This article is based on Bailey McCann’s interview with Antoine Drean titled ‘Insiders View: Investors & GPs On The Hunt For Quality” and published by Opalesque Private Equity Strategies.
In 1992 Antoine Drean founded Triago, one of the first private equity placement agents. Palico, another venture by Drean, is the first regulated on-line market place for private equity investments. The two companies provide PE advisory and placement services. Here are key takeaways from the interview.
State of the private equity market
The PE market is slowly recovering but the recovery is scattered. For example it is more pronounced in the US, where credit is available, but this is not the case with the Eurozone. “In Europe, the crisis is definitely not over and it is hard to see when the investment comes back, there are significant structural issues at play there.”
Drean brushes off U.S. “inflation” doomsayers, saying he didn’t view it as a threat. On the contrary he thinks of areas such as infrastructure, private debt and real assets as being “in fashion” right now because the risk/return profile is desirable.
However, Asia is also on the mend and opportunities are presenting themselves in China, as well as its satellite countries. But with over 1,000 GPS in China, “there are a very small number of horses to bet on.”
On the whole, however, 2013 is proving to be a surprisingly good year for PE fundraising, and that 2014 could also prove to be good, provided fund managers really deliver the goods that LPs are looking for.
And what’s that?
LPs (i.e. Limited Partners, or the investors) are now becoming choosy and careful, wanting to entrust funds to capable teams that can deliver performance in a dramatically changed financial environment. In fact you could see the “less disciplined GPs looking to put money to work at any price,” says Drean.
Encouragingly, LPs are becoming more aggressive with investible funds but tend to look for value vehicles such as niche funds, sector specific funds or region-specific (e.g. Asia) funds.
Drean: “Private equity still has the possibility of being a double digit return asset class, which you won’t necessarily find in other parts of the market.”