The private equity industry is grappling with a new challenge when it comes to selling off their holdings. These firms are now holding onto their acquired businesses for much longer periods. The reasons for this shift are varied and complex, including global uncertainties like the Covid pandemic, political disruptions and economic fluctuations. While the desire to sell remains, caution is prevailing as both private equity firms and potential buyers tread carefully. Another factor adding to the situation is the significant amount of unspent PE capital, approximately $1.5 trillion. This surplus of funds has led to a more cautious approach in deploying capital. In response to investor expectations for returns, private equity firms are exploring the sale of certain assets within their portfolios. It is worth noting that some firms are taking a bold step by testing the waters with initial public offerings (IPOs) despite a lukewarm market environment. These ventures, exemplified by companies like SoftBank Group Corp. and L Catterton, could potentially signal a shift in market dynamics within the private equity landscape.
"This slowdown came on the heels of such a hot year in 2021...We had Covid, lots going on in the political environment, interest rates, the Silicon Valley Bank crisis, the war in Ukraine—that’s a lot of hits for one market to handle in a short time horizon."
Emily Anderson, Union Square Advisors LLC
Private Funding Pulse Check
Lindus Health, a company delivering end-to-end clinical trials for health tech and biotech pioneers, has recently closed their $18M Series A funding round, with the participation of Thiel Group
The Hillman Family Office, Hillman Company, has invested in a $37M Series C funding round in Virtualitics, an advanced analytics company that helps enterprises and governments make smarter business decisions
In a recent Series C round, Sparta Group LLC participated in an investment totaling $30M in Instylla, a company focused on developing next-generation liquid embolics for interventional radiology
Consolidated Investment Group has joined a $9.8M Series B investment round in Zetagen Therapeutics, a Syracuse, NY-based clinical-stage, biopharmaceutical company dedicated to metastatic bone cancers and osteologic interventions
Consumers Enjoy Cash Reserves, Yet Grapple with Payment Delinquencies
In the midst of ongoing market discussions, all eyes are focused on surging delinquencies but there is a reassuring sense that widespread financial distress is being kept under control. Notably, certain loans are grappling with increased late payment rates, attributed in part to unused pandemic-related savings. Recent data from the Bank of America Institute unveils a significant 30% surge in median savings and checking balances for July compared to 2019 averages, notably among lower-income households. While the impact of delinquencies is discernible among those with limited credit histories, the overall financial landscape retains stability. Encouragingly, new foreclosures and bankruptcies continue to trend below pre-pandemic levels. Moreover, the majority of American mortgage debt remains somewhat insulated, protected by a large portion of homeowners locked into historically low interest rates. Localized trends may offer early signals of broader economic strain, as seen by heightened delinquency rates in Texas. This scenario could potentially illuminate the path to nationwide credit adjustments and prompt thoughtful economic considerations ahead.
"Where the stress appears the most acute is for borrowers with poor credit records. The 60-day-plus delinquency rate for subprime auto loans rose to 5.37% in June...That is well above the 0.49% June rate for prime loans in the tracker, and the highest June level ever for subprime."
Telis Demos, Wall Street Journal
Ruble Turbulence Persists Despite Central Bank's Efforts in Russia
The Bank of Russia's recent decision to increase borrowing costs from 8.5% to 12% aims to stabilize the ruble, which had witnessed a slide against the dollar, briefly reaching 102 rubles to $1. This move comes in response to a shrinking trade surplus, driven by a 38% drop in dollar-denominated exports due to falling commodity prices and an 18% rise in imports attributed to Russia's recovering economy and expansive fiscal policies, with inflation surging to 4.3% in July. The ruble's resilience, despite substantial economic warfare triggered by sanctions, raises questions about the effectiveness of the sanctions. Despite restricted access to international financial flows, the ruble's foundation in trade remains strong, though this doesn't attract investors to Russian financial assets. Elevated interest rates, a tactic employed by central-bank chair Elvira Nabiullina, may have limited impact. Russia's economic challenges stem from restrictions on foreign technology imports and the departure of Western firms, impacting industries like pharmaceuticals, machinery and information technology. These factors, combined with potential currency depreciation, could present President Putin with substantial economic concerns.
"A slower depreciation might not be the bang Putin’s opponents were hoping for after his invasion of Ukraine. But a whimpering economic decline can be pretty bad too."
Jon Sindreu, Wall Street Journal
Unlocking the Advantages of Data Tagging in Family Offices and Direct Investing
Amidst market turmoil, family offices are steering affluent clients away from traditional investing, favoring direct investing due to a stronger risk-return profile, as indicated by a Dentons survey with 63% of respondents embracing this shift. However, challenges in identifying investments, managing terms, and exit strategies can hinder this approach. The solution lies in platforms aiding complex portfolio management, integrating modules for precise data tracking and customization. In traditional investing, family offices struggle with due diligence complexities and legacy technology's limitations. Custom data tagging is pivotal for efficient analysis, but few tools cater to family offices. Innovative modules now offer real-time custom tagging, allowing rapid vulnerability assessment and opportunity capture. This extends to post-investment, enhancing reporting and prediction for market shifts. As direct investing gains ground, adeptly predicting and managing change becomes paramount, ensuring family offices' sustained success.
"Directly funding a business is difficult, especially when it comes to critical tasks like finding the right investment, wrangling terms and coming up with exit strategy. This makes some family offices wary, fearing they might be overwhelmed, lose control and fail to carry out necessary due diligence."
SageView, a Newport Beach, CA-based RIA, is expanding its wealth management services
John Longley, former Head of Private Wealth at BlackRock, becomes SageView's CEO in September
Longley brings a wealth of experience from SVB, Dobot, and Citi to his new role
The strategic move aims to enhance SageView's offerings and solidify its position in the evolving financial landscape (ThinkAdvisor)
Written by:
Andrew Popp | Sr. Research Associate
FINTRX delivers an industry-leading suite of private wealth data and research solutions to the alternative investment space and private capital markets. Engineered to help clients identify and access family office and RIA capital intuitively, the FINTRX platform ensures accurate and updated data and research on 850,000+ private wealth records globally. To subscribe to our newsletter and see previous versions click below.
