With two-thirds of those surveyed arguing their portfolios have been relatively unharmed by the credit crunch, the vast majority believe that private equity funds of the vintage years 2008 and 2009 will achieve outstanding performance overall, especially those that specialise in mezzanine and special situations.
The same could not be said for the larger end of the market, with respondents of the belief that large deals will be hit hardest, but not enough to significantly hit returns. Respondents believed that the top quartile IRRs will not decrease below 20% in any private equity sector.
GPs are not expecting an end to the current economic climate too soon with two-thirds predicting a return to normality within a 12 to 36 month period. However, a quarter of optimistic fund managers replied that the situation would significantly improve within the next 12 months.
The survey sent back the finding that borrowing costs are climbing and look set to continue to climb, with covenants become tighter, although this trend varies depending on geography. Credit costs for mid market buyouts in North America have already risen and will continue to rise according to all of those surveyed, but in Europe, 23% have not to date seen an increase.
There have also been no negative consequences for venture capital in terms of entry prices and financing options according to those surveyed. However, in the short and medium term, the exit situation for venture capital portfolio companies via IPOs and secondary sales is expected to be less attractive.