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News from private market insiders

On building a portfolio for outperformance

“The portfolio I inherited in 2022 had, over the previous two years, made around 80% of private markets commitments to buyouts. The approach we are now taking is to invest as much capital in private markets as possible and, within privates, allocate disproportionately to private equity and, within that, disproportionately to venture capital and growth. Over the past two years, we’ve committed 60% to buyouts and 40% to growth and venture. It’s very important to diversify and concentrate on pockets where there is more return dispersion. To capture that alpha, you need to focus on manager selection and then pursue structural alpha by partnering outside the fund structure – in many cases, that means co-investing.”

Anton Orlich, Managing Investment Director, Private Equity, CalPERS

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“We do need the IPO market to re-open because it is important to the funding ecosystem. But I’ve seen a fundamental change over the past three years. In 2021, too many companies went to market too soon – they were too young, not well prepared for the scrutiny of public markets and were not of sufficient scale to attract the right type of investor. As a result, many entrepreneurs no longer see IPOs as an appealing outcome. Where previously, 90% of entrepreneurs saw an IPO as their ultimate goal, that’s now down to about a third. They are realising that private capital is a better product for a young company. Yet we need liquidity to make this work and so secondaries may well provide some of the answer here. In my 20 years of working in this industry, I’ve never seen such an imbalance between liquidity and stock – we need to find a way to sort through this.”

Gabriel Caillaux, Co-President and Head of EMEA, General Atlantic

“Too many managers tried to differentiate themselves by putting a lot of money to work in bigger deals. That’s not necessarily a service to your client. A lot of these managers are lending to the same companies as each other, creating overlaps in portfolios, especially at the larger end. As an LP, you need to make sure that if you are adding another manager that they are providing something differentiated and additive.”

Katie Koch, CEO, TCW Group

On LP private credit portfolios

On entrepreneurs’ attitudes to IPOs

On NAV lending

“It matters where distributions come from. Our aim is for people to invest in quality companies, enhance their cash flow, and benefit from multiple expansions when possible. Ultimately, we want them to successfully realise their investments. While NAV lending is not inherently problematic, it needs to be productive and timed appropriately within the fund's lifecycle. Additionally, it's important to recognise that the concept of GPs borrowing for their commitments may not resonate with everyone, but it opens new possibilities for strategic flexibility and growth.”

Fred Pollock, Chief Investment Officer, GCM Grosvenor

On the private equity reset

“The last 12 years was an anomaly. The problem is that if abnormal times last 12 years, it’s hard to remember what went before. Private equity is not a self-fulfilling asset class where all do well – there has been a lot of tailwind over the past 12 years that won’t be there in the coming years. That doesn’t mean it’s the end of private equity; it just means it needs to go back to the core of what the asset class is about. There will be divergence of GP performance, but that that makes our job of identifying the best managers more apparent.”

Michael Lindauer, CIO Private Equity, Allianz Capital Partners

On how to spot greenwashing

“One easy way to assess greenwashing is to get beyond the words and instead focus on concrete actions. My trick for doing this is asking the simple question: what is your next step? What’s the next concrete thing you are going to do? This makes concrete all the words that are spoken and put in slides. The next step will specify how far along they are really on their journey. But also how we best can support going forwards. We find this a great filter.”

Anna Skarborg, Head of Sustainability, PCapital Partners