Sector-based portfolio changes of private equity funds during economic shocks

Wehking, Mo i z; He be ge , Tim Alexande
A icle — Published Ve sion
Sec o -based po olio changes o p i a e equi y unds
du ing economic shocks
Jou nal o Asse Managemen
P o ided in Coope a ion wi h:
Sp inge Na u e
Sugges ed Ci a ion: Wehking, Mo i z; He be ge , Tim Alexande (2025) : Sec o -based po olio
changes o p i a e equi y unds du ing economic shocks, Jou nal o Asse Managemen , ISSN
1479-179X, Palg a e Macmillan, London, Vol. 26, Iss. 6, pp. 697-706,
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Jou nal o Asse Managemen (2025) 26:697–706
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ORIGINAL ARTICLE
Sec o ‑based po olio changes o p i a e equi y unds
du ingeconomic shocks
Mo i zWehking1 · TimAlexande He be ge 1,2
Re ised: 9 Feb ua y 2025 / Accep ed: 7 May 2025 / Published online: 20 Sep embe 2025
© The Au ho (s) 2025
Abs ac
P i a e equi y in es men s a e highly sensi i e o economic shocks due o hei asse s' high le e age and illiquidi y. Alloca-
ions o PE ha e signi ican ly inc eased o e he pas decade; esea ch on po olio selec ions du ing economic shocks how-
e e emains sca ce. We b idge his gap by analyzing sec o -le el e-alloca ions du ing h ee global economic shocks ( he
Do Com-bus , he Global Financial C isis, and COVID-19). We do so by compa ing he sha e o sec o al capi al six mon hs
be o e each shock wi h capi al alloca ions made du ing he shocks, using a da ase o mo e han 53,000 buy-side ansac ions.
Speci ic sec o s showed inc eased ansac ions om PE in es o s ac oss all shocks, indica ing posi i e pe cep ion om in es-
o s in imes o unce ain y. Ou indings en ail: Limi ed Pa ne s need o c i ically assess indus y-o ien a ed in es men s o
Gene al Pa ne s and challenge o e -alloca ion in pe cei ed “sa e ha bo ” indus ies, especially when Gene al Pa ne s ha e
no specializa ion in hese indus ies. When he Gene al Pa ne s a e indus y-specialized, howe e , Limi ed Pa ne s can
unlock signi ican e u n po en ial when hey ag ee o an ex ended in es men pe iod. Fo Gene al Pa ne s wi h expe ise
in sagging indus ies, shocks o e in es men oppo uni ies as compe i ion shies away and alua ions dec ease. Companies
in sagging indus ies seeking ex e nal capi al should a ge sou ces o he han PE o accep inc eased e u n expec a ions.
Keywo ds Po olio managemen · Po olio selec ion· P i a e equi y unds
JEL Classi ica ion G01· G11· G23
In oduc ion
P i a e equi y (PE) e u ns a e highly sensi i e o liquid-
i y shocks (F anzoni e al. 2012). Economic shocks pose
challenges o he asse class, as shocks limi access o new
commi edcapi al (Rizzi 2009) and impede access o deb
(Se e akis 2012). Acquisi ions, he e o e, equi e highe
equi y p opo ions, limi ing e u ns and pu ing p es-
su e on alua ions (Uddin and Chowdhu y 2021). While
educed alua ions can unlock akeo e oppo uni ies, hey
pose challenges o in es o s seeking o exi om exis ing
in es men s. Despi e he impac o shocks on PE in es ing,
esea ch is sca ce as mos s udies ocus on p e-c isis pe i-
ods (Sahli and Khemi i 2020). S udies mainly ocus on one
e en (e.g., he Global Financial C isis, GFC), o en in only
one egion; he e o e, we canno assume ha hei indings
a e widely applicable as he dynamics o each shock a e
indi idual. We look a how PE i ms in es du ing imes o
c isis and add ess his gap by inding commonali ies ac oss
shocks and egions, helping Gene al Pa ne s (GPs) imp o e
in es men s a egies in imes o unce ain y. Applying an
indus y-le el ocus is an essen ial elemen o ou analysis,
as GPs wi h indus y specializa ions inc ease e u ns (Gil-
ligan and W igh 2020).
We show ha ce ain indus ies exhibi cohe en dynam-
ics conce ning capi al alloca ion ac oss shocks. The ene gy,
banking, insu ance, and li e science sec o s consis en ly
inc eased in es men sha es. Con e sely, he ma e ials and
echnology ha dwa e sec o s consis en ly dec eased sha es.
* Tim Alexande He be ge
im.he be g[email p o ec ed];
im-alexande .he be ge @uni-bambe g.de
Mo i z Wehking
[email p o ec ed]
1 Chai o Business Adminis a ion, Speci ically
En ep eneu ship, Finance andDigi aliza ion, And ássy
Uni e si y, Budapes , Hunga y
2 Depa men o Finance, Bambe g Uni e si y, Bambe g,
Ge many
698 M.Wehking, T.A.He be ge
This indica es se e al implica ions o GPs and Limi ed Pa -
ne s (LP).
