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Covid-19 corner: “LPs have a lot of homework to do on their investments” - Cambridge Associates

Talya Misiri 27 March 2020

Cambridge Associates, head of private equity and venture capital research, EMEA, Nicolas Schellenberg highlights that as funds commitments can often have different currencies, LPs have a lot of work to do to manage their investments. 

How has Covid-19 impacted your firm? 

As we are global, we are used to interacting virtually and have the systems to do so. All members of our global investing team, regardless of location, have the same information, tools, and capabilities outside the office as they do inside Cambridge Associates’ walls. Everyone works remotely now and it is quite efficient, so our day to day operations have not necessarily been impacted. 

 

What conversations are you having with funds? 

We are reaching out to managers asking what their portfolio looks like. Most managers have looked at their portfolio and are sending updates on operations moving forward. Everyone seems to be prepared to a certain extent. 

In the last year or two years, every communication we have had with a manager was how/are you prepared for a downturn, so either way, they had considered some impact. 

Apart from some exceptions (travel, pharma), it's hard to see how severely different sectors will be affected. 

 

What is the overall PE landscape likely to look like in the coming months? 

Exits will be delayed and multiples probably will go down. IPOs will also probably not be an option at the moment and strategic buyers might also find acquisitions challenging. 

We will be likely to see less dealmaking in the short term, more in the medium term and prices likely to rebalance.

 

How is the current landscape impacting fundraising? 

Some big funds are accelerating their timeline as they want to close earlier. They want to lock in the capital and be able to invest in what might be an attractive market. 

In contrast, the funds that are relatively new to the market, which don’t have such a strong existing LP base will have to delay. 

 

What do LPs need to consider when assessing their investments? 

Commitments that a lot of LPs have are often in different currencies. Given the volatility on the currency side as well, this is something that they will have to monitor. 

Investors and LPs have a lot of homework to do on their investments, being mindful of liquidity, planning for capitals to come, be it from past investment which funds funded with capital call facilities or new investments and taking into account recent and future commitments they’ve made. 

Our advice is to keep investing at a normal pace, don’t react suddenly and follow your investment plan. If anything, the impact of the COVID-19 virus shows the importance of having long-term capital and being diversified in order to muddle through to better days.

Categories: Insights Expert Commentaries

TAGS: Covid-19 Investments Lps Private Equity

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