2015 Private Equity Outlook Overview

Each year, we assess trends and market opportunities in private equity. Our philosophy and approach is rooted in developing a highly selective portfolio diversified by investment stage, type, vintage year and geography.

While we place a significant amount of importance on diversification, we believe manager selection also should be a primary focus as each sub-strategy will have managers with demonstrated ability to generate value across multiple economic cycles.

One challenge with implementing a private equity strategy is related to the length of time that private equity managers deploy capital under the typical fund structure. Investment periods are typically between three and six years, plus the holding periods and time required to liquidate holdings.

As it is difficult to react quickly and capitalize on temporary market dislocations, our outlook must be longer term and will typically focus on more structural market changes.

With that as backdrop, we review several trends in the private equity industry and highlight the opportunities we see as we move into 2015.

Favorable trends for 2015 include:

  • strong exit market;
  • energy market volatility;
  • institutionalization of emerging markets; and
  • co-investments and secondaries.

Unfavorable trends include:

  • high valuation multiples;
  • more capital in market;
  • regulatory pressure; and
  • emergence of large asset managers.

We see the most opportunity in the areas of flexible and specialized approaches, energy-focused opportunities, Latin America, and private debt.

 

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