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
Over Q1 2020, investments across the US Private Equity sector continued to increase. While valuations remained high through the end of 2019, there was a drop in exits in Q1, possibly setting the stage for a larger decline in exits and valuations over 2020.
The U.S. Venture Capital Market
US Venture Capital investments remained elevated over Q1. Exits were down compared to 2019. Fundraising saw a significant jump, driven by a few sizeable fundraisings. However, we may see some pull back in valuations and investments over 2020.
The European Private Equity Market
European Private Equity deal flow and volume contracted somewhat in Q1 2020. However, the EV/EBITDA multiple remained relatively constant from 2019. Exit activity continued the downward trend seen since 2018. Fundraising was weak in Q1 2020.
The Asian Private Equity Market
Following sluggish activity in 2019, Asian Private Equity was further hit by COVID-19 in Q1 2020, as China was the first country to be impacted by the pandemic. Deal and fundraising activities are expected to pick up in the second half of 2020.
The Natural Resources Market
Natural resources fundraising was at a record high in Q1 2020, with energy constituting the majority. Oil price volatility was unprecedented. Dry powder for energy has been decreasing since 2018. US Farm income continues its down trend. The timberland index was nearly flat.
The Infrastructure Market
Deal making in the Infrastructure market slowed down in Q1 2020 compared to Q4 2019, but was still higher than Q1 2019. Fundraising in Q1 2020 was the highest in any quarter in the last five years.
The Private Debt Market
Private Debt fundraising was weak in Q1 2020, whereas, dry powder has increased. The immediate impact of the global pandemic was to sharply reduce deal flow and realizations.
The Real Estate Market
In the US Real Estate market, slowdown began in March. European investment volumes remained strong in Q1 2020 with a slowdown beginning in March 2020. Investment volumes in the UK dropped at a double-digit rate in Q1 2020. In Asia, real estate fundamentals deteriorated further in Q1 due to the pandemic.
The Hedge Fund Market
After limiting the damage in the Q1 COVID-driven sell-off, hedge funds recovered a greater portion of their losses in Q2 2020 relative to the global equity markets. However, the dispersion of hedge fund returns was significant.