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What the banking upheaval in 2023 means for alternative assets

Private capital faces the fall-out from SVB

As Shaun Beaney, Editor of our daily newsletter Preqin First Close, last week reported, there was partial relief for VC and early-stage companies as regulators acted to protect depositors. Nonetheless, the wake of Silicon Valley Bank (SVB) is still being closely monitored across private capital.

Parallel, if separate, risks across banks in the US and Europe have prompted regulators to step in to prevent contagion throughout the banking sector, with interventions made in Signature Bank, First Republic Bank, and Credit Suisse, as Beaney notes in Preqin First Close this week.

Preqin will continue to scrutinize macroeconomic threats to private markets, publishing data-led insights and industry updates as events unfold and the impact across alternative assets becomes clear.

-Jasmin Naim, Head of Editorial

Read our coverage

research note | insights+
The implications of Silicon Valley Bank's collapse for venture capital, private debt, and the wider banking system

Catastrophe has been averted as depositors made whole, but disruption is still expected as open lines of credit are brought into question.

What investors will be asking in the wake of SVB

Watch out for greater scrutiny of details such as how portfolio companies would cover payroll in a crisis.

SVB fallout unlikely to cause contagion in Asia, but VCs brace for ripple effects

Experts discuss the impact of SVB’s collapse on the Asian start-up ecosystem

How banking developments are felt across the asset classes

Venture capital

SVB's business model was built on VC foundations, and in fact the bank prided itself on being the bank of choice for the sector. Cameron Joyce, SVP, Deputy Head of Research Insights, analyzes the immediate fall-out for the asset class in our Research Note on the wake of the bank's collapse, and considers the risk factors that left it exposed to rising interest rates (Fig. 1) and macroeconomic risk. We perceive potential pressure on valuations in the coming months, and will monitor the implications against our performance forecasts made at the end of 2022.

Private debt

In terms of the impact on private debt, RJ Joshua, VP, Research Insights, writes in the same note that the asset class appears relatively well-insulated from the challenges in the banking sector. He points out that "crucially, direct lending tends to be floating rate, meaning that holders are not faced with duration risk."

In the hunt for capital, more companies may turn to private debt funds, as their closer alignment with fund structure all but precludes similar bank runs. What's more, they have $409bn of dry capital to deploy, as of December 2022.

Coming soon

As events unfold in the banking sector, Preqin will continue to monitor the impact on private capital, and across alternative assets. We'll keep you abreast of developments with our ongoing insights and analysis of the data.

Come back to read more on the subject:

  • Preqin Risk Monitor: Managing Alternative Assets to Minimize Risk and Maximize Return
  • Research Note: VC funding slowdown

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