Executive Summary
In this issue of Portfolio Valuation, we expand our scope to include venture capital, which is the fastest growing part of our portfolio valuation practice.
Private Equity
A robust environment to monetize PE investments has added to the allure of PE investing as an asset class. With more capital allocated to alternative investments such as PE and private credit funds, pricing for new investments is being pressured upward while traditional PE investors look further afield for opportunities. Technology, which has long been a favorite industry sector for venture capital, is finding increasing popularity within PE as well. Technology deals accounted for 20% of all first quarter buyouts, compared to 10-15% historically.
Leverage Lending
The environment of low liquidity and wide spreads experienced in the leveraged loan market during 1H16 has been forgotten. During 1Q17 yields trended up with LIBOR; however, ample liquidity limited the move and helped tighten spreads a bit as refinancing accounted for 76% of the $345 billion of loan originations.
Venture Capital
After two consecutive quarters of lower VC-backed funding, VC investments ticked up in 1Q17 to $16.5 billion, perhaps in response to policies proposed by the Trump Administration that are perceived as being more friendly to business and capital; however, restrictions on visa programs and trade agreements with countries that supply labor and human capital to Silicon Valley startups could be problematic for VC-backed companies. Uncertainty remains an important theme when contemplating the future.
Realized returns are the handmaiden to attracting new capital. On that front, activity was encouraging during 1Q17 with $14.9 billion of VC- backed exits realized, helped in part by a pick-up in IPO activity. Some of the investments that were monetized will be reinvested in the sector. Among venture funds, 58 raised (or obtained commitments for) $7.9 billion of new capital in the first quarter.
FEATURE ARTICLE
Portfolio Valuation and Regulatory Scrutiny
Also in This Issue
Updated Metrics for
Private Credit and Equity
Publicly Traded Private Credit
Venture Capital