Capital Allocators – Inside the Institutional Investment Industry WTT: Private Equity Investing in 2030
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Apr 2, 2025 The discussion dives into the evolving landscape of private equity investing since 2021. It highlights the liquidity challenges confronting allocators, prompting a reevaluation of investment beliefs. The conversation emphasizes the importance of adapting strategies to align portfolio durations with the ever-changing market dynamics. Tune in for insights on refining approaches in a challenging economic environment.
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The Tide Has Turned
- Private equity thrived for nearly two decades due to low rates and revenue growth.
- Since 2021, market conditions have shifted, revealing weaknesses in the traditional investment approach.
Traditional Playbook
- Allocators historically used a bottom-up approach, selecting managers based on their beliefs about outperforming strategies.
- This approach relied on predictable market conditions and involved reinvesting with successful managers to maintain portfolio allocations.
Liquidity Challenges
- Increased commitments before 2021 revealed flaws in the traditional playbook, particularly regarding liquidity.
- Distributions have remained stable, but the invested amount has tripled in 10 years, reducing distribution yield and creating liquidity issues.