Private equity opportunities still exist for those carrying higher pedigree and experience, notes Bailey McCann of Private Equity Strategies.
Bailey McCann recently spoke to Chris Hastings, Principal at Berchwood Partners and Augustine Gus Long, Partner at Stanwich Advisors.
Value Partners Asia ex-Japan Equity Fund has delivered a 60.7% return since its inception three years ago. In comparison, the MSCI All Counties Asia (ex-Japan) index has returned just 34% over the same period. The fund, which targets what it calls the best-in-class companies in "growth-like" areas of the market, such as information technology and Read More
Opportunities for those having global outlook
Bailey capsulates his discussion with the two key private equity deal makers by highlighting the several opportunities still exist for LPs looking at all parts of the globe.
They also feel for first time funds, pedigree is key as GPs having several years of experience in varied facets of private equity can easily raise a fund.
PE market is healthy now
Long feels, unlike 2005-06 when there were plenty of demand and capital, currently the private equity market is experiencing healthier trend than witnessed during the downturn.
Long observes the private equity market is witnessing a flight to quality in several places, implying the market is attracted towards larger funds, as it is increasingly felt large size and brand name would involve lesser risk.
On the other hand, Hastings observes smaller funds having less than $2 billion size are facing hard times, though there is some interest in certain geographies, distressed, energy, real estate and turnarounds.
Flexible strategies for Latin America
Hastings feels emerging economies such as Latin America and Africa throw several opportunities as one can latch on to growing economies early on. However, he cautions the private equity players to have nuanced approach while addressing the countries’ needs.
For instance, historically, privately held companies in Latin America would prefer to permit private equity funds to have controlling stakes. Hence, funds having straightjacket approach would limit their universe of opportunities.
Long feels emerging markets would look for recycling capital into multiple funds. Considering labor intensive nature of diligence these opportunities, one time investment might prove difficult.
Strong secondary market in U.S. and EU
During his interaction with Bailey, Long notes increasing activity in secondary market is seen in developed markets such as the U.S. and EU. However, Long feels fresh vintage still hold opportunities for fund raising.
Thus Long concludes both fresh and secondary options should be considered in developed markets to build a well-diversified portfolio.
Long observes new standards like ILPA have gained more prominence than anticipated earlier. Hence, he suggests LPs can advantageously use ILPA guidelines to obtain some leverage on fund terms.
Both Long and Hastings feel private equity firms should demonstrate their core focus area of execution capabilities to raise more money. They point out that LPs having global outlook can benefit from several opportunities by taking a closer look at principals and terms while taking decisions.