Private Equity Calm Despite Public Market Turmoil

by: Research Recap

The private equity community does not appear to be overly panicked about the turmoil in public markets, according to a survey of attendees at this week’s Private Equity Analyst Conference.

Sponsor Dow Jones Venture Wire (subscription required) reports that attendees weighed on a variety of topics, including future return expectations from recent vintage years, the outlook for future deals and fund-raising, as well as when the credit crunch may lift. Perhaps reflecting the long-term outlook of the asset class, their answers indicated that while they expect current grim market conditions to last for some time, they do eventually see improvement.

“People are in a much calmer state of mind than the general public or Wall Street commentators,” said D. Malcolm Wright, a partner in the private equity group at KPMG who conducted the interactive survey.

Attendees remain relatively optimistic in their return expectations for U.S. private equity funds raised between 2005 and 2007, with 51% betting that although returns will not be great they will be okay. Another 25% felt that those years were a good time to invest in distressed debt and mezzanine but a bad time for large buyout funds.

Among the skeptics, 16% of the audience felt that many investors will wish that they had put their money under the mattress instead.

A slim 8% still view the 2005 to 2007 vintage years as a very good time to have invested.

On the deal side, 67% of attendees predicted that deal flow will remain patchy in 2009 as buyers and sellers grapple with the effects of the economy. However, 11% still feel that there will good quality deal flow in all sizes and sectors of the market, with another 15% predicting that there will be deals, but that they’ll be restricted to the mid-market and below. Only 7% said that the only area of private equity that will see good deal flow in 2009 is venture capital.