Businesses continue to navigate the challenges brought by the COVID-19 pandemic. While financial institutions have learned largely from previous recessions, this pandemic is unique in a way that it disrupted business models and accelerated existing trends – particularly digitalization and the importance of ESG. Previously, experts were able to read signs by following economic indicators. The pandemic, however, caused complete stoppage of specific sectors and in most cases, entire economic activity.
The road to recovery is slow, and governments are still finding ways to balance public health and economic considerations. Some jurisdictions focused on targeted lockdowns while others opted for more general, extended periods of quarantine. What is generally noticeable is how consumers relied heavily on e-commerce and payment platforms in order to manage the flow of goods and services – and how businesses reacted to this consumer demand.
The series of briefings, Finding Balance: The Post-COVID Landscape for Financial Institutions, seeks to map the post-pandemic environment that financial institutions need to navigate as we move from resilience and recovery to the business renewal phase. We cover four sub-sectors within the industry, as well as five of the most important trends we have been observing.
The Financial Sponsors installment focuses on private equity / credit funds, asset management, and sovereign wealth funds. Key findings include:
- There is considerable amount of dry powder available to private equity and credit funds to invest. A number of sponsors, particularly in the higher-end of the market, have been quite active in seeking to put money to work in a down-market.
- Even prior to COVID-19, the issue of liquidity stress testing for funds was gaining importance with regulators. As in the 2008 financial crisis, conditions of market stress and the use of business continuity regimes can present heightened exposure to conduct risk, as well as financial crime, such as market abuse and fraud.
- Private equity is increasingly sponsoring impact funds to focus on investments with an explicit focus on creating social or environmental benefits.
- Society sees the sector as having a key role in supporting and promoting the shift to sustainable investment by ensuring the integration of ESG factors across its core activities and providing disclosure to investors.
In the accompanying podcast, Michael Fieweger, a partner in the Chicago office, talks with Ying Yi Liew, a principal in the Financial Services group in Singapore, about key themes from the briefing. They elaborate on specific examples and other observations – covering global and regional developments.