05 May 2020

GP Trends: Private equity rushes to prepare for coronavirus fallout

  • 83 per cent do not expect to make an exit within next 12 months
  • A third have suspended marketing for their next fund or expect to do so
  • Industry enters buyer’s market, with 73 per cent expecting returns from 2020 vintage deals to be at least as strong as the 2010 vintage

More than half of private equity professionals believe that the economic fallout of the COVID-19 epidemic will be worse than the 2008-9 Global Financial Crisis, even as public markets have rebounded, according to the first detailed survey of the private equity fund management executives since the first European and US lockdowns were implemented in March.

The research, which analyses more than 400 responses from private equity professionals around the world and will be released in full as part of Investec’s annual GP Trends survey, identified and quantified how the industry is responding to the crisis so far.

Maximising liquidity

One of the most immediate responses that private equity funds took in response to the crisis was to maximise the liquidity available to them, first at portfolio company level and now, increasingly, at the fund or GP level.


Half of those surveyed (50 per cent) have already drawn down on all forms of portfolio financing options, such as revolving credit lines. A further 16 per cent plan to do so by the end of September.


A quarter (26 per cent) have already arranged additional portfolio financing, with an additional 41 per cent expecting to do so soon. Just under a third (29 per cent) have arranged financing at the GP or fund level or plan to do so in the short-term.


Callum Bell, Head of Growth and Leveraged Finance at Investec, said: 


“In the current environment, there is, understandably, an increased appetite for borrowing, as firms seek to bolster liquidity levels and protect against the impacts on the COVID-19 pandemic. Whilst certain sectors are feeling the pressure more keenly than others, portfolio companies are acting quickly to draw down on financing arrangements, regardless of the markets they serve. We expect many to require further capital, later in 2020.”

The research also revealed a move away from unitranche funding (down from 32 per cent to 28 per cent since the COVID-19 outbreak) in favour of syndicated lending, with 34 per cent of GPs using syndicated loans to finance portfolio acquisitions, up from 21 per cent.

Changing plans

While funds have acted decisively on financing, fundraising plans at many firms have also been significantly affected. One-third (33 per cent) of GPs that participated in the study already have or expect to suspend or postpone fundraising for their next fund. This cautious approach to asking investors for new money is partially reflected in the attitudes to drawdowns and other capital calls for current funds, as due diligence becomes practically challenging and LPs prefer to delay commitments. 17 per cent of respondents already have or expect to suspend the investment period of one or more funds.


Jon Harvey, Head of Relationship Management at Investec’s Fund Solutions team said:


“The 10 year anniversary of our GP trends report has produced striking insights across a variety of topics. The perception of the impact of COVID-19 among GPs is very different to the response we’ve seen in the pubic markets. For private equity, we’ve seen the market change from a sellers’ market to a strong buyer’s market with an expected slowdown in exits.  The findings of this year’s report support the conversations we’ve had with our clients – with the delay to exits, there’s an increasing appetite for GP financing structures to help with future fund commitments.”


The data also highlighted a potential challenge for GPs raising their next funds. Personal commitments typically add up to around two to four per cent of the value of a given fund, and more than a third (36 per cent) expect to use carry to fund this significant personal commitment. The research shows that, in the COVID-19 environment, 83% of GPs do not expect to make a portfolio exit in the next 12 months. As a result, carry is likely to be materially delayed, if not reduced or wiped out, meaning GPs and their teams will have to come up with other ways to meet those commitments. 

Adjusting expectations

The industry has made significant downward adjustments to return expectations.


Prior to the impact of COVID-19 being felt, 90 per cent of respondents expected returns over the next two years at their own firms to perform at least as well as 2019. That figure has fallen dramatically, with 58 per cent of GPs now expecting returns over the next two years to be worse than in 2019.


In fact, the industry now finds itself in a buyer’s market: 17 per cent expect this to last 12 months or less, and 61 per cent expect it  to last for between one and two years. Before the crisis hit, GPs had a very different view, with 76 per cent expecting what was then a seller’s market to last more than 12 months. 


This has led to a significant recalibration of expected returns. Prior to the impact of COVID-19, only a quarter (25 per cent) of GPs expected returns from 2020 vintage deals to be at least as strong as 2010 vintage deals. After lockdown, that proportion tripled to 73 per cent, highlighting the industry’s ability to buy discounted assets.

About the research

Now in its tenth year, Investec’s GP Trends survey provides a detailed view of the state of the private equity funds market, surveying hundreds of GPs on subjects including expected returns, career progression and diversity.


For the 2020 edition, Investec worked with MJ Hudson to survey approximately 400 private equity professionals between February 4th and April 24th. Additional questions were added to the survey, during the process, to capture COVID-19’s impact on the industry. Online questionnaires were supplemented with telephone interviews, discussing the findings, with key industry practitioners. Respondents were based principally in Europe (including UK) and North America, but also came from Asia, Africa and Australia.

For more information, please contact:

Luke O’Mahony, Investec (Public Relations)

020 7597 5261 



Caitlin Whyte, Lansons (PR agency for Investec CIB)





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