We discuss Financial Times "Is private equity worth it?" from the industry professional's perspective and provide additional data points: ➡ Despite higher interest rates suggesting the end of the private equity golden era, AQR Capital Management research indicates that private equity might still offer better prospects compared to public markets, especially in light of recent poor performances of traditional 60/40 portfolios. ➡ Hamilton Lane report confirms this view and shows that private equity have outperformed public markets even after fees ➡ Private markets performance measurement and the use of benchmarks. There are two quite distinct goals and methodologies. One serves as the manager selection tool and the other helps with asset allocation decisions between public and private markets. ➡ The choice of S&P 500 as a public markets benchmark is not ideal due to large company size and high concentration in contrast to smaller company size and highly fragmented private equity market. And yet it makes sense as it has been the best performing US public markets index for the past 5-15 years. Outperform S&P 500 = outperform any other US index (broadly speaking). ➡ We discuss how private markets have changed over the years and why "Barbarians at the Gate" narrative does not apply these days. ➡ The fees conundrum and how investing in private markets does not necessary mean less transparency and governance. Global Pension Transparency Benchmark 2023 showed that large institutional investors, such as CPP Investments | Investissements RPC and AustralianSuper, with high allocations in private markets, ranked in top 3 in terms of transparency and top 1 in terms of governance. ➡ Robust processes and experienced in house teams is of the essence when setting up private markets strategy. Both in front and back offices. Need help on the set-up? Digipeak Group is here to help - feel free to message us! ➡ Norges Bank Investment Management stands at stark contrast amongst its peers with no allocation to private equity. Some of the largest SWFs have been investing in alternatives for a while now and have built 22% - 65% allocations to this asset class. We argue that it is as opportune time as any to be a large at scale investor in private markets with more meaningful data points to evaluate GPs, more reasonably priced investment opportunities and no prior portfolio to deal with. Happy reading and making your own conclusions! #finance #privatecapital #privatemarkets #assetmanagement #institutionalinvestors #investing
Industry Professional's Perspective: "Is private equity worth it?" https://lnkd.in/eSC7vRxp