EisnerAmper Media Alert on Private Equity Distributions

Dominating the news agenda is the immense pressure the private equity industry is under. Allocators are demanding more frequent distributions, while managers are keen to impress the cyclical and relatively illiquid nature of the asset class. Articles, such as in the WSJ, highlight this stalemate. 

Drawing on insights from allocator and manager conversations, Nick Tsafos, Partner-in-Charge, New York Office of EisnerAmper, one of the world’s largest business consulting firms, argues that further education is the solution:   

• Optionality in Distribution: Managers have access to an abundance of tools to increase distributions without forcing a company’s sale (e.g., paying dividends from profits, bringing on another investor and including bolt-on or add-on investments).
• Liquidity-Enhancing Methods: Managers can use new NAV financing vehicles, fund-level leverage, dividend recaps, and secondaries, and continuation and evergreen vehicles to provide liquidity to the illiquid class.
• Strategy and Sector Choice: Private equity inherently involves a lock-up period, with heightened risk exchanged for heightened reward. Allocators should consider the sub-strategy and sector to which they are allocating, as certain sectors can offer more reliable distributions.  

Negative media sentiment also often overlooks private equity’s long-term growth opportunity and its strong position given macro tailwinds: 

• Performance and Interest: The longer-term duration of the asset class supports its viability, and anecdotally, EisnerAmper has heard from allocators that GPs are offering attractive terms to invest in their funds and both investors and allocators view 2024 and 2025 as a promising investment landscape.  
• Macro Tailwinds: EisnerAmper expects an uptick in private market allocations as public markets rise, buoyed by expected Federal Reserve rate cuts.  

Feel free to contact Nick to discuss his “glass half-full” view of the private equity sector.