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Laxman Pai, Opalesque Asia:

Nearly all private equity managers expect to see a surge in distressed fund deals over the coming year, said a new survey.

"An overwhelming majority (90%) of US private equity fund managers expect to see a rise in the volume of distressed fund transaction activity over the next 12 months," said the survey commissioned by fund service firm Intertrust Group.

Due to the impact of COVID-19, almost half (46%) of respondents believe that mismatches in valuation expectations between buyers and sellers will restrict deal flow, said the report, which interviewed around 150 private equity fund managers across Europe, North America, and Asia to identify the risks and opportunities facing the industry in light of the COVID-19 pandemic.

Distressed strategies are also likely to benefit from an improved fundraising climate, which for most other fund types is expected to worsen. 81% of respondents in the US expect the fundraising climate for distressed funds to improve over the next 12 months, of which 39% say it will significantly improve.

Venture funds are expected to see the biggest drop in investor appetite with 79% predicting fundraising conditions will worsen.

As the private equity sector adjusts to a rapidly transformed landscape, the study revealed a growing interest in the role that private debt can play during and after the crisis. Over a fourth, (29%) of private equity investors in the US are planning to diversify into direct lending ......................

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