Monday Market Minute | Apr 12, 2021

Third wave lockdowns test the resilience of private market portfolios

What Moved

Ontario declared a province-wide state of emergency as COVID-19's third wave overwhelmed hospital capacity. Stay-at-home orders returned, shuttering businesses that had only recently reopened. The timing was particularly disruptive — the lockdown arrived just as PE portfolio companies were rebuilding operational momentum and commercial real estate tenants were returning to offices. ICU admissions in Ontario reached pandemic highs, and other provinces tightened restrictions in anticipation of similar surges.

Why It Matters

Private market investors experienced a grim sense of déjà vu. Portfolio companies with exposure to in-person commerce faced another round of revenue disruption, albeit with better-prepared balance sheets than in 2020. The critical difference this time was that government support programs were winding down, meaning businesses had thinner safety nets. For commercial real estate funds, the lockdown reinforced the "work from anywhere" thesis and further delayed the return-to-office timeline that underpinned downtown valuations.

Signal to Watch

The pace of vaccine administration in the coming weeks would determine whether the third wave was a temporary setback or a prolonged drag on private market recoveries.

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