June 2, 2017
Interviewed by: Privcap
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MVision: ‘Blurry’ Growth Ahead for Private Equity

A blurring between private equity fund managers and their investors, as well as a shift to defined contribution pension capital, will define the future era of growth in the asset class, says the head of a major placement agent.

A blurring between private equity fund managers and their investors, as well as a shift to defined contribution pension capital, will define the future era of growth in the asset class, says the head of a major placement agent.

Blurry Growth Ahead for Private Equity

Mounir Guen, MVision:
We’re seeing quite a lot of movement at the moment that’s blurring the lines between GP and LP. Where 20 years ago it was a really large divide, today they virtually sit in the same room. And we’re seeing a movement of the professionals around as a result of that.

So I think private equity will be growing significantly. The nature of the type of business we’ll do is still the same—owning companies, driving alpha, improving the performance of the companies—but the entry point and means of the investment [will] change in the years to come. There is the potential of it changing quickly if the larger investors grow in assets. I’m aware of pension plans in Canada and in other countries that basically double in assets under management every five to six years. That’s a substantial amount of capital.

The other thing we have to think about is the nature of the capital. In the United States, currently, it’s defined benefit. If it moves to defined contribution, that actually changes the dynamic of the capital and creates larger pools of assets that will have lower return profiles, because that’s what the capital is looking for. The return is very much driven by the capital because the market adjusts to supplying it or delivering it. The result of that will be more money in the hands of fewer groups. They will be doing larger transactions and transactions that will be held for longer periods of time.

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