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Institutional allocation to private equity

A maturing industry calls for a differentiated approach

May 5, 2021

Becoming a public company is less desirable than before and private companies are staying private for longer.

We acknowledge that the private equity industry has over time matured with fewer opportunities to grasp low hanging fruit. Average buyout returns have steadily declined over the past three decades.

This calls for a differentiated approach to identify those that are able to outperform their peers. In this paper, we outline several key considerations we believe are vital in managing a successful private equity investment programme:

  • A diverse line-up of a small number of high-conviction bets to avoid the peril of over-diversification
  • Understand key megatrends and how they shape sectoral exposure
  • Exploit both extrinsic and intrinsic drivers to achieve alignment of interest
  • Leverage the size of commitments to seek better terms wherever feasible
  • Sustainable investment considerations are embedded in the investment process and decision-making
  • A well thought out and executed co-investment solution complementary to primary fund investments
  • A commitment to innovation
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