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.

Canada Asset Management

Views and opinions expressed are presented for informational purposes only and are a reflection of UBS Asset Management’s best judgment at the time a report was compiled, and any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed. Commentary is provided at a macro level and is not with reference to any investment strategy, product or fund offered by UBS Asset Management and is provided in Canada generally pursuant to the registration exemption provided for in Section 8.25(2) of National Instrument 31-103 and in Ontario pursuant to Section 34 of the Securities Act (Ontario) and does not purport to be tailored to the needs of the person or company receiving the advice.. The information contained in the materials should not be considered a recommendation to purchase or sell any particular security. The materials and content provided will not constitute investment advice and should not be relied upon as the basis for investment decisions. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. UBS Asset Management services offered to Canadian persons are provided by UBS Asset Management (Canada) Inc., a Nova Scotia corporation. UBS Asset Management (Canada) Inc. is an indirect wholly-owned subsidiary of UBS AG and is registered as a portfolio manager and exempt market dealer (in all provinces of Canada), commodity trading manager (Ontario), adviser – commodity futures (Manitoba) and investment fund manager (Ontario, Quebec and Newfoundland), all pursuant to Canadian securities law. Materials may include forward-looking statements. Actual future results, however, may prove to be different from expectations. Past performance is no guarantee of future results. Potential for profit is accompanied by possibility of loss.

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