Private equity professionals highly concerned about a change in UK government
28th February 2019
Private equity professionals highly concerned about a change in UK government, JCRA research reveals.
Two in five (40%) private equity industry professionals believe that a change in UK government is the biggest risk to their investment appetite in the UK, compared to 20% who selected a no deal Brexit. This is according to new research* conducted by JCRA, the independent financial risk advisor which works with clients in the real estate and private equity sectors, amongst others, to develop hedging strategies that reduce costs and protect returns.
The research showed that 90% of respondents operating in the private equity industry were actively focussed on making new investments in the UK in 2019. None of the respondents were concerned about higher interest rates as a risk to their investment appetite in the UK or the availability of debt finance in private equity, although one in five (20%) were anxious about currency volatility/sterling weakness.
By comparison, the research overall, which included professionals from across the financial services sector, showed that nine in ten (90%) were actively focused on making new investments in the UK in 2019, with just 4% saying they were not doing so and 6% suggesting they were not sure. Nearly half (48%) were most concerned about a change in the UK government as the number one risk to their investment appetite compared to 17% who highlighted a no deal Brexit. 13% were concerned about a global economic slowdown while one in ten are worried about higher interest rates. Only 6% were concerned about currency volatility or sterling weakness and the same number cited availability of debt finance as a risk to their investment appetite in the UK.
Benoit de Benaze, Head of Private Equity at JCRA, said: "Our research demonstrates that private equity professionals are very concerned about the impact that a change in the UK government will have on the industry. It is very encouraging to see that the industry is still committed to the UK despite market uncertainty and that there is very little concern about the prospect of higher interest rates in the near future. The response on current concerns chimes with our own experience and client enquiries.
"International expansion has moved up the private equity sector's agenda. With market volatility and geopolitical risk likely to remain on the radar in the coming year, our clients are benefiting from our advice to retain some flexibility in their hedging approach."
JCRA's private equity team works in partnership with clients to evaluate and hedge market risk. The team helps private equity funds and their portfolio companies understand and mitigate transaction risk, including pre-transaction due diligence, and FX risk for the fund during the investment holding period. JCRA's focus is to ensure that clients' returns are protected.
JCRA is an independent financial risk advisor specialising in hedging and debt advice. With 30 years’ experience in structuring and advocating for competitive pricing in derivative products, JCRA designs financial hedging solutions and provides debt advice globally to clients in real estate, project finance, infrastructure, private equity and social housing, as well as corporates.