Private equity investments are typically longer-term, illiquid, high tracking error commitments with an expected return higher than that of public markets. Notwithstanding the trajectory towards lower outperformance over public equities, we continue to see significant dispersion in manager returns in both venture capital and buyout. We believe that careful manager selection is key. Regardless of market behavior, the best managers will continue to drive portfolio performance in private equity.
In the 2017 Private Equity Outlook, Verus examines an array of regions and strategies to provide the following insights:
- Current market trends are putting downward pressure on the future of U.S. buyout returns, including record levels of dry powder, high purchase price multiples, and high equity contribution to deals
- Late-stage venture capital remains negative however muted exit activity brought a welcome correction in pricing
- The demand for private equity investments in Asia outpaced Europe in 2016
- Secondary managers are increasingly using various forms of leverage and deal structures to attain their target returns
- Fund-level lines of credit are being used more widely