Private markets deal level DPI returns softening in response to weak market

Dr Daniel Schmidt, CEPRES

The latest CEPRES Private Capital Market Outlook shows how Q2 2020 M&A deal value in the US declined by 60 per cent quarter-on-quarter which also represents a 50 per cent decrease year-on-year. These developments in the US exit markets reflect the weak market and investor sentiment during Q2, most likely impacted by the coronavirus pandemic.

Comparing to the last crisis, post-GFC private markets deal level median gross DPI (Distributions to Paid-in) recovered sharply to a 1.50x median DPI in 2009 compared to those deals with investment years between 2006 and 2008. This is followed by a softening of deal level DPI returns, with deals from 2012 and 2013 at 0.75x and 0.51x gross DPI, respectively, despite being seven to eight years old. If exits and realisation proceeds do not gather pace, DPI returns will continue to be subdued. 

All analysis is generated via investment and portfolio due diligence conducted on the CEPRES Platform by investment counterparties based on live transactional data. More information and further detailed analysis is available to CEPRES clients and upon request.

Dr Daniel Schmidt, Founder & CEO, CEPRES, says: “For investors, transparency will remain critical to understand the impact crises such as Covid-19 will have on the Asset side of the ALM equation. LPs rely on private equity to generate alpha to help underwrite their liabilities, but they can also have asset allocations covenants linked to NAV, which may demand rebalancing of allocations with their other investments in case of write-downs. Working with their GPs, our investment analytics technology has helped accelerate and ease the burden of accurate reporting and detailed analysis to help make the right decisions in a timely manner in this challenging time.”

For further reading download the white paper from the Digital Knowledge Hub on the CEPRES Platform

Author Profile