Confidence is sharply down among private equity professionals looking ahead to activity for the asset class, with nearly three-quarters of respondents in a study saying economic conditions posed a threat to their portfolios in the coming year.
Some 44% of general partners globally expect private equity activity will improve this year, compared to 59% holding the same view for 2018, according to an S&P Global Market Intelligence survey of more than 1,000 private equity professionals.
Meanwhile, 14% of respondents expect a deterioration in activity, compared with the 1% who believed this would happen in 2018.
Of those who believe private equity activity will deteriorate, 44% of respondents are from Asia Pacific, with 26% from Europe and the Middle East, 17% from North America and 13% from Latin America.
Thirty-eight percent of those who believe private equity activity will improve come from EMEA, 27% are respondents from Latin America, 18% from North America and 17% from APAC.
With regards to those who believe activity will remain the same, 65% of respondents were from EMEA, 14% and from Latin America, 11% from North America and 10% from APAC.
When asked to identify different risks to their portfolios, 71.5% of respondents believe the economic environment poses a threat. Other risks identified included political upheaval (39%) and issues related to sanctions, tariffs and protectionism (28%). Respondents were able to choose more than one risk factor.
With the industry awash with dry powder respondents identifying growth equity, buy and build, and add-on investments as top execution items this year, S&P Global Market Intelligence data shows there was a surge in transaction volume last year with 14,765 deals announced, compared with 13,714 deals reported in 2016 and 13,995 in 2017.
In terms of attractive sectors, healthcare topped the list with 49% of respondents already holding portfolio companies in the sector and 49% indicating they would be looking for opportunities in the sector this year. IT, industrials and consumer discretionary followed with 41%, 39% and 33% of respondents flagging these sectors as popular.
With regards to exit strategies, respondents identified a preference for IPOs in 2019. There were 3,387 exit transactions recorded by S&P Global Market Intelligence last year, a 22% decrease from 2017. Respondents in the U.K. and Brazil showed the most enthusiasm for IPOs this year.