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Raelan.vtt

English

{{00:00:07}}
We are facing an environment where there
has been a tremendous amount of pullback

{{00:00:14}}
in terms of distributions, in terms of
the opportunities to actually be able

{{00:00:19}}
to allocate capital, because a lot of
LPs are sitting on GPs that have a lot

{{00:00:23}}
of dry powder to put to work, right?

{{00:00:26}}
I think one of the challenges with
that is, That either you've got a

{{00:00:31}}
very tight fiduciary limitation in
terms of how much you can deploy.

{{00:00:35}}
I think those folks are the ones that
are probably in the most challenging

{{00:00:38}}
space because if you're, suffering
from the denominator effect, you

{{00:00:41}}
literally can't deploy capital, which
is not something we would recommend.

{{00:00:45}}
Others though, having gone through this
before, say back in the financial crisis,

{{00:00:49}}
have actually shifted from a strict
allocation to a range bound allocation, so

{{00:00:54}}
that provides them a bit more flexibility.

{{00:00:56}}
So I think it really depends on how
you're, governed in terms of how that

{{00:01:02}}
really plays out for your portfolio.

{{00:01:10}}
I would say that really, they always
focus on the five main things.

{{00:01:14}}
I call it stars, strategy team, alignment
returns, and systematic processes.

{{00:01:19}}
Now I might say that last one is
probably increasingly important because

{{00:01:25}}
there's a lot of concerns about that.

{{00:01:27}}
The there's a massive sort of beta, right?

{{00:01:31}}
There's this tides were all rising, COVID.

{{00:01:34}}
Everything was propped up.

{{00:01:35}}
So now you're left with investors that
were do they really have the expertise?

{{00:01:41}}
They have the experience.

{{00:01:43}}
And that's where the
systematic processes comes in.

{{00:01:46}}
What is the ability for managers
to continue to replicate

{{00:01:50}}
and sustain the returns?

{{00:01:52}}
So I think we're probably spending
more time looking at that one.

{{00:02:01}}
I used to actually I used to cover private
equity in special situations in Asia, and

{{00:02:07}}
we've seen a tremendous pullback in China.

{{00:02:10}}
LPs are still, I'd say, investing
in Pan Asian strategies largely

{{00:02:14}}
emphasizing India, Japan, Korea.

{{00:02:17}}
Europe, I think, still is pretty
attractive really some interesting

{{00:02:21}}
opportunities there across private
markets, really all private markets.

{{00:02:26}}
But North America continues
to be the biggest area, the U.

{{00:02:29}}
S.

{{00:02:29}}
is really, continues to be the
largest area of investment.

{{00:02:32}}
We actually did an analysis recently
where we asked ourselves, we've been

{{00:02:36}}
really focusing on how do you assess,
your exposure across the entire portfolio?

{{00:02:42}}
And that's what a lot of
CEOs are looking at, right?

{{00:02:45}}
They're not just looking at
sort of buckets, privates versus

{{00:02:47}}
publics, but also how much do we
have deployed in the technology

{{00:02:50}}
industry across the whole portfolio.

{{00:02:53}}
So we've actually done an analysis
there and found that most of our

{{00:02:55}}
client portfolios are have a good
healthy allocation of three sectors.

{{00:03:01}}
One is technology, one is consumer,
and one is actually industrials.

{{00:03:06}}
I believe if I've got that right.

{{00:03:08}}
But that's to say, I think
Having a good diversification

{{00:03:13}}
is probably more important.

{{00:03:14}}
And I would say too, just
challenging what's in technology.

{{00:03:18}}
So many businesses are
tech enabled, right?

{{00:03:21}}
And there's so many sub strategies
within technology that I think

{{00:03:24}}
I wouldn't be overly concerned.

{{00:03:25}}
It's not like you've got all
of your clients investing in.

{{00:03:29}}
A specific area of technology
that would be too risky.

{{00:03:38}}
They've been around for a long time, I
would say, but I think now LPs have really

{{00:03:43}}
organized themselves in a way that they
can hopefully execute a bit more quickly.

{{00:03:47}}
And I think that's the key to general
partners is they want somebody that

{{00:03:50}}
they trust and that can execute
quickly and they can ultimately

{{00:03:53}}
really utilize, leverage the expertise
of the GP in the first place.

