What Worries Institutional Investors

A new survey from Eaton Partners shows that institutional investors are growing concerned about anti-private equity rhetoric coming from some of the U.S. presidential candidates. Simultaneously, limited partners are also keeping a close eye on geopolitical events and starting to prepare for a possible U.S. economic pullback by taking a more defensive approach to investing.

Eaton Partners advises and raises institutional capital for investment managers across a range of alternative strategies – including private equity, private credit, real assets, real estate, and hedge funds – both in the primary and secondary markets.

These new survey results come from the quarterly “Eaton Partners LP Pulse Survey” which questioned more than 60 limited partners, many of whom expressed at least some level of concern about geopolitical and economic factors that could hinder investment strategies.

Views on U.S. Presidential Politics

  • An overwhelming majority (69%) say they are concerned about the anti-private equity rhetoric by some U.S. presidential candidates, even though most respondents admit any potential action remains unclear.
  • This could be especially problematic since more than half (55%) believe private equity will be the best performing private market fund class over the next six months, ahead of private credit (16%), real assets (16%), and hedge funds (13%).
  • Nearly two-thirds (65%) believe President Trump will be re-elected. Fifteen percent believe Elizabeth Warren will be the next president and another 15% think Joe Biden is headed to the Oval Office.

Economic and Market Views

  • Approximately 7 in 10 (69%) respondents note they are taking a more defensive approach to guard against a potential macroeconomic slowdown.
  • Exactly half (50%) believe signs are pointing to a recession sometime in 2020 up from 44% who felt this way in the July 2019 survey.
  • Forty-five percent predict the Federal Reserve will cut interest rates again this year. Sixteen percent believe the Fed is done for 2019. The rest are not sure.

Geopolitical Views:

  • More than four in ten (43%) are allocating less direct foreign investment to the U.K. because of uncertainty around Brexit, up significantly from 27% in the July 2019 survey.
  • Despite threats of potential escalation, 61% report the trade war is having no immediate impact on their investment into China versus 69% who felt the same way in July.

“Our latest survey clearly shows investors are expecting increased headwinds from several directions as we close out the year,” said Jeff Eaton, a partner at Eaton Partners. “Now more than ever, it is vital for general partners and fund managers to clearly articulate their investment visions and strategies with a view towards the projected macroeconomic environment, as we expect limited partners to become even more selective and disciplined when allocating investment dollars to the private capital markets.”

Rowayton, CT-headquartered Eaton Partners has helped investment managers raise more than $100 billion across more than 125 alternative investment funds and offerings since its founding in 1983. The firm is a subsidiary of Stifel Financial (NYSE: SF) and has offices throughout North America, Europe and Asia.

Eaton’s online survey of 62 institutional investors was conducted from September 19, 2019 through October 4, 2019.

© 2019 Private Equity Professional | October 17, 2019

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