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Alternative Market Briefing

Private equity investors raise concerns around geopolitical risk, climate change

Tuesday, June 16, 2020

Bailey McCann, Opalesque New York:

Private equity has a reputation for being a "people business" that is decoupled from the whims of the market or the concerns of the broader economy. While the long investment cycles of private equity funds often keep the asset class above the fray, it's hard to outrun global pandemic, recession, and the growing climate crisis all at once. Data from Coller Capital's latest Private Equity Barometer suggests that private equity investors are beginning to factor in a fall even if GPs aren't.

The Barometer researched the plans and opinions of 107 investors in private equity funds. These investors, based in North America, Europe, and the Asia-Pacific region.

According to the report, half of the world's LPs believe geopolitical tensions will have a material impact on the investment strategies and asset allocation of private equity funds over the next five years. Interestingly, this 50/50 split in Limited Partners' views does not vary at all by region.

Of the investors that see geopolitical risks growing for private equity firms, LPs expect to see the highest risk in emerging markets. Around two thirds of LPs think the emerging private equity markets of Russia, China, and the Middle East/North Africa will show a higher-than-normal level of political risk in the next five years. Investors see lower risks in India, and Central/Eastern Europe. The area of lowest political risk was South East Asia. The report did n......................

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