We have always been big supporters of emerging managers, which is harder to get right, but we are trying to find the next fund which will outperform. That has worked well for our clients.


A sector focus is something we have been proponents of for a decade. We collect operating metric data from our managers at the portfolio company level. That has been telling us for a long time that sector-focused managers tend to outperform their generalist counterparts.


That is not to say we do not support larger or generalist manag- ers, but this is what we have been focusing on. Could I challenge the concept of illiquidity? I work with schemes which are on their de-risking path where private equity and venture capital play an important role as the growth engine. Once you have a mature portfolio, it can be a strong cash-cow.


I work with schemes which are rationalising their portfolio but in a way that will continue to generate liquidity. Private mar- kets – private equity and venture capital, in particular – can still play a role even as schemes are de-risking.


What returns are you seeing? Aylott: The dispersion of returns is greatest at the early venture stage. If you get it right, those returns can be strong. Our clients expect to earn mid- to upper-teen internal rates of return on a portfolio level. There is a blend of returns driving that, so you would expect a higher return from your venture portfolio than from your buyout managers, who are generally targeting a two-times return on a fund level. Joanne Job: Private markets are broad: infrastructure, for exam- ple, is not just one asset class. You have core and core-plus strategies, which are fairly conservative with lower returns. Then you have high octane strategies. So, it depends on what level of risk you are comfortable taking. Anish Butani: There has been a surge of activity in private mar- kets amongst our clients. There are those starting out and those coming back for their third or fourth helping of the asset class. More work is required to help them understand where the gaps are in their portfolio and to fine-tune the mandate. Some investors are looking to integrate climate sensitivity or ESG within infrastructure, private equity, private debt and real estate. Then there are those creating a dedicated sleeve for it. We are all on a journey as far as ESG is concerned. It is clear that one size does not fit all. Different investors have different beliefs. Being “ESG sensitive” and “impact oriented” are differ- ent concepts though these terms can be used interchangeably. We spend a lot of time understanding investors’ beliefs before the implementation process begins.


Being carbon sensitive underpins the E in ESG. What about the S and the G? There is a realisation that private market


10 May 2022 portfolio institutional roundtable: Private markets


assets have an important role to play in societies, so what broader footprint beyond carbon should these assets have in terms of local engagement with key stakeholders?


Picking up on the illiquidity issue, how big a problem is it? Dobson: Private markets are as liquid as they have ever been. Once you have a mature and diversified portfolio, distributions will come off the backend to fund your drawdowns. Looking at it on a fund basis, whatever you make of general partners using subscription lines it gives the capital call pro- cess more visibility. You know when they are coming up. On the flipside, pricing in the secondary market for blue chips is tight. You can liquidate mature private market portfolios fairly easily. So, it is not as illiquid as people might think and you are still being rewarded for that illiquidity in the returns you are gener- ating above public market assets. You are also accessing assets you cannot access through the public markets. Butani: Canadian and Australian schemes are fairly mature investors in alternative asset classes. Some are 40% to 50%


The perception with defined contribution schemes is that you need daily liquidity. You don’t.


Roger Mattingly, Ross Trustees


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36