View all insights
image

Coronavirus & CEPRES‘ portfolio modelling and risk-management

The current standstill in global public life will have a strong impact on private markets in the near future.

Portfolio companies and therefore funds in the private equity, private debt, infrastructure, and real estate asset classes will be affected differently.

At CEPRES, we expect a very strong differentiation between different sectors with some even seeing positive effects.

According to CEPRES Market Data analysis, approximately 60-70% of the portfolio companies in the hands of private equity funds are active in traditional, manufacturing and consumer industries and are thus heavily dependent on functioning supply chains. Given the observed disruption to these global supply chains and structural changes in the short to medium term, affected companies will have to cope with efficiency losses, and consequently, lower operating margins. Due to lower purchasing power in all economies, we do not think potential medium-term revenue increases will compensate for these efficiency losses: the changes will, therefore, be at the expense of the companies’ enterprise value growth and investors’ performance.

The current standstill in global public life will have a strong impact on private markets in the near future.

Portfolio companies and therefore funds in the private equity, private debt, infrastructure, and real estate asset classes will be affected differently.

At CEPRES, we expect a very strong differentiation between different sectors with some even seeing positive effects.

According to CEPRES Market Data analysis, approximately 60-70% of the portfolio companies in the hands of private equity funds are active in traditional, manufacturing and consumer industries and are thus heavily dependent on functioning supply chains. Given the observed disruption to these global supply chains and structural changes in the short to medium term, affected companies will have to cope with efficiency losses, and consequently, lower operating margins. Due to lower purchasing power in all economies, we do not think potential medium-term revenue increases will compensate for these efficiency losses: the changes will, therefore, be at the expense of the companies’ enterprise value growth and investors’ performance.

Risk management
Portfolio monitoring
Portfolio management

Read next

image

Building a Better Private Market Risk Factor Model

CEPRES and Qontigo are developing a suite of factor risk models that provide broad coverage of the private asset space in Axioma Risk, Qontigo’s enterprise risk management platform.

image

Value Creation: Everything You Need to Know in 7 Minutes Or Less

We often hear about value creation when talking about growth equity and buyout investing. For these strategies, GPs usually deploy a “hands-on” approach to achieve value-add or value creation.

image

Donkeys, Elephants and US Private Markets: The 1990s

While the political parties incumbent in the branches of the US federal government are not the only influencing factor, they can and do shape the policies, regulatory frameworks, and often economic stimulus which have a material impact on sentiment and market developments.

Client Exclusives

Private credit: Spotlight on deals — the winners and losers & bounce back from the crisis

Read more
image

Navigating Private Debt: A Deep Dive into Historical Risk and Returns

Read more
image