Why invest in Private Markets
A significant share of the global economy is in private ownership. Rather than list on public exchanges, many private companies, or real estate and infrastructure assets, prefer to seek long-term investment capital from private markets investment funds in order to realize their growth potential.
Private markets fund managers typically take a majority stake in their investments, which they generally hold for 3-7 years. During the hold period, private markets managers aim to create value by following an active ownership model, aligning interests with management and other stakeholders, providing valuable strategic and operational input, and improving governance structures. The long investment period typically allows companies to better withstand periods of volatility.
Investors in private markets funds have in the past been rewarded with outperformance over public markets1. For this reason, many of the world's most sophisticated institutional investors have included allocations to private markets in their portfolios for decades.
In contrast to public market investing which tends to focus on potential future insights into a company, asset or market segment, private market fund managers actively work with management teams to try to increase the value of their investments and create returns.
Besides the potential for higher returns, an allocation to private markets typically helps to reduce overall portfolio volatility. In private markets, valuations tend to be much more a reflection of a company’s actual earnings and therefore are not as vulnerable to the extraneous ‘noise’ of investor opinion which can impact public market share prices.
Consequently, private markets investors can reduce portfolio volatility while at the same time increasing portfolio diversification through an investment in private markets.
The long investment periods and illiquid nature of private markets investing has meant that traditionally private markets funds have only been available to institutional investors. However, Partners Group has developed a range of private markets funds which also offer a certain amount of liquidity, providing investors with an attractive way to access private markets.
All investors should familiarise themselves with the risks and all of the product features in order to ensure they can bear the risks involved.
1 Outperformance relates to Partners Group’s Private Equity performance. Past performance is not indicative of future results. Performance based on quarterly time weighted returns of all Buyout investments made by Partners Group as of 31 December 2015 excluding disposals for non-investment related factors such as liquidity, in USD. Returns are net of calculated standard management and performance fees of Partners Group. Public benchmark figures from Bloomberg (NDDUWI Index). Private equity performance from Cambridge Associates one quarter end-to-end pooled returns of indirect private equity investments.