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Trends and Opportunities in Private Capital – Saranac Partners event

In December, Saranac Partners was pleased to welcome partners, professional advisers and counterparties to Aquavit, St. James’s, for a roundtable discussion on the trends and opportunities available in private markets. Hosted by Robert Crowter-Jones, Saranac Partners’ Head of Private Capital, the discussion centred on the following:

The growth of private markets

  • The size of private markets is at an all-time high, having grown to in excess of $5tn of assets, including $1.6tn of LBO assets and $600bn of venture capital.

Private clients’ interest in private capital exposure

  • This growth has been partly driven by an increasing demand from individuals and families to increase their exposure to private capital, despite the increasing amount of ‘dry powder’ in the market.
  • Families now tend to allocate 10-30% of their total assets into private capital investments, with debt/equity exposure via funds and direct investments growing year-on-year.
  • An interesting reason for this demand is that, given the quantity of new wealth generation that now originates from entrepreneurial activity, clients tend to have a great affinity for investing in other private enterprises, and enjoy taking a more active role in the growth of their capital.
  • Other factors, such as historically large returns and large distributions from ‘07/’08 vintages, have also played a role.

Recent developments and opportunities

  • Families and individuals have historically invested in private capital through funds but have more recently begun to do so via co-investment deals with fund managers, asset-by-asset deals. Indeed, many families have become more comfortable with idiosyncratic risk, as demonstrated by the fact that many have been investing directly into businesses without a PE sponsor alongside them.
  • The rise in GP-led secondary transactions has increased access to liquidity in the asset class and private equity investors are able to gain liquidity earlier in the life cycle of the fund investments. Analyzing the value to the investor can be challenging and professional advisors will play a key role in assessing secondary offers provided via the GP.
  • Private debt has grown fast, emerging as a key component of clients’ portfolios with significant deployment in both senior and mezzanine debt across Europe expanding a more established private debt market in the US.