Thomson Reuters
A pumpjack drills for oil in the Monterey Shale
Private equity investors, with tons of capital to invest and frustrated by a lack opportunity to deploy it, are starting to look forward to a recession and the opportunities it might create - especially in the energy sector.
Credit Suisse analysts met with industry executives including KKR chief executive Henry Kravis and Oaktree Capital founder Howard Marks and reported back to the market with a note Friday.
"The companies were more positive across credit - as they are finding more distressed opportunities in which to invest as the US could be near the end of a six year credit cycle," analyst Craig Siegenthaler wrote.
"However, with the risk of a US recession raised in '16/'17, the teams are still highly selective in deploying capital - but were more excited about where the market could be heading (especially in energy)."
Oaktree's Marks has already said "we're getting closer" to distress in the market. His firm has raised billions of dollars it is waiting to put to use buying up cheap debt, and its earnings could get a boost once the private equity firm starts putting more money to work.
Marks previously said he's waiting on a downturn but that volatility last quarter is a "harbinger" of things to come.
He's not the only one. Blackstone chief operating officer Tony James - who was not mentioned in the Credit Suisse note - said earlier this week at an industry event that he would not be surprised to see a recession by 2017.
"Consensus from the meetings was that [2016 and 2017] is shaping up to be an attractive time to invest in energy," the note said.