This document summarizes our views on the major Alternative Asset classes. It is provided for discussion purposes and do not provide any assurance or guarantee of future market returns. We do not expect clients to use this as a recommendation for Asset Allocation. Please note the content is for FOR INSTITUTIONAL INVESTORS USE ONLY.
The U.S. Private Equity Market
During Q2, investment activity across the US Private Equity sector continued to stagnate. Both deal flow and exit activity were at multi-year lows. Surprisingly, fundraising showed resilience, increasing dry powder to new highs. Valuations jumped due to high exposure in tech-related investments.
The U.S. Venture Capital Market
The US Venture Capital sector was more immune to COVID-19 related impacts due to larger exposure in the biotech and technology related sectors. While exit activity was significantly impacted, investment activity and fundraising continued to build on figures posted in Q1 due to mega funds and large financing rounds.
The European Private Equity Market
European deal activity declined in Q2 2020 and is likely to remain lower. Q2 2020 saw the weakest exit activity since the Global Financial Crisis (GFC) and Q3 is expected to be similar. Fundraising was weak in H1 2020 and was especially challenging for first time GPs.
The Asian Private Equity Market
Asian Private Equity saw subdued activities in exits and fundraising in H1 2020, due to the pandemic. Investment activity appeared to be robust, however, it was driven by two mega transactions. The situation is likely to improve in H2 2020 as most countries started to resume economic activities, although at a lower level.
The Private Debt Market
The leverage multiples in the US and European Private Debt markets are expected to fluctuate as the earnings landscapes become clearer. Default rates and yields have crept upwards in both the US and Europe.
The Natural Resources Market
Fundraising decelerated rapidly in H2 2020 in the Natural Resources market. Oil prices has seen unprecedented volatility in 2020. Timber showed weak performance while metals performed well.
The Infrastructure Market
Infrastructure deal activity declined significantly in Q2 across all regions. Telecommunications was the least affected segment. After a robust Q1 2020, Q2 experienced a significant slowdown in fundraising due to COVID-19.
The Real Estate Market
Investment activity declined in Q2 in the Real Estate market but has been slowly increasing in Q3. Valuations have moderated. Certain sectors like hospitality have experienced negative corrections while others such as residential are proving resilient.
The Hedge Fund Market
Contrary to the broader market, the third quarter was constructive for Hedge Funds. Equity-oriented strategies led the way in adding value. Almost all strategies except systematic macro did well in Q3.