Times are tough for private equity. But despite the harsh conditions, most practitioners seem in a relatively good mood. Dealflow may be slow, but transactions do get done. Fundraising is not the no-brainer it used to be, but funds still close. There is pain in portfolios, but there are also exits, meaning that cash distributions to investors do take place.
The buyside are nevertheless dealing with a raft of problems of their own, the issue of overallocation being the most pressing one for many. But here too morale seems a good deal better than one might expect – our team have yet to run into an investor saying that he was turning his back on the asset class following recent disappointments.
If the buyside are confident, it may be as much to do with their expectations in future vintages as with a growing safety in the knowledge that lack of liquidity is going to be less of an issue going forward. At present a growing band of secondary buyers are ready to offer liquidity at a discount. More importantly, some groundbreaking progress has been made in terms of securitising private equity, holding the promise of a whole raft of risk management and liquidity tools that many thought could never be deployed in this asset class.
If there is indeed a wave of innovative structures and transactions coming private equity's way, the early 21st century may well be remembered for having produced a structural revolution – hence the title of this issue's cover story.
Philip BorelManaging Editor