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The Pulse of Private Equity - 4/3/2017

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Plenty of value yet to be realized in older PE vintages

In the world of private equity, the long-persisting effects of the financial crisis are still evident, particularly when regarding fund returns from certain, most affected vintages. Funds from vintages between 2007 and 2009 inclusive still possess plenty of value yet to be realized, having taken relatively longer to build up total value to paid-in capital multiples given the effects of the crisis. In fact, the sizable disparity between what has been able to be realized thus far between funds of the 2009 vintage...

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Private Debt Intelligence - 4/3/2017

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Placement Agents and Private Debt

Placement agents servicing the private debt industry have been expanding their services to keep up with the development of the asset class. In addition to their traditional role of connecting fund managers with suitable investors, placement agents increasingly offer ongoing investor relations assistance, and services to help fund managers comply with regulatory standards...

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Leveraged Loan Insight & Analysis - 3/27/2017

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LBO purchase price multiples averaged 9.6 times in 1Q17

After averaging over 10 times for the past three years, the average purchase price multiple on LBO deals dropped to 9.6 times in 1Q17. A high concentration of smaller deals and a more diverse industry composition of LBOs in 1Q17 is a driver of multiples coming down so far this year. But lenders should not get accustomed to this trend. Lenders and sponsors confirm that lofty valuations continue to remain a major roadblock holding back a robust buyout environment this year...

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The Pulse of Private Equity - 3/27/2017

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On a long enough horizon, returns for PE funds of all sizes converge

By and large, the macroeconomic environment remains the most significant factor to bear in mind when assessing long-term private equity fund performance. Given the impact of the financial crisis, it makes sense that no matter the size of the fund in question, at the longest time horizon—10 years—internal rates of return (IRRs) have by and large converged. Following the typical J-curve of fund performance, at that point in the conventional fund lifecycle most assets that end up contributing to the majority of a fund’s return have already been sold...

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Private Debt Intelligence - 3/27/2017

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First-Time Fund Managers

The environment for first-time private debt managers has begun to stabilise in recent years as the industry continues to mature. Fundraising has been consistently robust, performance has been strong, and investors are increasingly open to the prospect of committing to managers without a proven track record.

First-time private debt managers secured a record total in 2013 ($9.6bn), and in the years 2013-14 firms have raised over $23bn as the market continues to develop....

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Leveraged Loan Insight & Analysis - 3/20/2017

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Leverage on institutional middle market deals climbs on new money deals in 1Q17

Interest in middle market loans from large corporate investors tends to wax and wane based on market conditions, but currently investors are super receptive to these smaller credits given a supply demand imbalance in the leveraged loan market. As a result, leverage levels on institutional middle market deals are rising in 2017 across most deal purposes. Leveage on dividend recap deals peaked in 2013 at 5.3 times and was in decline through 2016 down to 4.3...

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Private Debt Intelligence - 3/20/2017

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Private Debt Fund Performance by Strategy

The private debt asset class has continued to satisfy institutional investors with 93% of those surveyed by Preqin at the end of 2016 stating that the performance of their private debt investments had either met or exceeded expectation. However, performance as measured by the median net IRR of funds varies notably across the three central private debt strategies: direct lending, mezzanine and distressed debt...

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The Pulse of Private Equity - 3/20/2017

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Recent PE vintages outpace public indices by a smaller margin

Private equity funds of vintages 2005 and prior exhibit significant outperformance of public indices, employing the Russell 3000 Index for public market equivalents calculations. Since then, however, no vintage has exceeded 8% over public indices’ performance. There are many factors behind this particular trend, not the least of which is the impact of the financial crisis, which prolonged holding periods as managers worked to proof impacted companies...

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Markit Recap – 3/13/2017

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Its mid-March, spring is upon on us and the credit markets are rallying. A rate hike by the US Federal Reserve was greeted positively by the market thanks to a dovish tone struck by Janet Yellen and her colleagues.

Technical factors also played their part. Option expiry occurs on the third Wednesday of the month, and position covering no doubt contributed to the tightening in the indices...

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Leveraged Loan Insight & Analysis - 3/13/2017

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What is the #1 factor to winning a deal in today’s environment?

When asked to select the #1 biggest driver in helping them win deals in this increasingly competitive environment, middle market banks were mixed. According to Thomson Reuters LPC's recent survey, one quarter said it comes down to the relationship, especially in the non-sponsored market where issuers rely heavily on that long term relationship. Perhaps more surprising, only 4% of non-banks ranked reputation and relationship as the number one factor. One quarter of banks chose willingness to stretch especially with regard to sponsors who are often asking for large corporate term sheets on smaller deals. One fifth of non-regulated lenders agreed...

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