Private equity investors have a positive view of the economy and do not believe the most seemingly dire geopolitical events are significantly impacting their investment strategies, according to a new survey from Eaton Partners.
In the survey of 50 representatives of private equity limited partners conducted online between June 20 and July 1, 50% of respondents said things look good despite slowing growth, 44% say a recession is likely but is at least a year away, while only 6% say that a recession is imminent before the end of the year.
Regarding their own investment performance, only 27% of respondents said returns will be stronger in the second half of 2019 than the first half, with 73% saying they will not be as strong.
Regarding the recent concern over the U.K.'s exit from the European Union, or Brexit, 48% of respondents said it has not impacted their U.K. investment activity, while 27% said they are allocating less to the region and 21% said it was not applicable to their investment activity. Four percent of respondents said they are allocating more to the region following the Brexit vote.
Sixty-nine percent of respondents, meanwhile, said the trade war with China has not affected their investment strategies. Nineteen percent said the question was not applicable, 8% said they are allocating less to the region, and 4% said they are allocating more to the region.
Peter T. Martenson, partner and head of global distribution at Eaton Partners, said in a telephone interview that sentiment among North American institutional investors is more positive than one would imagine from mainstream news coverage.
"That recession everyone has predicted has been pushed back by this group by 18 to 36 months beyond where we thought it might be," he said.
Finally, when respondents were given a choice of four asset classes that would give the strongest uncorrelated returns to equity markets, litigation finance had the most responses, at 36%, followed by 32% that said life settlements. Twenty-two percent of respondents said timberland/farmland and 10% said royalties.