PUBLICATIONS

During the second quarter of 2019—which is the most recent data available—private markets posted solid results, matching or outpacing public market returns in all areas except credit. Venture capital was particularly strong, as several high-profile IPOs—including those of Uber and Lyft—occurred in the quarter. Bloom has come off the rose as the year has progressed, however, and investors have become more skeptical of the high-spending, negative earnings business model of these notable companies.

We are constantly looking for signs that the markets are overheated. It remains unclear how far purchase price multiples can creep before a setback reprices risk. FEG remains focused on select opportunities with experienced management teams overseeing smaller, agile funds, and the private markets continue to offer access to many dynamic industry trends.

Most of the performance data in this report is through September 30, when "blue skies" prevailed. By year-end, however, sentiment had shifted dramatically. As such, private fund investors should anticipate some degradation in valuations in fourth quarter reports, particularly in holdings that are energy-related, credit-related, or valued based on public market comparisons—real estate and infrastructure generally excluded. There is a tricky balance between caution and opportunity, but if the general backdrop remains accommodative, more years of blue skies are possible.