DEER ISLE: Insights, Views & Investment Trends
MARCH SHOWERS BRING APRIL FLOWERS…
Most major US equity indexes have been positive by almost 10% since the beginning of the year. On the heels of the “banking crisis” in March would many have expected this outcome?
Once again, the government came to the rescue and pumped liquidity into the economy.
We believe that private equity or venture capital market liquidity will remain difficult since one of the main drivers of private equity or venture capital market liquidity has been “asset allocators” increasing their allocations to private equity and venture capital markets. We believe that most allocators are at or close to maximum percentage allocation to private markets and that there is a systematic switch to less liquidity in these markets.
Tax Month – See PWC Tax Guide…Very Helpful.
Capital Provider Interest – We been approached by multiple “asset allocators” who have interest in expanding their allocations to “women owned or led” organizations.
Real Estate Credit – Private Lenders Filling the Gap: We are seeing multiple real estate firms which traditionally invested in RE equity moving up the cap structure to Preferred Equity or Mez investing. Bank Lending is now at 40 to 50% LTV and these organizations are filling the gap at attractive levels (10 to 18% depending upon risk).
Private Equity – Transactions still Funded Even With “Best” Deals off the Market: We are hearing that the “best” Private Equity deals have not been coming to market given current market conditions. Since some Private Equity firms need to keep investing through their investment period, deals are still getting funded at aggressive valuations.
Venture Capital Companies – Is there a 2 Year Cash Cliff? We are hearing that VC companies are worried about what happens to companies that have managed to conserve cash such that they have a 2 year cash run way in 2 years if conditions don’t improve. Many VC Funds are having a hard time raising capital since there has been much less cash returned to LP’s than expected.
