Partners Group expects a correction in public markets will lead debut private markets investors to part with private equity stakes amid the high pricing environment.
“We believe many of the new market entrants into private markets will waver in their commitment to the asset class in the event of a near-term market pullback,” the firm wrote in its H2 2017 Private Markets Navigator report on Wednesday.
“Any pressure on asset valuations should bring increased seller volume to the secondary market and open the door for experienced secondary investors to take advantage of market dynamics turning back in favor of buyers.”
The firm believes the best relative value can be found in inflection assets where the value creation process has just begun.
In infrastructure, there is better relative value in traditional secondaries involving inflection assets, the firm wrote. Partners remains neutral on all geographies: North America’s better fundamentals are offset by tax leakage, high valuations in Europe result in compressed returns and dealflow in Asia and emerging markets remains sporadic.
Zug-based Partners is investing its €2.5 billion Partners Group Secondary 2015, which focuses on private equity, as well as its Partners Group Global Infrastructure 2015, an integrated fund which has raised at least €1.3 billion out of a €1.5 billion target and invests in secondaries in the asset class as well as through funds and directs, according to PEI and Infrastructure Investor data.
Predictions of economic uncertainty are affecting buyer sentiment, with some eyeing bargain fund stakes and a continued flow of fund restructurings, according to Kate Ashton, a partner at partner at law firm Debevoise & Plimpton.
“Nothing dramatic has happened yet, though,” Ashton told Secondaries Investor in July. “Like so much in the market at the moment, we’re in a bit of a wait-and-see phase.”
– This article originally misstated the name of the Debevoise partner commenting. Her name is Kate Ashton.