Private equity investments are typically longer-term, illiquid, high tracking error commitments with an expected return higher than that of public markets. Performance of this asset class has come down over the years for a range of reasons, including more efficient markets and an increase of capital in the asset class. However, we believe significant value can still be generated in Private Equity, primarily through an intense focus on manager selection and a healthy awareness of fees.
In the 2016 Private Equity Outlook, Verus examines an array of regions and strategies to provide the following insights:
- U.S. Buyout will likely face headwinds in the near term as spreads have widened and new debt issuance has declined.
- U.S. Venture Capital is beginning to cool off due to a reduction in exit activity. With elevated dry powder, record late stage valuations, and muted activity exit, many risk remains for late stage Venture Capital.
- With elevated investment and exit activity, the Asian private equity market continues to show signs of attractive investment opportunities.
- Direct fund implementation has generated greater return above public benchmarks, although certain fund of fund solutions may be acceptable for some investors.
- Secondaries may be a good alternative outside the U.S.