Access: Private Capital Insights
The Ultimate End of Year Guide To Private Markets - Part Three
Hello reader,
Welcome to the 48th edition of Access and our final edition of 2023.
Over the past couple of weeks we’ve shared Parts One & Two of our Ultimate End of Year Guide to Private Markets focused on Private Capital Careers and Private Capital People. We’re rounding off the year with a compilation of our greatest hits, with a specially curated list of some of the most popular deep dives and long reads from the last 12-months.
All that remains is to say thank you to all of you who have read, commented on, or shared our posts, we’re so incredibly grateful for your support. Have a fantastic festive holiday and we’ll see you in the New Year!
Until next time -
Liz & Melissa
In case you missed it…
Last week, we posted the second of our festive special editions, packed with profiles and interviews on some of the most fascinating people in private equity. Check it out below! 👇
FEATURING:
The Ultimate End of Year Guide To Private Markets - Part Three, featuring…
The Imperfect Nature of Impact investing
Green Is The New Black
A Match Made In Heaven
The Art Edition
The Democratisation of Private Assets
IN DEPTH
"There is no alternative to alternative assets" - Elif Aktug
Welcome to The Ultimate End of Year Guide To Private Markets - Part Three…
For our final festive edition, we’ve compiled some of our most popular long reads from 2023. It’s been an absolute pleasure dropping into your inboxes on a weekly-ish basis over the last year, we’re looking forward to more of the same in 2024!
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The Imperfect Nature of Impact investing
Did you know that there is no universal agreement on what constitutes an impact investment? Even more confusingly, ESG & impact investing are often used interchangeably.
As Erika Karp, Chief Impact Officer at Pathstone points out, “ESG is not an asset class, it’s not a style, it’s not a strategy.” Erika goes on to explain that “ESG is an analytical lens… once you do ESG analysis you can do any kind of investing you want.”
“ESG is typically about how a company operates. Impact is what it does to make a profit”
- Megan Starr, Global Head of Impact at Carlyle
Elon Musk famously called ESG a “scam” after Tesla was booted off the annual S&P 500 ESG Index.
In their rebuttal, S&P asked the question that was on everyone’s minds - “But, how can a company whose self-declared mission is to “accelerate the world’s transition to sustainable energy” not make the cut in an ESG index?”.
“While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens.”
The answer was it lacked a low carbon strategy & business codes of conduct, plus “claims of racial discrimination and poor working conditions at Tesla’s Fremont factory”.
In other words, it’s possible that a business can have a clear impact goal, but still score poorly on ESG factors. Read more about ESG & impact investing in our long read below… 👇
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Green Is The New Black
Sticking with the ESG and impact theme for the moment, our second pick for this end of year round up is a piece we published in the summer about the relationship between private equity and the fashion industry.
We also took a look at some of the significant changes within the industry over the past few years. Consumer habits have shifted in the wake of the pandemic (suits out, athleisure in) and the sector is poised for a slowdown as shoppers conserve their cash.
“In fashion, there is never ever going to be a full perfect answer about sustainability because it’s always going to be at odds”
- Grace Beverley, CEO at Tala
Vintage fashion has experienced a resurgence, as consumers seek more affordable ways to indulge, while the cost-of-living crisis has also prompted more people to turn their clothes into cash. Luxury goods are also expected to weather the storm, as wealthier consumers are less impacted by the rising cost of living.
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A Match Made In Heaven
Private investment can provide sports teams and leagues with an injection of liquidity, which can be particularly useful when their net worth is often tied up in franchises or long media contracts.
And it’s popular with investors too - post-pandemic, lockdowns had transformed revenue sources, moving away from gate receipts and towards consumption of sport through digital channels. When in-person attendance resumed, the industry had found that it had diversified sources of revenue, which looked particularly appealing to private equity.
“It’s very difficult to buy a sports team and lose money.”
- David Rubenstein, The Carlyle Group
However, compared to other sectors, there’s a significant risk of alienating the team’s loyal fanbase. Supporters are often fearful that private equity investment will result in cost-cutting measures with the intention to sell within a few years for maximum profit, threatening the brand of both the club, and sport more generally in the future.
“For most fans, they are highly passionate [about] these products. A level of passion you’re not going to see even in consumer products where you may have a connection to the brand.”
- Tyler Brewster, senior director at EY-Parthenon
Read more in our sports deep dive, including where the sector is likely headed next… 👇
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The Art Edition
In March, we set about unpicking the concept of art as an investment asset, and what makes it both unique and exclusive in the world of alternatives.
One of the earliest recorded art funds, La Peau de l’Ours, or ‘The Skin of the Bear’, was established in France in the early 1900’s. It takes its name from a cautionary fable attributed to Aesop and immortalised in Jean de la Fontaine’s ‘Fables’ - it instructs eager hunters not to sell the skin of the bear before the beast is dead. The message to investors in the fund was presumably ‘don’t spend your returns before they’ve been realised’…
Sometimes grouped into so-called ‘collectibles’, art sits alongside wine, cars, stamps, and even baseball cards as an alternative investment that’s largely uncorrelated to the stock market.
“Investing in art disregards the traditional benchmarks of financial analysis. Investing in art is a bet on the price appreciation of something whose values defies financial logic.”
- Artscoops
What sets it apart is the uniqueness of each piece of art, which creates a scarcity that isn’t typically replicated for other collectibles.
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The Democratisation of Private Assets
Individual investors hold roughly half of the world’s global wealth, a figure in the region of $150 trillion USD, yet according to Bain’s Global Private Equity Report, only a fraction is invested in private markets.
“Retail investors account for half of all wealth globally. No wonder alternative funds have them in their sights.”
- Skolnik et al., 2023
While many of us are invested in private equity through our pension, direct investment opportunities have been scarce. Private equity funds have tended to outperform public markets, so there is intense and growing interest from the retail sector, particularly given current turmoil in the wider financial markets.
As demand hots up from the investor side, funds are slowly starting to respond, and with tough fundraising conditions generally, the potential opportunity is significant.
In our piece from earlier this year, we explored some of the challenges for individual investors, and how the leading investment platforms are tackling these… 👇
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