CBRE Caledon Private Equity: Performance Through Recessions
Private equity investments have historically generated attractive returns over short and long-term time horizons. The current economic dislocation has created an opportunity for private equity investors to take advantage of lower valuations and potentially generate excess returns. To determine how attractive it is for investors to deploy capital to private equity strategies during these periods, CBRE Caledon analyzed private equity performance through the last two major recessions to provide insight into what the coming quarters may look like for the asset class.
CBRE Caledon found that in periods of economic dislocation, top-performing private equity managers have been able to invest in attractive businesses at discounted valuations and generate outsized returns. Firms most successful during these periods are those focused on buyout investments and distressed for control transactions. Importantly, not all managers can achieve superior performance, so selecting the right managers is critical for a private equity investor to obtain long-term outperformance.
In addition, CBRE Caledon found that investors who have built strong relationships with top-performing GPs are best positioned to outperform through these periods and can capture additional upside by co-investing with these managers in their more attractive investments.