Listed private equity funds have faced subdued valuations and limited exits since April’s US “tariff tantrum,” but if markets remain relatively steady in the coming months, this could allow a recovery in realisations to help boost the sector, said analysts at Stifel.
Managers have been holding off on sales amid market volatility, with analyst Iain Scouller expecting this to lead to first-half reporting showing "fairly subdued" valuations, with NAVs typically moving +3 to -3%.
Returns across the sector have generally been in the low single digits, leaving many investors drawn instead to the excitement of the so-called “Mag 7” technology stocks and the funds that focus on them.
“Whilst there is no direct link between the price performance of the Mag 7 companies and the private equity sector NAVs, we think this does show the opportunity cost calculation many investors have taken,” Scouller said.
Looking ahead, the analyst expects managers to pursue portfolio sales and IPOs in the run-up to year-end.
He added that a pick-up in exits and stronger NAV growth of at least 10% per annum could draw new investors and eventually help reduce current discounts.