Fo GPs wi h expe ise in sagging indus ies, shocks o e
signi ican oppo uni ies. Sho - e m exi op ions, and he e-
o e capi al dis ibu ion capabili ies, diminish, ye he pool
o akeo e candida es inc eases as compe i o s shy away.
This pu s p essu e on he sho e m and opens s ong p o i
po en ial in he long e m. Capi alizing on hese oppo uni-
ies equi es GPs o e-con igu e hei po olio alloca ion,
und imeline, isk p e e ence, and alignmen wi h he o e -
all in es men s a egy.
Also, LP mus e-align hei in es men ho izon and isk
p e e ences. Sho - e m capi al dis ibu ions om ma u e
unds in es ed in sagging indus ies a ec p o i s, while
addi ional lexibili y p o ides mid- e m e u ns, especially
o indus y-specialized unds.
Con e sely, companies in he ma e ials and echnology
ha dwa e sec o s should a ge sou ces o he han PE when
seeking ex e nal capi al du ing a shock.
The emainde o his s udy is s uc u ed as ollows:
“Rela ed li e a u e” sec ion e iews he ela ed li e a u e.
“Da a and me hodology” sec ion" desc ibes ou me hodol-
ogy. “Resul s and discussion” sec ion p esen s and discusses
ou esul s, and conclusions a e o e ed in “Conclusion”
sec ion.
Rela ed li e a u e
Fund pe o mance and he abili y o aise ollow-on unds
a e s ongly co ela ed wi h boom-and-bus cycles (Kaplan
and Schoa 2005). Bu h and Reißig-Thus (2019) show
ha GPs mus di e en ia e s a egies o build p o iles and
imp o e inancing e ms. Specializa ion e icals include
indus ies, ansac ion ypes [g ow h equi y, en u e capi al
(VC)], o ansac ion sizes. Cash lows and inancial pe o -
mances di e ac oss indus ies (Gombola and Ke z 1983),
indica ing a ying sui abili y o PE akeo e s.
Aside om an indus y's economic dynamics and a
und’s abili y o cap u e hem, indus y specializa ion is a
sou ce o compe i i e ad an age. C essy e al. (2007) ind
ha PE unds wi h indus y specializa ion gene a e 8.5%
e u n p emia. Le Nadan e al. (2018) added ha a d i e o
supe io pe o mance is a GP’s abili y o iden i y sui able
akeo e candida es, i.e., companies in a ge ed indus ies
ha we e pe o ming poo ly bu o e po en ial o ope a-
ional imp o emen s.
These indings indica e wo p e equisi es o sec o al
adjus men s du ing shocks: Fi s , GP wi h indus y expe -
ise should only shi away om hei “home” indus ies
when changes in sec o dynamics a e expec ed o ha e an
impac on e u ns ha exceeds he und’s abili y o gene -
a e p o i abili y p emiums (i.e., an impac g ea e han 8%).
Second, when shi ing a sec o al ocus o indus ies ou side
hei a eas o specializa ion, GPs a e a a knowledge disad-
an age compa ed o hose who specialize in indus y and
a e he e o e disad an aged in bidding p ocesses.
Speed is a key de e minan o success in sec o al eal-
loca ion. Funds ha eac quickly o changing condi ions
ha e an ad an age and can expec o aise unds and e u n
capi al o sha eholde s as e (Ljungq is e al. 2020). This
iming componen exposes in es o s o wo challenges: An
in ended exi may coincide wi h a pe iod o downcycling,
including lowe alua ions, and he ini ial buy-in may occu
a a high poin in he cycle.
Thus a , PE esea ch ocused on an agg ega e le el,
emphasizing mac oeconomic indica o s a he han GPs’
app oaches o adjus ing hei in es men p ac ices (Cab al-
Ca doso e al. 2016). Howe e , esea ch does show ha GPs
modi y hei s a egies du ing shocks. In he VC a ena o
example, manage s p e e la e -s age a ge s o e ea ly-s age
a ge s in such pe iods (Paik and Woo 2014).
Bella i is e al. (2022) analyze aspec s o VC unds'
indus y- ela ed in es men s a egies and ind ha in es -
men s in he a el indus y declined du ing COVID-19
while in es men s in he bio ech indus y inc eased. We
sys ema ically ex end hei indings o a b oade ange o
s a egies (LBO, g ow h equi y, VC), indus ies, and shocks.
Haa meye (2020) concludes ha GPs a oided cyclical
sec o s du ing COVID-19. Malik e al. (2020) show ha
du ing COVID-19, GPs in India shi ed capi al owa d sec-
o s such as educa ion, heal hca e, and inancial se ices.
Sahli and Khemi i (2020) ound ha bidding o indus ial
companies declined among GPs in F ance du ing he GFC.
Musa o a (2009) concludes ha Russian PEs shi ed owa d
less cyclical indus ies du ing he GFC. Fo VC in es o s in
he USA, Townsend (2015) inds ha being o e exposed o
IT- ela ed sec o s du ing he Do Com-bus esul ed in capi al
se backs and limi ed access o inancing. C oce e al. (2019)
ack in es men olumes h oughou he GFC and di e en i-
a e be ween capi al-in ensi e and labo -in ensi e indus ies.
