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Summary
  • During what’s shaping up to be the worst year for the global economy since the Great Depression, investors are raising mega-funds within days or weeks (rather than 12-18 months) to invest in distressed assets and growth opportunities emerging from the crisis.
  • Companies are seeing strong demand for their debt, in part due to historic moves by the US Federal Reserve to inject liquidity by buying corporate debt. While some of these are rescue situations, there are many corporates taking money as “insurance” to cover cash needs in the case of an extended downturn.
  • It’s not only private equity and credit investors that are seeing opportunity in the crisis. Hedge funds and venture capital are closing multi-billion-dollar funds, often targeting later-stage rounds, which will take advantage of 15-30% discounts in valuation.
  • Assuming we see the “U”-shaped recovery most likely right now, we’ll still have to live with the ramifications of how we fill in that $20 trillion hole for years to come – from higher corporate debt loads to government deficits and lower consumer savings.
  • Countries are stepping up protectionism to prevent foreign powers – i.e. China – from poaching vulnerable homegrown companies. We should worry about the world becoming less interdependent – global decouplings, especially between the US and China, may carry serious ramifications that go beyond the economic.
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