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New firm leads in emerging liquid private equity alternatives space

Monday, January 10, 2022
Opalesque Industry Update, for New Managers - PEO Partners, LLC, a private equity liquid alternatives firm, has achieved a significant milestone of eight months of management of the PEO Private Equity Access Master Fund, its flagship fund launched in May 2021, and is experiencing strong momentum in growth of AUM.

Founded by Jean-Louis Lelogeais, co-Founder of Strategic Value Partners, LLC, a leading distressed investment firm, and Randolph Cohen, Senior Lecturer at Harvard Business School, PEO has pioneered a proprietary investment strategy to provide a broad spectrum of investors access to returns comparable to traditional private equity (PE) funds net of fees through public market investing.

PEO Partners' strategy selects Russell 3000 public equities that mirror the industries that traditional leveraged buyout firms invest in and the company characteristics that these LBO firms target, namely high profitability, high payout ratio, and low multiples. It also involves a hedging strategy using S&P put options that seeks to reduce downside volatility and protect capital during significant market downturns.

"Private Equity is arguably the best-performing asset class; it has delivered better average net returns than public equities with a much lower downside," said Mr. Lelogeais. "The strategy we have developed can achieve similar performance to median PE through public market investing and has the significant advantage of being liquid. We are very excited to be first to market in the U.S. and to be able to offer this strategy to a wide range of investors without the traditionally high barriers to entry of PE."

"PEO fills a gap that exists for many investors looking to add private equity-like return exposure to their portfolio," Mr. Cohen added. "Importantly, PEO is not looking to replace PE; rather, for large institutional investors with established PE investment programs, our strategy provides an additional portfolio management tool. Liquid PE can help them handle their uncalled capital and make it easier for them to improve their "batting average" in selecting top quartile funds by being patient and passing on marginal re-ups. We believe the many other use cases for liquid private equity are so compelling that this nascent asset class has the potential to grow to over $1 trillion in the next ten years."

The PEO team of seven brings together experienced professionals with highly complementary skillsets across investment management and academia. It is supported by an Advisory Board, a Research Council, and Special Advisors consisting of prominent investment professionals. It is also working with Gladius Capital Management, a leading provider of derivatives solutions and alternative funds for institutional investors, who is acting as sub-advisor.

PEO is also a non-discretionary sub-advisor to Mackenzie Investments, a Canadian asset manager with over CAD $200 billion (US$158bn) in assets, for the Private Equity Replication mutual fund launched in December 2020 with CAD $15 million.

Press release

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