In the 2018 Private Equity Outlook, Verus assesses the effects of the recent U.S. tax reform legislation on private equity, and examines an array of trends across regions and strategies to provide the following insights:
- The Tax Cuts and Jobs Act (TCJA) is expected to have a net positive effect on private equity over the next 12-18 months
- Deployment into private equity companies in the U.S. was strong, despite the high valuation environment
- While rich by historical standards, private companies are trading at a discount to public companies
- Investment activity in Europe mirrors trends in the U.S. with investors completing fewer, but larger deals; and on average, at lower valuations relative to the U.S.
- As investors continue to observe various attributes of private credits, including enhanced yields, capital raised for direct lending has surged
- Lean times continue for distressed strategies as the credit markets remain strong with low defaults
While market behavior, if sustained, can impact returns, we note the long-tern nature of funds and the asset class overall. For these reasons, we believe that careful manager selection will continue to drive portfolio performance in private equity.
We look forward to discussing this research with you.