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Alternative Market Briefing

Private equity will continue to perform well, but manager selection is critical

Wednesday, June 12, 2019

Bailey McCann, Opalesque New York:

Despite a growing pile of dry powder, delegates at the recent Opalesque North America PE/VC Roundtable suggest that private equity will continue to outperform. Demand for private capital remains strong, they say, and the asset class is still uncorrelated to the broad market.

"How do you get to a seven or eight percent actuarial assumption in a low yield environment, with an expensive stock market? The answer for many institutions is to increase their target allocations to private assets," said Christopher Zook, Chairman and Chief Investment Officer at CAZ Investments. "Therefore, if institutions are going to continue to allocate more capital to the private market because they don't have any other realistic choice, that is going to drive assets under management growth for the entire industry. It is going to go to private equity, private real estate, private credit, etc., and we want to own the firms that are going to benefit from that systematic growth."

Zook says that private equity is still maturing as an asset class and there is a long runway for investments in GPs and funds. He adds that as more companies choose to stay private for longer, it follows that investors will continue to support private equity in order to get exposure to those companies.

The key, delegates say, is focusing on manager selection. With a robust fundraising environment, it is more important than ever before to identify managers that are going to re......................

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