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A BNY Mellon report – “Split
Decisions: Institutional Investment
in Alternative Assets” found private
equity to be the most favoured
asset class among clients
PRIVATE EQUITY INFRASTRUCTURE REAL ESTATE HEDGE FUNDS
37% 25% 24% 14%
the next economic downturn comes, the
fundraising and dry capital will be put to
work into distressed and other types of
deals.”
Some believe private equity – like hedge
funds – have grown too big too quickly.
Hedge funds produced alpha when it
was a truly cottage industry, and manag-
ers were able to slip in and out of niche
trading opportunities. As hedge funds
became bloated following the crisis when
institutions switched from equities and
fixed income, those once lucrative market
openings became harder to access be-
cause of crowding.
As money now flows out of underper-
forming hedge funds into private equity,
the parallels are hard to miss. It would not
be unreasonable to suggest that alloca-
tions could shift away from private equity
into other alternatives such as hedge funds, as private equity
returns begin to drop, and capital distributions from managers
outpace the deployment of new commitments.
Nonetheless, private equity is diversifying into new asset
classes, most notably private debt, alternative loans and credit.
“We are seeing managers enter new geographies, or introducing
variety into their strategies by moving away from traditional
buy-outs and into the special lending or distressed debt mar-
kets,” adds Patel.
But why is this happening? Regulation has forced banks to
“[The] consistent ability of private equity to deliver good
performance means flows have been strong.”
MICHAEL COLLINS, CHIEF EXECUTIVE OFFICER, INVEST EUROPE
deleverage, and funding, particularly to small and medium-sized
enterprises (SMEs) has become less assured due to various bal-
ance sheet implications. In response, private debt and loan funds
The Private Equity Issue 2017
globalcustodian.com
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