Image: Stanislav Kondratiev via Unsplash
The coronavirus pandemic has hit markets hard, and private equity is no exception. A striking illustration came as early as May, when private equity exits dropped almost 70 percent globally compared to May 2019.
But while it might be creating a turbulent market environment, the pandemic has also thrown into sharp relief the virtues of private equity – and demonstrated just how much we have come to rely on it for both the growth and development of emerging economies and innovation in developed ones.
Figures from Bain & Co. suggest that, in December 2019, private equity firms were sitting on a record pile of dry powder roughly equivalent to the value of France’s economy. Since then, they have invested in infrastructure and solutions that will help us to combat COVID, negotiate the challenges of social distancing, and adjust to new ways of living.
American investment firm KKR set up a $50 million coronavirus relief fund, and is now reportedly in talks along with Blackstone to invest in the Serum Institute, the world’s biggest manufacturer of vaccines. In Russia, a funding platform of up to $200 million to support promising Russian companies affected by the coronavirus crisis was launched by the Russian Direct Investment Fund and the country’s largest independent private equity firm Baring Vostok Capital Partners, along with Elbrus Capital and RTP Global. In Britain, Brewdog, backed by TSG Consumer, has made and donated over 50,000 units of hand sanitiser.
In addition to funding ESG and scientific research, private equity support has enabled the innovation required for economies to adjust to a changing world. HireHand, a staffing platform backed by Mustard Seed, has used its technology to set up SpareHand, supporting charitable organisations to carry out essential tasks in support of vulnerable populations across the UK.
In emerging markets, where private equity is proving particularly resilient, innovation is more important than ever. The rapid development of online services, like Russian e-commerce platform Ozon.ru and online video service ivi.ru (both backed by Baring Vostok Capital Partners), has helped housebound families to find alternative ways to perform daily tasks which would otherwise require them to leave the house. Also in Russia, the tech giant Yandex, another of Baring Vostok’s big projects, has developed the philanthropic project Helping Hand, delivering COVID-19 testing kits and dedicating a fleet of its taxis to transporting doctors at the peak of the pandemic.
It is precisely at times of crisis that innovation is most vitally necessary. Private equity is showing that, in the market as elsewhere, the drive to find new and innovative solutions to the complexities of the present day is as strong as ever.