{{00:03:58}}
But co investments I think are
an area that LPs, you know,

{{00:04:00}}
particularly ones at are seeking
to continue to manage down fees.

{{00:04:05}}
So that's certainly of interest,
or there's interest in if you're

{{00:04:09}}
looking to rebalance your portfolio
and, say, sell portions of it.

{{00:04:13}}
Co invest might be an area where
strategically with certain managers

{{00:04:15}}
you're looking to ramp up, say, in
bits and parts of the portfolio where

{{00:04:18}}
you don't have a lot of exposure.

{{00:04:20}}
But I think that just the demand
for co investments, I feel it's

{{00:04:23}}
a real attractive quality that
GPs can offer to their top LPs.

{{00:04:28}}
But again, the LPs also have
to be able to execute quickly.

We are facing an environment where there
has been a tremendous amount of pullback

in terms of distributions, in terms of
the opportunities to actually be able

to allocate capital, because a lot of
LPs are sitting on GPs that have a lot

I think one of the challenges with
that is, That either you've got a

very tight fiduciary limitation in
terms of how much you can deploy.

I think those folks are the ones that
are probably in the most challenging

space because if you're, suffering
from the denominator effect, you

literally can't deploy capital, which
is not something we would recommend.

Others though, having gone through this
before, say back in the financial crisis,

have actually shifted from a strict
allocation to a range bound allocation, so

that provides them a bit more flexibility.

So I think it really depends on how
you're, governed in terms of how that

I would say that really, they always
focus on the five main things.

I call it stars, strategy team, alignment
returns, and systematic processes.

Now I might say that last one is
probably increasingly important because

The there's a massive sort of beta, right?

There's this tides were all rising, COVID.

So now you're left with investors that
were do they really have the expertise?

And that's where the
systematic processes comes in.

What is the ability for managers
to continue to replicate

So I think we're probably spending
more time looking at that one.

I used to actually I used to cover private
equity in special situations in Asia, and

we've seen a tremendous pullback in China.

LPs are still, I'd say, investing
in Pan Asian strategies largely

Europe, I think, still is pretty
attractive really some interesting

opportunities there across private
markets, really all private markets.

But North America continues
to be the biggest area, the U.

is really, continues to be the
largest area of investment.

We actually did an analysis recently
where we asked ourselves, we've been

really focusing on how do you assess,
your exposure across the entire portfolio?

And that's what a lot of
CEOs are looking at, right?

They're not just looking at
sort of buckets, privates versus

publics, but also how much do we
have deployed in the technology

So we've actually done an analysis
there and found that most of our

client portfolios are have a good
healthy allocation of three sectors.

One is technology, one is consumer,
and one is actually industrials.

But that's to say, I think
Having a good diversification

And I would say too, just
challenging what's in technology.

So many businesses are
tech enabled, right?

And there's so many sub strategies
within technology that I think

It's not like you've got all
of your clients investing in.

A specific area of technology
that would be too risky.

They've been around for a long time, I
would say, but I think now LPs have really

organized themselves in a way that they
can hopefully execute a bit more quickly.

And I think that's the key to general
partners is they want somebody that

they trust and that can execute
quickly and they can ultimately

really utilize, leverage the expertise
of the GP in the first place.

But co investments I think are
an area that LPs, you know,

particularly ones at are seeking
to continue to manage down fees.

So that's certainly of interest,
or there's interest in if you're

looking to rebalance your portfolio
and, say, sell portions of it.

Co invest might be an area where
strategically with certain managers

you're looking to ramp up, say, in
bits and parts of the portfolio where

But I think that just the demand
for co investments, I feel it's

a real attractive quality that
GPs can offer to their top LPs.

But again, the LPs also have
to be able to execute quickly.

How are LPs and GPs aligning to optimize returns in today’s market? Raelan Lambert, Global Alternatives Leader at Mercer, provides her perspective from SuperReturn North America. Discover the challenges LPs are facing, what criteria they prioritize in new investments, and how they’re leveraging co-investments and secondaries to capitalize on attractive opportunities across regions and sectors.
