Covid-19 escalation renders GP reporting ‘out of date almost immediately’

Private equity firms are facing a race against the clock to provide up-to-date information about the impact of coronavirus on their funds.

The pandemic has sparked chaos in the public markets, leading to fears that private equity portfolios – some of which are marked to market – could face similar declines.

But the efficacy of information about covid-19’s impact has been limited by the speed at which it is escalating, according to Sam Robinson, managing partner at Singapore-based North-East Private Equity, the Asian investment arm of Denmark’s North-East Family Office, who spoke to sister title Private Equity International.

“One large fund issued something detailed and professional, which was out of date almost immediately,” Robinson said.

“It’s better to have a direct phone call because everything is changing so quickly. Detailed analysis would probably take at least a week to put together, by which time it would no longer be accurate.”

Managers have taken a variety of approaches to covid-19 reporting. One managing partner at a North Asian firm told PEI it would disclose portfolio company financials alongside its Q4 2019 reporting later this month. A partner at a South-East Asian firm said it had already distributed ad hoc financial details for its latest fund.

“From week one, some were sending detailed matrices of their portfolio company exposure level,” the head of private equity at a global bank told PEI on condition of anonymity. “It has been interesting seeing how different firms handicapped their portfolio companies in different ways, and it isn’t depending on size either.”

The full impact of covid-19 on portfolio companies will be unclear for some time. The UK is expected to follow in Italy’s footsteps this week by enforcing a total lockdown, while nearly one-quarter of Americans have been told to close businesses and stay home following a rapid spike in cases.

Blackstone warned earlier this month that coronavirus could impact the performance of its funds as the effects of the epidemic continue to disrupt the global economy.

Soon-to-be-published December 31 fund valuations will largely not reflect the severity of the covid-19 pandemic’s impact on their portfolio companies, as reported last week.

Those wishing to value their fund interests amid the crisis should start by calling their managers and asking for guidance on discounts, according to a recent webinar from advisory firm Duff & Phelps.

California Public Employees’ Retirement System is among those in the dark about its portfolio, reported PEI, with CIO Ben Meng noting recently that the fund does not yet have visibility into what its fiscal year returns will be since valuations in private asset classes are delayed by one to two quarters.

“We’ve just been telling GPs to tell us which portfolio companies they’re concerned about and which they aren’t,” Robinson added. “For Q4 reports, I just expect to receive fund performance as of December and some mention that the numbers as at March will likely be down.”

– Toby Mitchenall contributed to this report