Eventually, there will be “some LPs who all of a sudden get tired of explaining to their boards why they’re down this quarter, and last quarter,” Ryan Levitt, principal at Pomona Capital, said during an LP panel discussion at the Buyouts East conference Tuesday, March 24. (The conference is produced by Buyouts Insider, publisher of Buyouts.)
However, panelists said there would likely not be a flood of energy fund interests hitting the market any time soon.
There may be an uptick, but that would come later this year after another quarter or two of portfolio markdowns, said Christian Kallen, principal at Hamilton Lane.
The collapse in energy prices made some limited partners wary of energy, sources have told Buyouts in past interviews. But many LPs have experienced economic cycles and understand the asset class is about the long hold rather than moving in and out of funds, panelists said.
Trying to time the market is not a good idea, as the worst performing portfolios are those with lots of volatility, Brian Murphy, managing director at Portfolio Advisors, said in a later panel at the conference. “We push [our clients] to be very consistent in their deployment.”
The smart move would be to find opportunities amid today’s uncertainties in the environment, Mike Elio, partner at StepStone, said on the earlier panel.
“Any new commitments to energy now will do well,” Elio said.
Larger firms that may have had some dislocation in their portfolios because of falling energy prices are likely shielded from taking big hits because of diversification. Those shops will probably shift into areas of dislocation around the world, Elio said.
Some energy private equity firms have been gearing up to invest into the distressed environment. Along those lines, some secondary firms have staffed up with energy specialists, said Sheryl Schwartz, managing director at Caspian Private Equity, who moderated the panel.
“Certainly the secondary firms think there will be opportunity,” she said.