What is Private Equity?
Private equity investments (typically accessed through a limited partnership) take an ownership position in companies or securities that typically are not listed on a public stock exchange. The goal is to add value by providing capital to help new businesses grow and by restructuring existing businesses with operational inefficiencies that offer the potential to generate significant long-term gains.
A solid track record
ASW private equity team has developed a robust network of partners globally, and take pride in our ability to spot private equity opportunities many other firms may miss
With a strong focus on financial research and analysis before execution we take the time and effort to make sure our clients are being placed in the most suitable areas for their risk appetite.
PRIVATE EQUITY INVESTING
Specialists since 1989
USD Million assets under
Private equity focus
ASWs expertise spans a wide range of private equity investments, including primary and secondary funds, as well as co-investments.
Our private equity team screens roughly 350 investment opportunities per year (including funds and co-investments), ensuring only the most appropriate options are selected for tour client solutions.
ASW can offer our clients an enhanced level of deal transparency, as well as preferential access to secondary investments and a strong position for co-investments.
Private equity: specialising and accepting longer terms
Private equity has earned high returns for investors in the past, yet there is scepticism about whether this can continue. Managers acknowledge that competition for assets is intense, increasing entry prices and reducing potential returns. Some are reacting by specialising more and investing for longer periods of time in new evergreen structures. “Over the next five years, we will see larger pools of capital being directed in much more focussed efforts,” says Jeremy Brooks of our private equity desk. “Our firm has set up a fund within a fund to target deals as low as $50 million—which is lower than our traditional minimum size. We are seeking businesses growing at 50% plus per year. About half are in technology. More and more interesting deals fit the model.
Once invested, we take a ‘Navy SEAL/ SWAT team’ approach to improving the operating model.” Several private equity managers are establishing funds like this that employ specialist teams to zero in on a particular sector, using their expertise to ensure operational excellence and accelerate growth.
Longer-term funds suit more patient investors, such as sovereign wealth investors or family offices. We think funds with terms of ten years or longer, or even evergreen, versus the typical term of six to eight years, are likely to become more popular. Because the risk profile is lower, return targets are also diminished for these funds, in the region of 10% to 15% internal rates of return (IRR) a year, compared with 20% to 25% IRR a year for funds with typical terms. But fees are lower, too.
There have already been several evolutions of private equity as an asset class. In the first, from the time the first private equity firms were established in 1946 to shortly before the financial crisis of 2008, financial leverage was the main driver of returns. At about the time of the financial crisis, operational excellence also became a driver, and more recently, multiple arbitrage, in which more than one arbitrage style is employed without achieving operational excellence, has been driving returns. Going forwards, accelerating growth through both organic and more aggressive, inorganic ‘buy and build’ strategies may become more important. Already, private equity firms are investing in businesses at earlier stages in their lives and remaining invested longer, squeezing out more returns. We’ve seen instances in which private equity funds have invested in a business, improved the stability of earnings and then sold it on to a later-stage, infrastructure-type fund looking to harvest sustainable returns over many years. This is a sign of things to come.
ASW are well positioned to offer our clients access to various private equity opportunities. Please speak with your advisor for more information
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