Gompe s e al. (2022) su eyed GPs and included a a ing o
a ac i eness among a ious indus ies du ing COVID-19.
GPs iewed ene gy, u ili ies, and indus ials as una ac i e
sec o s compa ed o IT, heal hca e, and elecommunica ions.
A undale and Mason (2020) obse e ha du ing COVID-
19, GPs shi ed capi al away om ha d-hi sec o s ( a el
and hospi ali y) o companies in digi al heal hca e, cybe -
secu i y, and AI. These indings a e consis en wi h hose
o Chen e al. (2021), who iden i ied heal hca e and online
se ices as he mos in es able indus ies du ing COVID-19.
Resea ch on indus y ele ance du ing shocks is no lim-
i ed o PE/LBO unds; i ex ends o also hedge unds and VC
(see Tashano a e al. 2020). Bella i is e al. (2022) show he
likelihood o ea ly-s age en u es ob aining inancing du ing
COVID-19 di e ed d ama ically when compa ing a el o
699Sec o -based po olio changes o p i a e equi y unds du ingeconomic shocks
bio ech en u es. De V ies and Block (2011) assess he likeli-
hood o syndica ion be o e and du ing he GFC and Do Com
c ises o VCs. Cumming e al. (2009) compa e ea ly-s age,
expansion-s age, and la e -s age in es men s ac oss in e ne ,
bio ech, and o he indus ies unde sca ce liquidi y. Acco ding
o Mason (2020), angel and VC in es o s a o ed “s a ups
wi h a pandemic pu pose” du ing COVID-19.
Al hough se e al s udies add ess he sec o al ocus among
PE unds du ing shocks, his esea ch has subs an ial limi a-
ions. Fi s , mos o hese s udies conside a single shock (e.g.,
COVID-19). Second, hey ypically analyze only one egion
(e.g., he USA). Thi d, only one ype o in es o (e.g., VC)
is assessed. This means he esul s a e ha dly gene alizable.
Economic dynamics o shocks di e by e en (e.g., due o
supply/demand dynamics and hei implica ions).
We add ess hese limi a ions: Fi s , we include h ee shocks
in ou analysis (Do Com-bus , GFC, and COVID-19). Second,
we use a global da ase ha co e s se e al egions and di e en
ypes o in es o s (LBO, g ow h equi y, and VC).
In his s udy, we in es iga e whe he GPs disp opo ion-
ally in es in speci ic indus ies du ing shocks. The se e i y o
down u ns and eco e y speed du ing shocks di e by indus y
(Jiang e al. 2021). In es o s he e o e e-alloca e capi al, o
less-a ec ed indus ies. Uddin and Chowdhu y (2021) show
ha highe equi y p opo ions p essu e alua ions, emphasiz-
ing he impo ance o ela ed deal olumes and ansac ion
sizes. We he e o e p opose Hypo hesis 1:
1. Shocks nega i ely a ec deal pa ame e s such as alua-
ion, ansac ion size, and ansac ion olume.
Sahli and Khemi i (2020) obse ed declines in in es men s
in he indus ial sec o du ing he GFC, while Gompe s e al.
(2022), and Chen e al. (2021) ound p e e ences o IT and
heal hca e in es men s du ing COVID-19. Thus, we p opose
Hypo hesis 2:
2. Du ing shocks, in es o s alloca e mo e in es men s o
speci ic indus ies, such as ene gy o inancial se ices.
Malik e al. (2020) explain ha PE capi al shi ed o indus-
y g oups wi h obus business models du ing COVID-19,
while Haa meye (2020) concludes ha in es o s a oided
cyclic sec o s. We, he e o e, o m Hypo hesis 3:
3. Du ing a shock, in es o s p e e non-cyclical o e cycli-
cal indus ies.
Da a andme hodology
The o ma o an e en s udy was no chosen, as i is no
ully applicable o a ious easons: Fi s , we s i e o
de elop gene al implica ions. One e en would limi he
gene ali y o esul s. Second, dynamics di e be ween
shocks. The GFC, o example, s ongly a ec ed he inan-
cial sec o , while heal hca e was no . This con as s wi h
COVID-19, which impac ed he heal hca e indus y bu
no he inancial sec o . We, he e o e, ha e an asymme i-
cal e ec on he indus ies a ec ed. Thi d, da a a ailabili y
has inc eased signi ican ly o e ime as PE ansac ions
ha e inc eased. Focusing pu ely on he Do Com-Shock
in an e en s udy would limi he numbe o a ailable
ansac ions.
The da a used a e based on PE ansac ions and we e
e ie ed om Me ge ma ke , a inancial da abase wi h
ex ensi e da a on PE- ela ed ansac ions (Tian 2024). The
pe iod s udied is om Janua y 1998 o Oc obe 2022. We
chose a long- ange ime ame because i allows o include
h ee majo shocks, i.e., he Do Com-bus in 2000 (Ljun-
gq is and Wilhelm 2003), he GFC o 2008–2009 (Blank-
enbu g and Palma 2009), and COVID-19 om 2020 (Ha -
jo o and Rossi 2023). Only PE buy-side ansac ions a e
included. T ansac ions a e de e mined by hei announce-
men da e, which is closes o he in es men decision and
is hus bes sui ed o ep esen in es men decisions a a
gi en ime.
