Outlook and Opportunities of Private Markets

17th January 2020 – CAMRADATA has published a new whitepaper entitled, Outlook and Opportunities, which looks at the growing appetite for Private Markets and shares insight from investment managers and pension managers who attended a recent Private Markets roundtable.

The roundtable participants included Edmond de Rothschild, Muzinich & Co. Limited, BAE Systems Pension Funds Investment Management (BAPFIM), Buck, Mercer and PwC.

The roundtable guests highlighted that appetite is not the only thing growing in private markets; the timeline along which funds plan their capital commitments is expanding too and the stockpiles of dry powder mean demand for private markets will only grow.

With the wealth of divergent strategies available to investors, they can now reallocate within their alternative portfolios too but what is key in these markets is experience, investment insight and access. That said, arguably alternative investments can come with challenges.

CAMRADATA’s roundtable considered many of the questions investors have around private market strategies, including if the illiquid nature of these strategies can be overcome and are their fees pitched at a level that are too high for the institutional investor, as well as looking at the risks and opportunities.

Sean Thompson, Managing Director, CAMRADATA said, “There is a growing trend for pension funds and for insurers to turn to various forms of private lending in search of yield. Our panel agreed there is a strategic place for private lending in institutional portfolios, although this space has become more crowded, good opportunities remain for structural reasons.

“One structural reason is Europe’s transition to a low-carbon economy, which offers opportunities for infrastructure debt not only in new energy generation, storage and supply; but also transport and communications. Another reason is the increasing replacement of banks by long-term institutional investors in corporate finance.”

“The CAMRADATA panel explored not only why private debt is attractive but how to select suitable managers, which are the most rewarding sectors and how to monitor these choices, including the ongoing risks, making this new whitepaper a must read for investors in this asset class.”

Key takeaway points were:

  • The appeal of private debt should aggregate economic growth in Europe. The panel said if growth remains so-so, then debt is a good place to be because investors are getting the reliable income streams.
  • Diversification is key. In contrast to investing in publicly traded securities, private debt portfolios are ‘lumpy’.
  • The panel highlighted that while people often talk about an illiquidity premium for private markets, some prefer to describe it as a complexity premium.
  • Managers are paid to undertake a huge amount of credit analysis, due diligence and structuring of the underlying debt instruments in order to understand would-be borrowers thoroughly.
  • The panel discussed two distinctive forms of merit: how much pension funds and insurers ought to be allocating to private debt relative to other private markets; and how individual houses could prove their worth as managers of third-party money.
  • Several participants in the CAMRADATA panel mentioned the importance of experience in managing private forms of debt.
  • The CAMRADATA roundtable finished by discussing ESG elements in private markets. ESG means different things to different people but the panel noted that at least there is an increasing amount of data now available on which to make decisions.

Sean Thompson, Managing Director, CAMRADATA concluded, “Whilst protecting and growing a client’s assets will always be the primary responsibility of private markets managers, the infrastructure and tools to assist with this process are also developing at breakneck speed; thus firms have to scale their businesses to stay competitive whilst maintaining their fundraising efforts. Investors interested in this sector will value the insight shared at our roundtable and we’d encourage them to download this free resource.”

To read the Private Markets whitepaper, click here

For more information on CAMRADATA visit www.camradata.com

Media enquiries:

Kathryn Hughes, Kayak PR

Tel: 07801 823 839

Email: Kathryn@kayakpr.co.uk

About CAMRADATA

We provide institutional investors, including pension funds, insurance companies and consultants, with data and analysis to assess research and report on their investments. We are committed to fostering and nurturing strong, productive relationships across the institutional investment sector and are continually innovating new solutions to meet the industry’s complex needs.

We enable institutional investors including pension funds, insurance companies and consultants, to conduct rigorous, evidence-based assessments of more than 5,000 investment products offered by over 700 asset managers.

Additionally, our software solutions enable insurance companies to produce consistent accounting, regulatory and audit-ready reports.