By Kristina West – There is no doubt that the fallout from last year’s pandemic-related volatility is continuing to impact the markets – but that does not always result in a negative outlook. Indeed, for private equity markets, it is looking likely to be a record year.
With momentum building in late 2020, the first five months of 2021 saw volumes increase by 21.9 per cent compared to the same period last year, with 2,346 deals, according to research from PwC.
Protecting downsides
LEM Capital was among the firms well-placed to leverage exciting opportunities. “We’ve always focused heavily on protecting downsides, and that has made us very disciplined investors,” says Jay Eisner, Co-Founder and Managing Partner at LEM Capital, winner of Best Real Estate Manager (up to USD 1 billion).
Focused on real estate, the firm noticed an imbalance between growing demand and limited new supply of Class B apartments worsen during the pandemic, highlighting the need for safe, clean and affordable housing.
Harrison Street, winner of Best Real Estate Manager (above USD1 billion), has also positioned itself to withstand black swan events. Christopher Merrill, Co-Founder, Chairman, and CEO at Harrison Street, says: “While we appreciate that no assets are recession-proof, we believe our assets are more resilient than those that are more correlated to the broader economic market.”
A challenging secondaries market
Despite opportunities elsewhere, not all sectors of the market performed the same. Among the firms to face and overcome challenging market conditions was Setter Capital, winner of Best Secondaries Platform, who increased both its research capabilities and its execution team in order to add value to clients.
Focusing solely on the challenging secondaries market, the firm “tweaked our approach in order to capture opportunities afforded during the down market, such as helping LPs with highly unfunded exposure and GPs to tap the secondary market for capital,” according to Secondaries Advisor at Setter Capital, A.J. Patel.
Covid-19 accelerates sector trends
A number of market and sector trends have emerged over the past year. According to Kelly Meldrum, CFA, Partner and Head of Primary Investments at Adams Street Partners: “Our portfolio historically has been overweight in software and technology enabled services, healthcare, Changing Consumer Preferences and Industrial. These sector trends have accelerated since Covid-19.”
Meldrum notes that the firm – this year’s winner of best fund of funds manager (above USD500 million) – will continue to focus on these four themes, as well as funds and companies with the operating resources to grow the business in order to build on this year’s performance.
Ares Management also notes a significant level of PE dry powder globally, which has led to increased M&A activity and larger transaction sizes, with PE firms writing significant equity checks into larger companies. “Increasingly large, mega transactions are coming back to the market,” says Mitch Goldstein, Partner and Co-Head of the Ares Credit Group.
With ESG also impacting the market as the COP26 summit draws to a close, there is no doubt that 2022 is set to be as exciting – and as challenging – as 2021 has been so far. 
