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Bailey McCann, Opalesque New York:

Private equity appears to be preparing for the worst. 89 percent of private equity fund managers expect a prolonged downturn sometime in the next two years, according to the findings of a newly released survey from BDO.

The trade war was cited as a top concern among GPs. According to the survey, private equity firms with stakes in domestic and foreign manufacturing companies are finding the predictability and calculation of future cash flows less certain. There are also questions about how regulatory shifts will impact the manufacturing and distribution channels of other businesses in their portfolios. The Trump administration and Brexit were also cited as potential headwinds.

In response to the increased likelihood of correction, 70 percent of fund managers in the survey said they were being more selective about deals and are ramping up diligence. 14 percent of respondents went so far as to say they were actually planning to hold their investments for longer periods of time in order to manage exits through a slowdown.

"We're seeing more uncertainty around when investment committees are going to pull the trigger on deals," Scott Hendon, National Private Equity Industry Group Leader at BDO tells Opalesque. "We expect that managers are going to be thinking through entry and exit points in order to manage IRRs over the next few years."

GPs are also increasing their focus on the middle market in an effort to be more defens......................

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