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Institutional investors give thumbs down to federal response on outbreak

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A large percentage of Institutional investors lack confidence in the U.S. government’s ability to contain and eradicate the coronavirus outbreak.

But they also are maintaining confidence in private equity investments, and have no plans to pull capital from specific geographic regions due to the pandemic, according to a new survey released Tuesday by Eaton Partners.

In an online poll that conducted March 5-March 13, Eaton Partners also found that 70% investor respondents say the outbreak in having an impact on investment activity and planning for 2020. But 78% have said they have no plans to pull capital from any specific global region due to the pandemic.

“There’s a general feeling that private equity could be a well-positioned, steady-hand investor during the recent coronavirus-induced volatility,” said Peter Martenson, a partner at Eaton Partners, a subsidiary of Stifel Financial Corp (NYSE: SF).

“In fact, our survey found that 52% of investors believe PE is the most appealing alternative asset class going forward, on the heels of lower interest rates, falling valuations, and more clarity in the presidential race.”

The potential for a U.S. recession is the top factor on the near-term investment strategy for 33% of respondents, while 29% cited the coronavirus outbreak. (Another 29% cited market valuations).

The survey results from 69 partner-level investors found that 38% have no confidence in the federal government’s ability to contain the outbreak, and 48% are only “somewhat” confident of a successful outcome.

In addition, many respondents (70%) felt the Federal Reserve Board of Governor’s interest rate cuts were not “an appropriate remedy,” given the biological – rather than financial – problem the COVID-19 outbreak represents. (The survey took place after the Fed reduced rates to 0.25%, but before Sunday’s emergency intervention action by the Fed reducing its benchmark interest rate to 0%, as well as announcing plans to purchase $700 billion in government and mortgage-related bonds).

Nearly two-thirds (64%) of investors believe President Trump will be re-elected, while 33% predict a win by former vice president Joe Biden, who is leading the delegate count from Democratic primary elections.

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Private equity Alternative investments Coronavirus