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Laxman Pai, Opalesque Asia: The level of dry powder in the private equity industry stands at a record of $1.48tn as of April 2020, so firms have a huge amount of capital to put to work, said a study.
About $314bn of that total is in venture capital funds, said a report by Preqin.
Given the difficulty of valuing businesses at present, venture capital financing rounds are likely to be smaller in size and take longer to complete, the report noted.
"The increases in valuations between financing rounds are also likely to be smaller. Investor appetite for IPOs is limited in a recession, so venture capital firms looking to monetize their investment in later-stage companies will be considering alternative exit routes," it said.
The global recession is likely to weigh on deal-making in the near term, particularly in sectors such as retail, leisure, and hospitality, which have been hit especially hard by the global lockdown.
Retail - especially brick-and-mortar stores - faces considerable headwinds as shoppers increasingly opt to buy online. This trend is accelerating at a time when in many cities, only stores deemed to offer essential services, such as pharmacies and supermarkets, remain open to the public.
"The impact on retail has been so significant that more than a quarter (26%) of LPs we surveyed in April 2020 said they planned to avoid retail-focused private equity this year, because of COVID-19," the report said.
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