With $120bn AuA in private equity assets in the Americas alone, fund administrator and financial services provider Apex Group is well placed to comment on the expectations of the private equity industry for the first 100 days of Biden’s presidency. Apex’s Elaine Chim, Head of Private Equity & Real Estate, Americas comments below.
Private Equity Industry & Biden Administration
“Sentiment is generally positive, with so much dry powder ready to invest and the new administration providing a sense of stability for the medium term, it is in a good position to access deals and play strategic role in rebuilding the economy through rapid, targeted capital deployment. Along with the rest of Wall Street, private equity investors are eager to see swift action on Covid-19 and economic stimulus, given early noises from the Biden White House, we can be confident we will see this sooner rather than later.
Economic stimulus will be crucial to support distressed private equity–backed portfolio companies, especially those in the retail sector. Commitments to Federal spending of $5.4 trillion over the next decade have been welcomed by the PE industry and are likely to create opportunities to deploy capital in priority subsectors such as clean energy, education, healthcare and infrastructure. We expect to see a key vintage of funds resulting out of COVID-19, which will be sector specific and forward looking.”
“The private equity industry paid close attention to the Biden-Harris campaign’s tax plans and this will remain a focus. Among his proposals, Biden committed to raise the top individual rate to 39.6 percent, from 37 percent. He also called for taxation of investment income, such as capital gains, at the same rate as wage income for earners making $1 million-plus which could significantly increase the tax bill of high-earning general partners.
However, PE investors are not overly troubled yet: opposition of the Republicans in the Senate and the fact this issue has been long discussed but never pushed through, suggests this topic will remain highly contentious. Perhaps of more concern in the longer-term is noise around overhauling corporate tax policy, including raising the rate from 21 to 28 percent which would have implications for PE-backed companies as well as the tax status of listed PE firms.”