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In the 3rd quarter of 2020, IHS Markit teamed up with
Mergermarket to learn about the challenges private equity firms
will face going into 2021 due to the effects of COVID-19. We
interviewed 30 private equity executives and measured sentiment
with a mix of quantitative and qualitative questions about their
plans.
Our findings suggest an overall shift toward managing
risk while diversifying portfolios - in other words,
remaining cautious and simultaneously expanding. Based on these
results, we assess a multilateral need for fresh strategies and
technology.
37% of respondents told us that they'd focus on managing
downside risk over the next year. There are various interpretations
as to what this will look like: on the one hand, companies must
support their portfolio companies through the pandemic; on the
other hand, ongoing risks like ESG will become a priority for these
firms.
23% of our respondents, meanwhile, expressed that their
strategies would not change.
20% said they'd focus on bolt-on acquisitions to fit with their
current portfolio companies.
These breakdowns represent practicality, but they also highlight
an unwavering risk appetite that has not succumbed to the
externalities of COVID-19.
Diversification is a growing trend.
37% of respondents indicated that they plan to diversify their
asset classes over the next year, with 20% of those individuals
expressing complete certainty in their intent to do so.
In addition, we found that 65% of firms looking to diversify
viewed distressed debt as their top segment choice. Underpinning
this finding is a growing demand among investors for distressed
opportunities; fund managers are answering the call.
The results of our joint survey support what we at IHS Markit
know to be true: when firms expand and grow, their needs grow with
them. PE firms have shown their ambition in the face of hardship -
but to execute on their new goals and compete with others in the
space, they will have to keep their technology fresh.
Our solutions for private equity have supported over 700 firms
in their journey of growth and their expansion into new asset
classes. We understand that as markets change and economies
fluctuate, firms and people need a partner they can trust to help
optimize output. Learn more about how we support
efficiency and streamline workflow.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
