Trends in private equity 

One of the biggest challenges right now is fundraising, as general partners (GPs) across the board are finding it challenging to raise capital. There are a number of reasons driving this, including the denominator effect, where some limited partners (LPs) have had to scale back private markets allocations to balance out their portfolios following a reduction in public market valuations in recent years.

However, this presents an opportunity, as LPs now have the opportunity to invest with managers that historically were hard to access. The key here is to have an adviser that has strong relationships with the best performing GPs. Having been advising and investing in this space for a long time, we have been fortunate enough to develop long-term relationships with some of the best GPs globally.

There is also some uncertainty around the economic climate. However, having invested in private markets myself since the nineties, I believe investors should not put off investing because of the macro environment. The GPs with the strongest track records have shown that market uncertainty can lead to opportunities, and the best-in-class managers should be able to generate strong returns during these periods. 

We provide clients with access to who we believe are the best private equity fund managers in the world. We have developed relationships over decades and know these managers in-depth. Our clients are looking to us to recommend managers, perform our due diligence, and to ultimately secure access on their behalf.

Some clients, concerned about economic uncertainty, are asking us if this is the right time to be investing in private markets. What we want to convey is that some of the best returns can be made when the economic outlook is unclear. This is where our connections and relationships come in. Again, having access to the managers who have been top performers is crucial to success.  

The potential to generate strong returns has not changed. By investing with private equity managers, clients can get exposure to companies they wouldn’t be able to access through the public markets or as private investors. Managers have the skills and ability to add real value and transform companies, and LPs have the opportunity to benefit from it.

There is certainly a trend, particularly within Europe, of private equity becoming more ESG-focused. In some markets, we are seeing greater consideration being taken of an investment’s impact on the environment, or its Diversity, Equity and Inclusion (DEI)  attributes. This has been slow to evolve but we have been seeing it gaining pace in recent years.

I have been working in financial services for a long time, and in private markets since 1997. It used to be the case that I was the only female in the room – but I am seeing more women now getting into private markets. Despite this progress at a junior level, real diversity is lacking at more senior levels. This suggests a retention problem. Firms may hire women but struggle to keep them, and this means an entire generation hasn’t progressed through yet.

There was, and to an extent still is, great difficulty in being female in this industry. When I talk to my younger female colleagues, they can’t recognise some of the comments I’ve had to deal with. This is because there has been progress and, sitting here as a ‘woman of influence’, I am excited to be at Mercer where there are many senior female figures. This is quite unique in the industry. 

There is still a long way to go, however. The financial services industry is still behind regarding DEI, with the situation even worse in private markets. Do I expect it will be fully equal in my lifetime? No.

Change is happening but the issue of retention remains. Firms should work harder to retain their best women. For instance, how can we give women a route back into work after maternity leave? What else can be done to help encourage the sharing of childcare? Importantly, this extends beyond gender to all areas of DEI. Mercer is ahead of the curve, but the industry is not there yet. It is on the right track – it just needs to keep going and accelerate.

I am proud of my recent achievement and flattered to be put forward by my peers, but it would be nice if it was just a private equity award. One day I hope we don’t need to have a separate list for women, or other minorities in the industry. 

Rhonda was recognised as a Woman of Influence in Private Markets, an annual list by financial publisher PEI Group to highlight women demonstrating excellence in private funds.

If you would like to speak to Rhonda or another of our private markets specialists, contact us on the form below.