Private equity investors and managers are attempting to position their portfolios for a period of lower returns in some sectors and of global economic uncertainty without quantitative easing, if the lively discussions at The Pension Bridge's The Private Equity Exclusive conference in Chicago on July 21-22 are any indication.
Some investors are looking to get in on the ground floor with new emerging private equity managers, many of which have spun out of larger firms. Other investors are looking for returns in emerging and frontier markets, while still others are reconsidering venture capital, mezzanine and other debt strategies. At the same time, some larger asset owners are continuing their push to invest more money with fewer firms. Meanwhile, private equity managers are keeping an eye on pending regulations and the mountain of unspent capital commitments, the so-called “dry powder” needed to invest or return by the end of their funds' investment periods.
Some investors are looking at smaller firms. Among them is the State of Wisconsin Investment Board, which oversees $104.1 billion in assets including $94.6 billion of the Wisconsin Retirement System, said John A. Drake, senior investment officer, private equity, speaking on the panel “Pension Plan LP Perspectives.”
“I believe in being very selective,” Mr. Drake said. “Our peers have done large strategic accounts. We have been going down market.” SWIB is shifting from the megafunds, and now is considering funds of $500 million to $1 billion, he said.
“We like the alignment of interests down there,” Mr. Drake said. SWIB has also been active investing on the private equity secondary market, he added.