We made he ollowing adjus men s o he da ase
be o e conduc ing ou analysis:
1. Imposed consis en indus y classi ica ion: The da ase
con ains in o ma ion abou he a ge ’s indus y; how-
e e , he alues ollow no cohe en sys em. We modi ied
indus y classi ica ions using he GICS s anda ds and
aligned he da a on indus y-b anch le els (see S anley
2001).
2. Added Pu chasing Manage Index (PMI) alues. To cap-
u e shocks quan i a i ely, we added he PMI index. We
assume ha a PMI below 45 indica es a shock, as gene -
ally, a PMI below 47 indica es he manu ac u ing sec-
o is con ac ing (Koenig 2002). This app oach allows
us o compa e o e ime, a oiding he e oscedas ici y
isks. This index-based app oach allowed us o ace
c isis leng h wi h de ined s a and end poin s. Since
he s a ing poin can be de ined based on he PMI index,
we buil he a e age ac oss he p eceding six mon hs,
e lec ing p e ious in es o p e e ences in indus ies.
Al hough he PMI is manu ac u ing- ocused, i is con-
side ed a leading indica o o o e all economic g ow h.
3. Classi ied cyclical and de ensi e indus ies. The indus y
ca ego ies we e so ed in o cyclical and de ensi e using
700 M.Wehking, T.A.He be ge
Damoda an’s (2021) da a on be as (βs) pe indus y. We
use a e age, unle e aged βs o 2018–2021, co ec ed
o cash, o accoun o indus y-wide pa e ns in cash
holdings. We compu e he simple a e age β ac oss all
indus ies and de ine cyclical indus ies as ha ing abo e-
a e age unle e aged βs and de ensi e indus ies as hose
ha ing below-a e age βs.
In ou esea ch, he Asian and Russian c ises in 1997 and
1998, espec i ely, a e no included.
The Asian c isis, d i en by inancial libe aliza ion (Cli-
men and Meneu 2003), hi i e na ional s ock ma ke s om
July 1997 onwa d. The Russian c isis began in Augus 1998
wi h he de aul o uble-denomina ed deb obliga ions
(Me ick 2001). Despi e a ying dynamics, bo h e en s
esul ed p ima ily in a egional cu ency c isis (Gunay and
Can 2022).
Ou shock de ini ion is based on a PMI index alue below
45, while 47 is assumed o indica e a con ac ing manu ac-
u ing sec o (Koenig 2002). Fo he Russian and Asian c i-
ses, he PMI anged be ween 46.8 (Decembe 1998) and 57.7
(July 1997), abo e he h eshold PMI c i e ia. Despi e he
impac on egional economies, he ele ance o he global
economy was somewha limi ed.
Addi ionally, PE in bo h egions was a an ea ly s age
o de elopmen a ha ime. In ou se o Russia in 1998,
only he s ake acquisi ion o KKR in Impe ial Po celain was
included. Thus, addi ional obse a ion poin s would ha e
had a negligible e ec .
The h ee shocks included in ou analysis di e in
hei p ope ies. A i s , he o igin o he shock di e ed.
COVID-19 was an exogenous shock, no o an economic
bu i al na u e (Bo io 2020). This con as s wi h he eco-
nomic na u e o he GFC, which o igina ed in he inan-
cial sec o , and he Do Com-bus , which o igina ed in he
echnology and inancial sec o s (Alexakis e al. 2021).
Second, he geog aphical scope di e ed. The GFC and
Do Com-bus mos ly a ec ed wes e n inancial ma ke s,
while COVID-19 had a global scope (Bo io 2020).
Thi d, he impac di e ed; he GFC and Do Com-bus
had human and in en ional d i e s, indica ing a high abil-
i y o con ol hem. Con e sely, he non-human s ee ed
i al ou b eak du ing COVID-19 lacked con ol, and he e-
o e, unce ain y was signi ican ly highe (Aga on e al.
2024).
Fou h, he speed di e ed. COVID-19 showed a as e
down u n and eco e y compa ed o Do Com-bus and
GFC. F om he p e-pandemic s ock ma ke high o local
minimum ook ou weeks, du ing he GFC i ook 23
weeks, and du ing he Do Com-bus , i ook 109 weeks.
The economic eco e y du ing COVID-19 was sha p,
while i ook signi ican ly longe du ing he GFC and
Do Com-bus (Da is and Zla e 2023).
The da ase con ains 53,472 ansac ions. T ansac ions
inc eased o e ime, in line wi h inc easing PE in es -
men s. The egional dis ibu ion is concen a ed in No h
Ame ica and Eu ope, as shown in Fig.1.
The da ase includes ansac ions om a ious indus-
ies, wi h concen a ion in comme cial se ices, pe sonal
p oduc s, and li e science as shown in Fig.2.
