Global Private Market Investing in the Year to Come

As part of SS&C Intralinks’ Alternative Investments Global Virtual Summit 2021, I had the pleasure of sitting in the moderator’s chair for a panel titled "Global Private Market Investing: New Directions for GPs," a wide-ranging conversation between Dixon Doll, co-founder, DCM Ventures and general partner, ImpactVC; Nat Kellogg, managing partner and director of manager research at Marquette Associates; and Kevin Lawi, managing director, portfolio manager and head of origination at Credit Suisse Asset Management.

The panel discussed the strategies and sectors that are delivering competitive returns. I asked the panelists for their views on the latest trends in alternative allocations, private equity, venture capital and more.

The conversation kicked off with a look into performance expectations for the coming 12 months. Kevin cited widespread concern around valuations and equity returns. He explained that in many cases, rebalancing will be necessary and that moves into private credit might provide suitable alternatives.

Dixon noted that investors might consider putting money into breakthrough technologies, as the pandemic has accelerated innovation in many areas. He later added, “I think this is a fabulous time for venture [capital] because there's so much disruption that's happened across the economic cycle — and that leads to innovation.”

The future of allocations

According to SS&C Intralinks' 2022 LP Survey, 72 percent of investors plan to increase their allocation to alternatives. I asked the panelists whether they felt that the trend would continue in the new year. 

Nat’s perspective was that there’s still a lot of momentum in this area. “The fundraising timelines are getting shorter,” he explained. “People used to come back five years or four years; now it’s three or two. So I think there's a little bit of cyclicality with that … and my guess is next year will be a busy year as well.”

Kevin agreed, saying that, “...it's a trend and I do think it has long legs to go for the foreseeable future.”

The conversation also delved into expected movements in other areas of alternatives such as infrastructure and the private debt market over the next 12 months. Nat saw promise in Infrastructure. “I think there's clearly a demand and need for capital in the Infrastructure space,” he said. “We've been recommending allocation to that space. We've seen clients doing more.”

"What's also beneficial about private credit is we can invest in a lot of different types of markets," added Kevin."We saw this in COVID. We saw this in 2015, and in pockets of volatility in 2018. In a dislocated market, private credit can step in and price risk when the banks or the public markets are dislocated."

Beyond Infrastructure, Dixon highlighted advantages in impact investing."I look for it to be a very fertile area for quite some time to come. I don't see any reason to believe that all that venture [capital] is going to slow down. I think if anything, it picks up."

Potential headwinds

Even in the face of these market bright spots, the panelists also predicted some bumps in the road. They agreed that inflation, particularly, has been a regular topic of discussion in their respective circles.

"We’ve got a lot of folks who agree that inflation is a big risk out there," Kevin explained."We're not seeing it in earnings from our portfolio companies — but I'll caveat: yet."

Nat added, "For a long time, when somebody would bring [inflation] up at a client meeting, we would sort of say, ‘it's not really something to be thinking about or worried about.’ I think that's different now … it has to be a higher probability today than it was five years ago." 

Overall, however, the panelists didn’t express tremendous concern over inflation."I'm not really worried," said Dixon. “There will be some increases, but I don't think there's any reason to believe that they're going to be dramatic and problematic.”

My thanks to Dixon, Nat and Kevin for sharing their fascinating insights. To watch the entire discussion, click the play button below.