The status report

An update on private markets

On venture capital risk and returns

“If, as an LP, your private equity strategy is giving you 15% to 20% net, your hope would be that venture investments would be delivering north of that to reflect the higher risk. Yet in reality, many VC funds don’t meet their preferred return hurdle. The problem is that many investors believed in the promise of investing in companies that would reach $1bn valuations; but they failed to look at the maths of what that would do to a fund portfolio. If you’re taking a sub-5% stake of a company in a $100m Series A round, and the company does get to a billion, that’s a $50m outcome and it doesn’t move the needle on a fund. Add to that, high valuations and a lack of capital efficiency in many of the companies backed, and I think many LPs may find that their private equity outperforms their venture capital portfolio.”

Pamela Fung, Partner, Morgan Stanley Private Equity Solutions

On private versus public markets

“The whole idea of private markets no longer makes sense. The markets are evolving quickly and we’re seeing a blurring of public and private markets. In private debt, we are seeing the banks pull back and that will continue. We’ve seen that in direct lending, but it’s now happening in asset-based finance. All this means that the investable universe of public and private fixed income securities is growing dramatically, so the players who can only do private or public are not going to find it easy in that environment.”

David Hunt, President & CEO, PGIM

On GP platform expansion

“Many GPs are expanding into new strategies on the back of strong performance. These platforms make a lot of sense because they can bring, say, deep domain knowledge to different segments of the market and have economies of scale and synergies. As an LP, we must assess each strategy on a case-by-case basis. This ensures that the new strategy is additive and where their expertise is visible, that team incentives are appropriate, and that overall alignment remains intact, because it’s a very different proposition from a GP that is focused on single strategy.”

Sunil Mishra, Partner, Adams Street Partners

On the LP-GP relationship

“Many people don’t realise that a venture capital fund has a longer lifespan than most marriages in the US. You have to treat LP-GP relationships with that level of respect. There needs to be open communication about any issues and be transparent with valuations, how you’re arriving at them and what you’re comparing them with. GPs need to update LPs regularly and work through any problems together – they’re married for at least 10 years, after all.”

Ali Fancy, Partner, Cento Ventures

On four big trends in private markets to 2030

“Private markets in 2030 will look quite different, driven by four main trends. The first is that private markets will represent between 12% and 15% of client portfolios, up from 10% today, so from $13tn today to between $17tn and $20tn. The second is we think that infrastructure and private credit will be the fastest growers, increasing from 20% today to around 30% of private markets allocations. Third, a small set of very capable global asset managers, who can serve clients’ needs across their whole portfolios, will capture most of the growth in private markets. And fourth, the fog of private markets will continue to give way to transparency, consistency and standardisation as investment in data ramps up.”

Mark Wiedman, Head of the Global Client Business, BlackRock