382 487 612613 712
985
1,378
1,691
2,124
2,386
1,831
1,056
1,793
1,974 1,949 1,962
2,410 2,553
2,851
1,910
2,983
3,563 3,647
6,810
4,810
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
APAC
EMEA
No h Ame ica
Sou h Ame ica
O he
3,684
24,847
21,948
959
2,034
Fig. 1 Da a poin s pe yea . This igu e p esen s he numbe o PE ansac ions included in he da ase pe yea

701Sec o -based po olio changes o p i a e equi y unds du ingeconomic shocks
Resul s anddiscussion
We compu e Pea son co ela ion coe icien s using he PMI
o assess he impac o he economic en i onmen on d i e s
o PE ansac ions. The Pea son co ela ion be ween he PMI
and unle e aged β is 0.051 (signi ican a 0.003). This indi-
ca es a weak bu signi ican ela ionship, al hough he alue
is below he h eshold o 0.1 o be conside ed meaning ul.
We ind simila esul s o PMI and EBITDA-mul iple, wi h
a co ela ion o 0.05 (signi ican a 0.003), again below he
h eshold. The co ela ion be ween PMI and deal alue is
0.015 (signi ican a 0.022), again below he h eshold. O e -
all, he co ela ion analysis shows weak bu signi ican co -
ela ions be ween he PMI and alua ion me ics ha a e oo
low o be conside ed meaning ul.
EBITDA-mul iple du ing non-shocks a e ages 11.6×,
alling o 10.3× du ing shocks(Table1). The independen
- es shows = 2.491 (0.013 signi icance le el; = 2.5;
d = 3,724), indica ing signi ican alues. The mean deal
alue is EUR 311m du ing non-shocks, which is highe
han he mean o EUR 216m du ing shocks. The uns and-
a dized coe icien o shocks is −1.286 (s d. e o o
0.516, Table2), implying an es ima ed eg ession equa-
ion o :
Fig. 2 Da a poin s pe indus y.
This igu e p esen s he numbe
o PE ansac ions included in
he da ase pe indus y (del a o
53,472 is “o he ” indus ies)
1,089
2,210
1,839
3,351
708
1,198
3,694
2,103
290
1,826
1,949
1,276
2,315
7,654
3,909
976
1,336
01,000 2,0003,000 4,000 5,000 6,000 7,000 8,000 9,000
Telecommunica ion
Technology ha dwa e
So wa e
Li e Science
Ma e ials
Insu ance
Pe sonal p oduc s
Heal hca e
Food, Be e age & Tobacco
Ene gy
Di e si ied Financials
Consume se ices
Consume du ables
Comme cial se ices
Capi al goods
Banks
Au omo i e
Table 1 Compa ison o key
ansac ion pa ame e du ing
shock and no-shock pe iods
This able p esen s he compa ison be ween shock and no-shock pe iods in key ansac ion pa ame e s
EBITDA-mul iple and deal alue
N Mean SD S d. e o mean 95% con idence in e al
Lowe bound Uppe bound
EBITDA-mul iple
No-shock 3600 11.56 5.68 0.094 11.37 11.75
Shock 126 10.28 6.00 0.535 9.22 11.34
Deal alue
No-shock 22,480 311.3 1086.97 7.249 297.09 325.51
Shock 924 216.5 726.58 23.90 169.6 263.42
Table 2 Desc ip i es o EBITDA-mul iples and compa ison be ween
shocks and no-shocks pe iods
This able p esen s he compa ison o EBITDA-mul iples be ween
shock and non-shock pe iods
BEBITDA-mul iple
S d. e o Be a Signi icance
No-shock 11.565 0.095 – 121.848 –
Shock −1.286 0.516 −0.041 2.491 0.013
702 M.Wehking, T.A.He be ge
whe e x is a binomial dummy a iable and equals “1” in
case o shock.
The nega i e coe icien indica es ha EBITDA-mul iples
(i.e., deal alua ions) decline du ing shocks.
Simila esul s a e ound o deal alue. The mean
alue du ing non-shock pe iods is EUR 311m, wi h SD o
1086(Table1). Du ing shocks, he a e age alue dec eases
o EUR 216m wi h a SD o 726. The SD is skewed wi h
inc eased sca e ing, so we canno apply addi ional pa ame -
ic es s. Resul s align wi h Uddin and Chowdhu y’s (2021)
obse a ions o p essu e on alua ions and con i m akeo e
oppo uni ies, as discussed in Neely and Ca michael (2021).
These indings a e consis en wi h Hypo hesis 1, as key
pa ame e s dec ease.
Nex , we assess whe he GPs shi hei ocus owa d spe-
ci ic indus ies. We apply he chi-squa e es and ob ain a
alue o 144.57 (signi ican a he 0.001 le el), indica ing
ha GPs p e e o in es in speci ic indus ies du ing shocks.
Nex , we e iew a he indus y le el. We compa e he
sha e o ansac ions in each indus y pe shock o he sha e
six mon hs p io . We p e en ime- ela ed compa ison bias
om o e weigh ed a e ages. The esul s e eal mixed
dynamics o mos indus ies; howe e , speci ic indus ies
EBITDA Du ing Shock
=
11.6
−
1.3
x=
10.3
show consis en esponses, namely banking, ene gy, insu -
ance, ma e ials, echnology ha dwa e, and li e science.
Bo h ma e ials and echnology ha dwa e consis en ly show
a educed sha e, while sha es o banking, ene gy, insu ance,
and li e science inc eased (Table3).
