Private assets’ role in a diversified portfolio

Private assets are an increasingly important source of returns and diversification. Shaniel Ramjee, senior investment manager, Multi Asset, takes us through the opportunities private markets offer, as well as the risks they pose.

Q: Why private equity?

A: There are many reasons why companies might choose to remain private. They might be family owned, or not want to be subject to the administrative burden of public listing, or to the short-termism imposed by quarterly reporting. Typically they are in a different part of their lifecycle – usually at an earlier stage – from publicly-traded firms. They might have just found their niche in the world of business and are starting to grow. It’s at a stage where a lot of exciting things happen to some of these companies. And where a bulk of their returns is often generated. So for investors to be able to access investments at this stage is particularly interesting.

Q: Does it make any difference being a Europe-based private equity investor?

A: Europe has a long history of private companies, many of which have been in existence for decades and controlled by a founding family. But we see with increasing frequency in these companies that younger generations are less involved in the business, or indeed, a first round of professional managers have stepped into the business hoping to expand or grow it. Private equity can be one of the ways in which they do that without relinquishing family control. Private debt becomes important here too – historically, these companies were much more dependent on bank loans, but these can be relatively inflexible compared to contracts that can be struck with private lenders.

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