Alternative Asset Advisory
Provides an array of consulting services to alternative investment managers and investors.Alternative Asset Advisory
London – According to a new global survey of alternative investment fund managers by Duff & Phelps, the global advisor that protects, restores and maximizes value for clients, just under 50% (47%) of respondents said that three months is the “breaking point” at which the current economic restrictions impair the ability of businesses to resume business as usual after the lockdown.
Two thirds (65%) of respondents are expecting the impact of COVID-19 on GDP growth to be -3% or more in 2020, while 36% predict net asset valuations (NAV) between Q4 2019 and Q1 2020 would decrease by at least 6% to 10%. Another 30% of respondents believe that net asset values could decrease between 11% to 20%, leading to a longer recovery period, or no recovery at all, on certain assets.
Ryan McNelley, Managing Director, Portfolio Valuation at Duff & Phelps, said:
“Portfolio companies are struggling under high levels of leverage and investors will be faced with difficult questions on Q1 and Q2 valuations in the coming months. Some of these businesses may not survive. In this market, GPs will need credible and independent valuations and a narrative for the future of their fund performances.”
Looking ahead to 2021, some 55% of investors believe that the impact of COVID-19 on GDP will still be negative at -0.5% in their market, though 11% are more bearish, expecting a contraction of3% or more for 2021 GDP. Almost half (47%) agreed that their assets’ sale prices (fair value of their investments) will not have recovered to pre-COVID-19 levels by 2021. A majority (71%) think that the government in their focus market is doing enough to support businesses through the crisis.
McNelley concluded: “The strong will survive, but the recovery will bring its own challenges for asset valuations. If we have learned anything from 2008, it’s that investment fund managers will be judged on the process and rigour they take in their valuations. While there can be no standardised approach to valuing each portfolio, the fundamentals of valuations haven’t changed – it’s the macro environment that has. Broad brush strokes cannot be applied, and a detailed analysis will need to be done for each portfolio.”
Note to editors
The survey received 118 respondents from North America (40%), UK (20%) and Europe (28%). Fund managers were predominately invested in private equity (47%), private debt (15%), and venture capital (7%). The survey was conducted between 3 April – 16 April 2020.
About Duff & Phelps
Duff & Phelps is the global advisor that protects, restores and maximizes value for clients in the areas of valuation, corporate finance, disputes and investigations, cyber security, claims administration and regulatory issues. We work with clients across diverse sectors on matters of good governance and transparency. With Kroll, the leading global provider of risk solutions, and Prime Clerk, the leader in complex business services and claims administration, our firm has nearly 4,000 professionals in 25 countries around the world. For more information, visit www.duffandphelps.com.
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