We pe o med he same analysis, educing he a e age
o h ee mon hs p io . Resul s emained cons an , wi h di -
e ences ound only in he ene gy sec o (sha es inc eased
du ing he GFC and COVID-19 bu dec eased du ing he
Do Com-bus ), media (cons an dec ease), and elecommu-
nica ion (cons an inc ease). All o he ou comes emained
equal(Table4). A chi-squa e es con i med signi icance a
he 0.0056 le el.
We con as ed he esul s by analyzing he peak phases
o shocks, unning he analysis wi h a PMI h eshold o
43(Table5). Dynamics emained unchanged o banks,
ene gy, insu ance, ma e ials, and echnology ha dwa e. The
magni ude o shi s inc eased, howe e , o se e al indus-
ies. Ma e ial in es men s shi ed a a highe pace (−5.5 pp ,
−2.0 pp , and 2.7 pp du ing Do Com, GFC, and COVID-19,
espec i ely) compa ed wi h he PMI 45 h eshold (−4.4 pp ,
−1.8 pp , and −1.7 pp du ing Do Com, GFC, and COVID-
19, espec i ely). Simila esul s we e ob ained o comme -
cial se ices (+2.0 pp , +0.1 pp , +5.2 pp du ing Do Com,
GFC, and COVID-19, espec i ely) compa ed wi h he PMI
Table 3 MSCI indus ies sha es h oughou majo shocks
This able p esen s he sha e o ansac ions pe MSCI-Indus y ac oss h ee shocks. The “Be o e”-Pe iod measu es he sha e 6 mon h p io o
each shock, based on ansac ions olumes (no alue). Cumula i e del a o 100% consis s o “o he ” indus ies
Do Com GFC COVID-19 Pe cen age-poin change
Be o e (%) Shock (%) Be o e (%) Shock (%) Be o e (%) Shock (%) Do Com (%) GFC (%) COVID-19 (%)
Au omo i e 4.6 3.3 3.3 3.4 2.2 2.6 −1.4 0.1 0.4
Banks 3.5 4.0 2.7 3.0 1.2 1.6 0.5 0.3 0.4
Capi al goods 6.5 10.5 10.0 8.6 8.1 5.0 4.0 −1.4 −3.1
Comme cial se ices 12.5 13.0 15.0 13.8 16.7 18.7 0.5 −1.1 2.0
Consume du ables 5.7 6.9 6.9 7.2 3.5 0.8 1.2 0.3 −2.7
Consume se ices 2.2 3.4 2.8 1.9 2.2 0.8 1.3 −0.9 −1.4
Ene gy 0.5 0.6 3.7 4.4 3.0 3.4 0.0 0.7 0.4
Food, be e age and
obacco
4.6 3.8 4.4 5.7 3.2 3.4 −0.8 1.3 0.2
Heal hca e 4.1 4.6 5.4 4.2 8.2 11.3 0.5 −1.2 3.1
Pe sonal p oduc s 2.7 3.6 2.7 3.3 2.2 2.1 0.9 0.6 −0.1
Insu ance 0.8 1.5 1.3 1.5 1.4 2.9 0.7 0.2 1.5
Ma e ials 9.2 5.9 8.5 7.7 5.0 2.9 −3.3 −0.8 −2.1
Media 3.3 4.0 4.0 3.6 3.5 2.6 0.8 −0.4 −0.8
Li e sciences 1.6 1.7 1.5 2.0 2.5 3.7 0.1 0.5 1.2
So wa e 9.5 6.3 6.4 8.6 20.3 23.7 −3.2 2.1 3.4
Technology ha dwa e 7.6 5.9 4.8 4.0 3.8 2.6 −1.7 −0.8 −1.2
Telecommunica ion 3.3 3.3 1.7 1.5 1.2 2.1 0.0 −0.2 0.9
Cyclical 59 57 60 61 67 66 −1.8 1.0 −0.3
De ensi e 41 43 40 39 33 34 1.8 −1.0 0.3
703Sec o -based po olio changes o p i a e equi y unds du ingeconomic shocks
Table 4 MSCI indus ies sha es h oughou majo shocks
This able p esen s he sha e o ansac ions pe MSCI-Indus y ac oss h ee shocks. The “Be o e”-Pe iod measu es he sha e 3 mon h p io o
each shock, based on ansac ions olumes (no alue). Cumula i e del a o 100% consis s o “o he ” indus ies
Do Com GFC COVID-19 Pe cen age-poin change
Be o e (%) Shock (%) Be o e (%) Shock (%) Be o e (%) Shock (%) Do Com (%) GFC (%) COVID-19 (%)
Au omo i e 3.7 3.3 3.1 3.4 2.0 2.6 −0.4 0.3 0.7
Banks 1.5 4.0 2.6 3.0 1.3 1.6 2.6 0.5 0.3
Capi al goods 3.7 10.5 12.8 8.6 7.9 5.0 6.9 −4.2 −2.9
