When we think about the potential impact of a recession on the private markets, we thought it best to look at cash flow behavior during historic recessions. Continue reading to understand the net cash flows, contribution rates and distribution rates during prior recessionary periods.

• Net cash flows are generally negative during and surrounding historic recessions. However, during times of recovery and strong markets, we have historically seen positive net cash flows.
• During the previous two recessions, we saw that net cash flows were negative. Those negative net cash flows also lasted at least a year after the recessions ended.
• However, those draw downs were manageable. At most, only 7% of unfunded was drawn during a historic recession.
• Even during recessionary times, general partners are focused on efficiently and effectively putting capital to work.

• Historically, rates of contribution and distribution fell during recessions. This most likely occurs because general economic activity decreases. However, distribution pace quickly rebounds after a recessionary period
• The data shows that the increase in both contribution and distribution rates after the 2008 recession is less than the increase after the 2001 recession.
• Historically, there is a correlation between both contribution and distribution rates, regardless of market condition. However, this does not guarantee changes in one rate or fully explain changes in the other.
• During the previous two recessions, rate of contribution and rate of distribution decreased significantly from pre-recession peaks.
• Presently, the rate of contribution hovers near long-term average.
• We have observed GPs exhibiting caution relative to other market peaks.

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