Why consider investing in private equity (PE) now?
MB: We believe private equity to be a very exciting asset class to invest in, especially in current times. For a start, PE has been growing steadily for years, providing on average higher returns than other asset classes1 in the long term, and rewarding investors with an illiquidity premium for their long-term commitment. Over the past years we’ve witnessed a very strong fundraising environment of more than USD 600 billion p.a.,2 with an equally strong investor demand.
Further, diversification is another benefit of PE, which not only can improve returns but also decrease volatility. Market volatility and uncertain economic scenarios usually pave the way for investors to enter this asset class, as well as favor higher returns. This has been the case historically (see Figure 1; these are vintage years since inception returns; vintage years younger than 2020 are not yet meaningful), as volatile vintage years marked by economic uncertainty represented entry points to PE, along with strong relative returns. We saw this both during the dot-com bubble in 2000 and the GFC some years later, where PE opportunistically took advantage of cheaper entry-level valuations.
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