PE and pension fund leaders look ahead to opportunities in uncertain times

The Canadian markets have seen uncertainty in the start of 2023 due to various economic and geopolitical concerns. Despite these challenges, industry leaders are optimistic about the opportunities that lie ahead.

Partner Guy Berman spoke to Canadian Lawyer to discuss Torys’ fourth annual PE Pulse survey findings, which takes a look at recessionary trends, concerns in fundraising, a new focus on energy transition and ESG, and more.

When asked about his thoughts on the current market, Guy assured that “there are some dark clouds that are over the horizons, but there’s also rays of sunshine.”

“I don’t think the sky is falling, but from the survey results, the tone is that we’re not going to have the same robust market activity that we had over the last five years,” he added.

Observing the increase in interest rates, Guy noted larger deal prices as a result.

“That’s one of the negatives coming down the pipeline,” he said.

“On the flip side, over the last four of five years, when we’ve asked our clients what their biggest challenge to making deals is, they mention high valuations.”

Read: PE Pulse 2023

In this year’s findings, the PE Pulse survey indicated the opposite.

“In fact, 61 percent of our clients said they expected pricing to drop, and that’s always a good indicator that there will be M&A activity,” he said.

“Sometimes, downturns can yield pretty good private equity returns.”

Guy stated that 31 percent of private equity stakeholders expect the average size of transactions they make to increase over the next year, while no pension fund respondents hold the same view.

The denominator effect could also affect pension fund investing.

“So, if you have allocated ten percent of your investible funds into private equity, but your assets under management have shrunk, you may still put then percent into private equity, but there are actually less dollars that you can invest in that class,” he said.

Wealth Professional also featured Torys’ PE Pulse 2023 report in an article, which commented on the market’s current uncertainty.

You can read more about our Private Equity and Principal Investors work on our practice page.

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