Specialist Articles
September 2, 2020

Investing in buyout funds

Nicolas Cole

A recent Bloomberg Law analysis shows that despite the financial difficulties generated by the Covid-19 crisis, private equity  buyout volumes remain solid. In the US alone, there are $101.3bn in proposed, pending, and completed private equity buyouts this year, a 15% rise from 2019.

For those who have not previously invested in private equity, there are some important considerations to bear in mind:

Role in portfolio

Data from at least the last three decades shows that private equity has provided investors with the highest risk-adjusted returns as an asset class. Private equity offered the highest annualized returns among the major asset classes while exhibiting less volatility than listed equities, even when desmoothing private equity returns, according to Henry H. McVey, Head of Global and Macro Asset Allocation at KKR & Co.

Buyout as a private equity investment strategy

Large cap buyout funds offer new private market investors a vehicle to access the benefit of strong underlying assets stewarded by effective, experienced managers. The investment strategy targets the technology sector, which has generated the strongest returns for investors between 2010 and 2018.

Existing investors in the asset class may want to consider if they are sufficiently diversified, both across the different fund types (from buyout to private debt and real assets) and in terms of the underlying assets. Accessing the full range of opportunities afforded by private equity requires diversification even within the asset class.

For more information and source material for the above, please see details here

Nicolas Cole

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