Comme cial se ices 12.5 13.0 14.6 13.8 15.7 18.7 0.5 −0.8 3.0
Consume du ables 6.6 6.9 5.5 7.2 2.4 0.8 0.3 1.7 −1.6
Consume se ices 2.2 3.4 2.0 1.9 1.5 0.8 1.2 −0.1 −0.7
Ene gy 0.7 0.6 3.8 4.4 3.0 3.4 −0.2 0.6 0.4
Food, be e age and
obacco
5.1 3.8 3.5 5.7 2.5 3.4 −1.3 2.2 0.9
Heal hca e 5.1 4.6 5.7 4.2 9.1 11.3 −0.5 −1.5 2.2
Pe sonal p oduc s 4.4 3.6 2.0 3.3 2.0 2.1 −0.8 1.3 0.1
Insu ance 0.7 1.5 0.5 1.5 1.5 2.9 0.8 1.0 1.4
Ma e ials 10.3 5.9 9.5 7.7 4.6 2.9 −4.4 −1.8 −1.7
media 4.4 4.0 5.1 3.6 3.6 2.6 −0.4 −1.5 −0.9
Li e sciences 2.2 1.7 1.5 2.0 2.8 3.7 −0.5 0.6 0.9
So wa e 10.3 6.3 4.6 8.6 22.9 23.7 −4.0 4.0 0.8
Technology ha dwa e 9.6 5.9 5.9 4.0 3.5 2.6 −3.6 −1.8 −0.8
Telecommunica ion 2.9 3.3 1.3 1.5 1.4 2.1 0.3 0.2 0.7
Table 5 Peak o MSCI indus ies sha es h oughou majo shocks
This able p esen s he sha e o ansac ions pe MSCI-Indus y du ing he peak o each shock, based on a PMI h eshold o 43. The “Be o e”-
Pe iod measu es he sha e 3 mon h p io o each shock, based on ansac ions olumes (no alue). Cumula i e del a o 100% consis s o “o he ”
indus ies
Do Com GFC COVID-19 Pe cen age-poin change
Be o e (%) Shock (%) Be o e (%) Shock (%) Be o e (%) Shock (%) Do Com (%) GFC (%) COVID-19 (%)
Au omo i e 3.7 5.3 3.1 3.2 2.0 3.2 1.6 0.1 1.2
Banks 1.5 3.9 2.6 3.0 1.3 1.3 2.5 0.5 0.0
Capi al goods 3.7 7.9 12.8 7.3 7.9 3.8 4.2 −5.5 −4.1
Comme cial se ices 12.5 14.5 14.6 14.6 15.7 20.9 2.0 0.1 5.2
Consume du ables 6.6 4.8 5.5 7.3 2.4 0.0 −1.8 1.8 −2.4
Consume se ices 2.2 2.6 2.0 1.7 1.5 0.6 0.4 −0.3 −0.9
Ene gy 0.7 1.3 3.8 4.7 3.0 4.4 0.6 0.9 1.4
Food, be e age and
obacco
5.1 3.9 3.5 6.1 2.5 2.5 −1.2 2.6 0.0
Heal hca e 5.1 3.5 5.7 4.4 9.1 10.8 −1.6 −1.3 1.7
Pe sonal p oduc s 4.4 4.8 2.0 3.5 2.0 1.9 0.4 1.5 −0.1
Insu ance 0.7 1.3 0.5 1.7 1.5 1.9 0.6 1.1 0.4
Ma e ials 10.3 4.8 9.5 7.5 4.6 1.9 −5.5 −2.0 −2.7
Media 4.4 4.4 5.1 3.8 3.6 2.5 0.0 −1.3 −1.0
Li e science 2.2 1.3 1.5 2.1 2.8 3.8 −0.9 0.7 1.0
So wa e 10.3 9.2 4.6 8.2 22.9 27.2 −1.1 3.6 4.3
Technology ha dwa e 9.6 6.6 5.9 4.0 3.5 3.2 −3.0 −1.9 −0.3
Telecommunica ion 2.9 3.5 1.3 1.5 1.4 1.9 0.6 0.2 0.5
704 M.Wehking, T.A.He be ge
45 h eshold (+0.5 pp , −0.8 pp , and +3.0 pp du ing Do -
Com, GFC, and COVID-19, espec i ely). The magni ude
o e-alloca ions inc eases wi h unce ain y, chi-squa e es
indica ed signi icance a 0.00369.
The esul s con i m Hypo hesis 2. GPs shi in es men s
owa d o away om speci ic indus ies du ing shocks.
We ex end he analysis, assessing whe he GPs p e e
de ensi e indus ies du ing shocks. Pea son’s chi-squa e
alue o 63.471 (signi ican a he 0.000 le el) shows ha
GPs p e e cyclic indus y in es men s e en du ing shock
imes. Howe e , capi al alloca ion in de ensi e indus ies
inc eases. Valua ion le els do no d i e his, as he a e age
EBITDA-mul iple o cyclical indus ies du ing shocks is
10.2× compa ed o 10.3× o de ensi e indus ies.
Hypo hesis 3 is he e o e accep ed, as he e is a shi in
cyclic e sus de ensi e indus ies du ing a shock.
We cons uc an ANOVA o EBITDA-mul iple and deal
alue and conclude no signi ican di e ence ac oss egions
exis s.
