Private vs. public market drawdowns
Source: Bloomberg Finance, L.P., and Preqin. Global financial crisis represented by the period from September 30, 2007–March 31, 2009. Covid represented by the period from December 31, 2019 through March 31, 2020. Buyout strategies refer to controlling investments typically in established, cash flow positive companies. Growth strategies occur when investors take a minority or non-controlling stake in companies they believe will grow rapidly. In secondary strategies, a limited partner invests in existing private equity funds, private credit funds or other assets that are acquired in privately negotiated transactions, typically after the end of the relevant fund’s fundraising period.
- Despite the optimistic market tone underpinning markets for most of the year, notable macro risks remain in place, of which we have seen glimpses emerge over the past month.
- Today’s combination of macro risks with ever-present idiosyncratic challenges highlights the importance of building active and flexible portfolios that have the potential to limit downside risk should market sentiment turn sustainably lower.
- Against this backdrop, private markets may represent an attractive allocation. They have shown the ability to participate in market upside while also limiting declines. As the chart shows, private markets generally saw significantly smaller declines during each of the past two major market drawdowns compared to their public counterparts.
- Private debt and equity markets make up a growing portion of the investable universe and may represent a significant opportunity for investors seeking alternative growth potential as well as possible diversification.
