PE investments going forward.

During the week there was some push back from funds expressing their unhappiness in disclosing detailed information about valuations on unlisted assets.  They would prefer to only talk in terms of asset classes.  It is worth noting that there are no standards around asset class definitions. This is an interesting article from Bloomberg that discusses many of the challenges in this space but is also indicating how investors are demanding better information and withholding further investment to get it.  Weekly valuation information being part of the list. The other points raised are also if interest particularly the impact around debt. See https://lnkd.in/e4SVCERm #wealthmanagement #financialplanners #financialadvisor #financialadvice #investing

EisnerAmper's Cory Markling, CFA shares the latest trends shaping the private equity industry in 2024 and examines the impact on deal volume, returns, valuations, and stakeholder interest. Read our latest outlook here: https://okt.to/WietVq #Outlook2024 #PE #PrivateEquity