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CEPRES develops Covid-19 portfolio risk management assessment

CEPRES is offering a Risk Analysis & Rating Dashboard on its platform to support LPs in understanding the impact of the Covid-19 crisis on their portfolios.

CEPRES’ Health Check Rating System is based on the CEPRES Platform’s flexible analysis dashboarding system and can inform investors on whether their private market portfolio is in good position to face major challenges ahead. The Platform allows the rating of users’ portfolios according to a predictive methodology derived on the granular analysis of development pattern of more than 80,000 portfolio company investments during former crises and recovery phases, as well as CEPRES’ own economic forecasts.

The observed disruption from the Coronavirus crisis to global supply chains and structural changes will negatively impact traditional, manufacturing and consumer industries, accounting for 60-70% of private equity funds according to CEPRES Market Data analysis. Affected companies will have to cope with efficiency losses, and consequently, lower operating margins. 

The rating methodology incorporates economic assumptions that portfolio companies in countries with established markets (approximately 85 per cent of PE-financed companies) will tend to recover faster due to larger governmental and central bank driven recovery programs than investments in emerging markets, which are exposed to higher risks driven by geopolitical adjustments. Systematic risk was generally very high before the current crisis, but CEPRES’ rating shows now that correlations between asset performances in traditional areas are further increasing but decoupling from other industries that benefit from the “new normal”.

Furthermore, interest rate levels resulting from monetary policy actions – low level in long term – are bound to increase asset valuations in private equity, infrastructure and real estate sectors after the period of the current “perfect storm”.

The CEPRES Health Check Rating strives to respond to these insights and will provide rating scores of portfolios in one click, for different aspects, including investment exposure, profitability, valuation, and more.

Investors need simply to upload their portfolio details to initiate the dashboard sharing process.

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