PE dry powder to increase in 2020, says survey

Over two-thirds (69 per cent) of chief financial officers (CFOs) and chief operating officers (COOs) at UK-based private equity and venture capital firms expect levels of dry powder – money raised but not yet invested – to increase in 2020.

Surveyed at a recent BVCA reception event for CFOs and COOs, the results of the survey, conducted by Intertrust, a global leader in providing tech-enabled fund and corporate solutions, also found that 69 per cent expect the private equity fundraising climate in 2020 to mirror 2019 levels.
However, over one-third (31 per cent) predict it will become slightly harder to raise capital and nobody agreed it will get ‘easier,’ suggesting that next year could see a marginal tightening of conditions.  Interestingly, this figure is still less than the 41 per cent who said it would be hard to raise capital in 2018, when Intertrust carried out the same survey in 2017.
Although the volume of dry powder stands at over USD1.5 trillion globally, driven by cash-rich but yield-starved institutional investors, 50 per cent of CFOs and COOs expect valuations to stay the same.  This is almost 20 per cent more than the number of those who believe the valuations will fall (31 per cent) while 19 per cent believe it will increase in 2020.
Patrick O’Brien, Global Head of Fund Services at Intertrust, says: “It’s clear that senior private equity managers believe the market will continue to perform at a similar level in 2020, with fundraising outpacing deployment and capital returns. This is despite uncertainties in the UK market concerning Brexit and the outcome of the upcoming General Election.

“While this remains a challenging market environment, there is still a lot of capital to be put to work and we look forward to working with managers in the next year so they can continue to support business growth and of course generate value for their investors.”