Ou analysis does no suppo Haa meye ’s (2020)
hypo hesis o auni ied shi owa d de ensi e indus ies. The
same applies o Musa o a (2009); howe e , hose esul s
p ima ily ocus on Russia, and we did no analyze p e e -
ences a coun y le el.
Gi en g ea e cash low p edic abili y, shi ing owa d
de ensi e indus ies in a shock seems plausible. A undale
and Mason (2020) showed in es o s shy away om he ha d-
es -hi sec o s, whe he cyclical o de ensi e. No ably, ans-
ac ion sha es in cyclical indus ies inc eased consis en ly
despi e he shocks. This could imply ha GPs had posi i e
expe iences in es ing in ola ile indus ies du ing shocks,
po en ially a dec eased alua ions, p o iding signi ican
e u ns in pos -shock pe iods (“buy low, sell high”). Gomp-
e s e al. 2022) and Chen e al. (2021) obse ed inc eases in
IT and heal hca e in es men s du ing COVID-19, gi en ha
bo h indus ies bene i ed om COVID-19. In con as o ou
indings, Gompe s e al. (2022) show educed in es men s
in he ene gy indus y, which should be pu in o pe spec i e.
Ou esul s indica e ha PE unds end o shi capi al o
ene gy, also du ing COVID-19. Howe e , sub-ca ego ies o
ene gy (e.g., oil and gas) came unde p essu e, while o he s
(e.g., enewables) show posi i e dynamics.
We no e ha GPs consis en ly p e e speci ic indus ies,
implying ha in es o s iew hem as sa e ha bo s. Two
indus ies consis en ly educed sha es ac oss shocks, indi-
ca ing hey a e pe cei ed as una ac i e.
GPs mus e alua e hei po olio, und imeline, isk
p e e ence, and s a egy and adap o he economic ou look.
Shocks o e oppo uni ies o GPs specialized in undesi -
able indus ies. Companies unde inancial s ess seek inan-
cial suppo and accep gene ous e ms. GPs mus conside
o ma s such as equi y placemen s and lexible deb mod-
els. Du ing shock phases, GPs wi h indus ial specializa ion
main ain hei abili y o selec sui able a ge s o alue c e-
a ion. Reduced alua ions p o ide oppo uni ies o in es .
Shi s in in es men s a egies equi e LP o adjus hei isk
p e e ence and in es men imeline (i.e., i a und is due o
epaymen in he nex yea , in es men s in dec easing sec-
o s a e di icul o jus i y). Howe e , ex ending he payou
pe iod by 2–3 yea s b idges sho - e m p essu e and unlocks
mid- e m e u ns.
LP mus e-assess hei own isk p e e ence, capi al dis i-
bu ion imeline, and ole, and hey should e alua e in ol e-
men and suppo o GPs. Sho - e m capi al dis ibu ions
om unds wi h an indus y oo p in in sagging indus ies
esul in hi s in p o i abili y. Howe e , LP should also emain
c i ical owa d he in es men s o GPs. They should e alu-
a e he ollowing: a e GPs placing ce ain in es men s o
capi alize on bene i s po en ial (i.e., a ac i e in es men s in
diminishing indus ies ha hey can iden i y based on hei
sec o expe ise), o a e hey ollowing he gene al ends o
pe cei ed s able indus ies? The e o e, shocks equi e close
collabo a ion be ween LP and GPs.
Ul ima ely, companies in he ma e ials and echnology
ha dwa e sec o s equi ing inancing du ing a shock should
a ge sou ces o he han PE o accep inc eased p emiums.
Iden i ying shocks ea ly and ac ing as e han compe i-
o s in indus y-d i en in es men s can help GPs gain an
edge. Compa ing he decline in EBITDA-mul iples o educ-
ions in deal alues shows ha deal alue dec eases mo e
(−31% s. −11%), implying ha in es o s p e e smalle
ansac ions o diminish “clus e ing” isks.
This s udy has limi a ions. Fi s , only buy-side ansac-
ions we e analyzed, which limi s he insigh s ega ding
holis ic po olio adap a ions. Addi ionally, alua ions a he
indus y le el a e no ully e lec ed. Fu he mo e, only h ee
shocks a e included in he s udy, limi ing he gene al appli-
cabili y o he esul s. Addi ionally, he e a e no insigh s in o
he success o ailu e o indus y-based in es men s a egies
due o a lack o da a.
Conclusion
PE in es ing is sensi i e o shocks; howe e , esea ch mainly
consis s o anecdo al e idence. We analyze PE ansac ions
du ing h ee shocks and iden i y ene gy, banks, insu ance,
and li e science as sec o s ha cons an ly inc ease hei sha e
du ing shocks, implying ha in es o s iew hem as sa e
ha bo s. In con as , ma e ials and echnology ha dwa e con-
sis en ly educed hei sha e. Ou conclusions a e as ollows:
Shocks c ea e oppo uni ies o GPs, pa icula ly hose
specializing in ma e ials and echnology ha dwa e. Sho -
e m exi s diminish, bu so does compe i ion. The abili y
o iden i y in es men s and o ac swi ly is key. Capi al-
izing on hese oppo uni ies equi es GPs o e-con igu e