While 2016 has proven to be a tumultuous year for financial markets, one area has been enjoying a strong performance. Private equity has faired relatively well over the last year, with opportunities being sought in a number of areas.
Striking oil
An unsteady time for the oil markets could offer private equity firms an opportunity to come to the fore, according to industry commentary from Ernst and Young (EY). Citing the findings of research firm Preqin, the EY report, led by Jeremy Barnes and Charles Berkeley, found that private equity firms are sitting on $971bn. Reporting for
Business Insider, Rachel Butt writes that private equity firms are ready to plough money into the oil and gas sector.
$917bn
The amount private equity firms have to deploy
The article quotes EY’s global oil and gas transactions leader Andy Brogan as saying that “greater consensus over the oil price future and more favourable asset valuations are improving the conditions for private equity.” He says that an uptick in deals is expected before the end of the year.
Butt reports that private equity giants such as Carlyle Group and Blackstone Group are eager to dive into the area of distressed energy credit and that these alternative asset managers are beefing up their lending arms as large banks retreat amid regulatory pressure.
Business Insider article
Record highs
Also referring to the Preqin research,
ValueWalk reports that emerging markets, predominantly in Asia, have hit a record $297bn in assets under management (AUM), despite a slowdown in fundraising and an influx of foreign managers.
ValueWalk quotes Preqin’s Head of Private Equity Christopher Elvin as saying: “Emerging markets have developed significantly over the past decade; as many more developed markets have seen slower growth in the wake of the global financial crisis, some economies in emerging regions maintained double-digit growth rates.”
The article also states that venture capital is the most sought-after strategy for emerging market investors, with 55% stating a preference for this type of funding in the Preqin research. Just 35% of investors in these regions preferred buyout funds, it found.
ValueWalk article
Consider societies
However, Dr Helmut Schuehsler, CEO of TVM Capital Healthcare Partners, argues in
Gulf News that in emerging markets, the PE industry needs to focus on helping society rather than itself.
He writes that in regions such as the Middle East and North Africa, job creation, skills development and economic diversification are key issues and that governments are looking to private investors to play a positive role in these areas.
Schuehsler says that private equity firms should take responsibility in emerging market countries to ensure that investments are well-researched and truly address unmet needs. He gives the example of ProVita International Medical Center in the UAE, which TVM’s healthcare branch exited in 2015.
“We recognised that nationals of the Arabian Gulf countries were travelling abroad for specialist care, but mostly preferred to be at home, close to their families,” he said.
“To establish a presence, firstly in the UAE, it was necessary to develop a new licensing and payments regime. To thrive, the company needed to demonstrate that the care provided was as good, and even better than that provided in countries such as Germany and the US.”
He said that the process was holistic and included building strategic partnerships, resulting in the provision of “expert clinical care and therapy”.
Schueshsler adds that value creation is not enough and that private equity firms need to show how they mitigate risk and to promote efficiency and positive governance, as well as creating new business opportunities.
Gulf News article
Seen a blog, news story or discussion online that you think might interest CISI members? Email jules.grey@wardour.co.uk