Private equity

Private equity delivers

Strong performance drives investor interest

Matthias Goegele, Head of Multi-Managers Private Equity Europe

Over the past 12 to 18 months, private equity has continued to attract strong inflows both globally and across various investment strategies. Against a backdrop of generally robust macro-economic conditions and a strongly performing public equities market, this has been driven by investor appetite for strong risk-adjusted returns.

2017 private equity industry review

In North America, buyout activities for 2017 amounted to USD 421 billion, representing an increase of 12% compared to 2016. 2017 was also another strong year for European buyouts—one of the highest years on record, partially driven by cross-border deals completed by non-European investors. Exits in Europe followed the same trend as seen in North America, with 2017 volume declining slightly from 1,570 deals in 2016 to 1,544. Fundraising also experienced a slight dip—88 funds closed at an aggregate value of USD 69 billion. Buyouts in Asia increased in 2017 and venture capital activity in Asia remained robust with a larger total value of USD 82 billion.1

Trend to watch—private equity and healthcare

The healthcare sector has attracted increased interest from private equity investors. In an environment which is generally impacted by political and macro-economic uncertainties, powerful secular and demographic trends provide the basis for robust long-term growth dynamics that are mostly resilient through economic cycles.

A continuing global environment of high public market valuations will be a cause for concern as private equity players fret over the availability of upside and the pressure it puts on private market valuations. Undoubtedly, the equity bull market that started 2018 has been partly fueled by the quantitative easing that has been ongoing in much of the world, not least in China. It looks likely that this monetary policy support will diminish in the coming year, albeit gradually. Meanwhile, uncertainty around global trade, brought on by the targeted US tariffs on specific goods or industries as well as the US cancelation of its nuclear deal with Iran, is likely to persist.

Where does this leave private equity?

While increased prudence and additional caution is advised, we do not think investor interest in private equity will drop off significantly. We remain convicted that our investment focus on the global growth themes, including small- and medium-sized buyouts, is better positioned to reap the upside of a continued growth scenario.