Tariffs Effect On CVC

CVC, one of the leaders in private equity asset management in Europe and globally lost around 35 % of its market capitalization from its December 2, 2024 peak before its market capitalization recovering a bit in the last few days of trading.

CVC's assets under management are 200 billion EURs. CVC's main asset base is private equity investment management where around 115 billion EURs of CVC's total assets under management are invested.

Since private equity is essentially leveraged equity investing where firms put down 30-40 % of equity, the rest is borrowed via high-yield bonds and bank debt, CVC 's stock sold off on the expectations that Donald Trump presidential administration's could cause a US and by extension a global economic recession. Thus CVC's various firms under management could start loosing money, their value will decline and since CVC has invested its assets in these firms in a leveraged way, CVC's investments value and by extension CVC's value will fall by a lot.

Basically, the market overreacted in CVC and other private equity firms' case, according to Wolfteam Ltd.'s projections and estimates.

First, CVC invests its assets under management in mature, net profit, positive cash flow making large firms predominantly. Second those are private, not liquid investments. Based on these two premises CVC's investment will not loose a lot of value in the case of even a mild recession. The cushion of profits CVC's firms under management have will provide value saving opportunities. The firms value in CVC's portfolios will bounce quickly back once equity markets start rising in value again.

And since CVC's investments are equity leveraged in value, when the stock markets recover CVC stands to unlock tens of billions of EURs in market value, in Wolfteam Ltd.'s view.

In addition 16 billion EURs of CVC's assets under management are in private credit. If there is a recession, mid-market firms which borrow at interest rates of 7 % to 12 % will again turn to alternative asset management firms like CVC for borrowing. And thus CVC will further gain market share, displacing further corporate and investment banks in lending opportunities.

This will further enhance CVC's value.