Private equity portfolios are typically less exposed to tariff-sensitive sectors and businesses than major public equity indices, according to a survey of more than 100 private equity managers from around the world.
The survey provided the basis for a report published by Neuberger Berman on April 16. It noted that private equity managers have historically been less exposed to sectors that rely on imports, such as consumer goods, capital goods and technology hardware, and have greater exposure to services and intellectual capital.
“We believe that private equity portfolios are typically less directly exposed to tariff-sensitive sectors and businesses than the economy as a whole or major public equity indices,” the report said.
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Forty-nine per cent of private equity companies are in service-oriented sectors, compared to 27 per cent of S&P 500 companies, the report said.
“In our view, this positioning could help buffer private equity from some of the input-cost fluctuations and supply-chain disruptions that tariffs may cause,” the report said. “However, we recognize that there are indirect effects, and any macroeconomic disruptions could affect private equity, as well.”
Just 2 per cent of respondents expect a significant impact to EBITDA as a result of tariffs, while 53 per cent anticipate a moderate impact. Forty-six per cent of respondents expect no impact on EBITDA.
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Three-quarters of respondents expected no impact from tariffs on financial services, while 77 per cent industrials would sustain a moderate impact.
Private equity-backed companies have a number of mitigation strategies at their disposal. Fifty-five per cent are weighing up raising prices to offset additional costs, while 46 per cent are mulling diversifying suppliers or shifting sourcing to non-tariffed countries.
Eighty-three per cent of managers are not considering building or increasing US production or moving to a US-based supplier, with just 4 per cent weighing up domestic production in the near term.
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