HarbourVest Partners, the global private markets investment specialist, with more than $143 billion of assets under management as of December 31, 2024, today shared commentary from the firm’s Senior Market Strategist, Scott Voss on the recent tariff announcement.
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With April 2nd behind us — a day we hoped would bring clarity — the path ahead remains uncertain. We need only look at global public markets to understand the implications. As financial investors, public markets are our barometer. Private markets, with their longer durations, will dampen the volatility seen in public markets but are subject to the same underlying uncertainties.
The markets are worried about immediate threats like inflation and a global recession. They are also concerned about the potential rebuild of the global supply chain, its duration, and its future state. These changes represent a conscious reset of the post-World War II economic order.
April 2nd did not provide answers; it merely posed the first question in this game of Jeopardy. The most notable reciprocal tariffs were against China (54%), Cambodia (49%), Vietnam (46%), and Sri Lanka (44%). Japan and Europe, though lower on the list, should not be ignored. As the world diversified away from China, alternatives like Cambodia and Vietnam were added. However, tariff tactics have largely mitigated these diversification efforts. Notably, Canada and Mexico were exempt from the Liberation Day tariffs, presenting opportunities for US border trade partners.
The second Jeopardy question is how markets and stakeholders will respond. On April 3rd, global equity markets plunged, oil and USD fell, and gold continued its historic rise. Volatility and uncertainty have been prevalent and will likely remain so through 2025. The follow-up question is how our counterparts will retaliate. Already, China has imposed reciprocal tariffs of 34%. Others may follow.
As private-market investors in an illiquid asset class, long-term duration is our ally. Private market investments will likely end up in the same place as public market investments over time, but without the interim drama. While there is anxiety about not being able to sell immediately, public market investors face the same dilemma daily.
Our private market portfolios, primarily composed of information technology, business services, healthcare, and financial services, are less exposed to tariffs (for now). These sectors will benefit from deregulation under the next phase of Trump’s policy rollout. Private equity capital, often positioned to facilitate complex transformations, is well-suited to navigate the current uncertainty.
Private market KPIs, including exits, investments, fundraising, and performance, showed early signs of a rebound in the second half of 2024. We anticipated this would accelerate into 2025, driven by:
- Open credit markets
- Sellers motivated to return capital to investors due to elongated hold periods
- Buyers under pressure to deploy capital as their investment periods age
This dynamic remains unchanged, but the anticipated acceleration has been deferred.
Consumer behavior will change. Duty-free shops in airports will thrive, and global travelers will likely travel with one empty suitcase and return with a full one. Used car dealers, with inventory already onshore, are well-positioned. Owners of cars manufactured in Germany and Japan are likely receiving offers from dealers above fair market value. Secondary merchandise sales of foreign goods will emerge as a strong business model under the current regime. While this may narrow the trade deficit for manufactured goods, it does not account for the trade surplus the US enjoys in services, particularly technology.
As the situation evolves, we will continue to provide updates. This story is far from over.
HarbourVest Partners, LLC (“HarbourVest”) is a registered investment adviser under the Investment Advisers Act of 1940. This material is solely for informational purposes; the information should not be viewed as a current or past recommendation or an offer to sell or the solicitation to buy securities or adopt any investment strategy. In addition, the information contained in this document (i) may not be relied upon by any current or prospective investor and (ii) has not been prepared for marketing purposes. In all cases, interested parties should conduct their own investigation and analysis of the any information set forth herein and consult with their own advisors. HarbourVest has not acted in any investment advisory, brokerage or similar capacity by virtue of supplying this information. The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication, are not definitive investment advice, and should not be relied upon as such. This material has been developed internally and/or obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy or completeness of such information. The information is subject to change without notice and HarbourVest has no obligation to update you. There is no assurance that any events or projections will occur, and outcomes may be significantly different than the opinions shown here. This information, including any projections concerning financial market performance, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. The information contained herein must be kept strictly confidential and may not be reproduced or redistributed in any format without the express written approval of HarbourVest. |
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ABOUT HARBOURVEST
HarbourVest is an independent, global private markets firm with over 42 years of experience and more than $143 billion of assets under management as of December 31, 2024. Our interwoven platform provides clients access to global primary funds, secondary transactions, direct co-investments, real assets and infrastructure, and private credit. Our strengths extend across strategies, enabled by our team of more than 1,200 employees, including more than 235 investment professionals across Asia, Europe, and the Americas. Across our private markets platform, our team has committed more than $62 billion to newly-formed funds, completed over $62 billion in secondary purchases, and invested over $45 billion in direct operating companies. We partner strategically and plan our offerings innovatively to provide our clients with access, insight, and global opportunities.
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Contacts
Andrew Hopkins
+1 617-348-8372
AHopkins@Harbourvest.com
