Funds Europe – Finally, what is your outlook for private assets over the next couple of years?
Allright – We’re definitely going to see growth, but the dispersion of returns is going to be much higher because of the changing rate environment. People are going to need to be more discerning around the types of investments they have. Private credit and lending is here to stay and is very strong in Europe. We see huge growth in our client base in just that strategy alone.
On technology, this industry is still very inefficiently run. As we build new technology solutions to support everything from onboarding of an investor to monitoring and administration, it will create even better growth opportunities in the market.
Tidswell-Norrish – It may be wise to prepare for a downturn in 2023. After 14 years of printing, it’s going to be an interesting period. The effects of interest rate hikes and inflation are going to be profound, and it’s going to be particularly painful for consumers. It’ll have a bigger impact on monthly expenses, but also for those companies that are not in strong cash positions, are not profitable and are highly levered.
It’s a really good time to be putting money to work in private markets, particularly those who understand the value of entry price and of valuation, and particularly those who are specialised and truly understand the industry they’re investing in.
For those that can take advantage of the downturn and pretty dramatic decreases in tech valuations, it’s going to be an exciting time – just pick your partners wisely.
Degosciu – In the short term we will see some very significant macro events. We will be surprised about what can happen from monetary policy. Everything is unbalanced. But when this is over, I am very optimistic for private markets because it’s the only way to get an inflation hedge in your portfolio from an economic perspective. You are buying market leaders that have a niche position, and if they are not able to pass on higher prices, then nobody else can.
Pesch – In the current context, due diligence processes led by the GPs concerning potential new portfolio companies will be more selective and will mainly focus on quality assets and resilient ones. These target companies will also be required to manage their costs, analyse the way they work or process information, and secure supply chains and logistics. GPs are proactive, they look at solutions, and that’s what we love in our sector.
They are real specialists, who can create the value add. The pension funds are a core target in the next years, including the national and public ones, in order for all retirees to also get some exposure to private assets.
I would be very happy then to see the evolution from ‘democratisation’ of private assets into ‘retailisation’ once we are ready and everything is well prepared as it should be.
Nicoll – Given we are in a credit cycle, and the interest rate cycle hasn’t finished, history shows that people pull back to duller assets. So, although great opportunities will turn up over the next couple of years, the chance of getting lots of new investors will be quite difficult. But for the actual structure of the private assets and private equity markets, there are some good long-term tailwinds.
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