As we come to the close of yet another rollercoaster year in private markets, Private Equity International takes this opportunity to turn to the 12 months ahead.
For our final Friday Letter of 2021, we cast our net far and wide to find out what key industry figures hope to see – or, in some cases, hope not to see – in the coming year.
Here’s what they told us.
Robert Smith, founder, chairman and chief executive of Vista Equity Partners
“The persistence of technology supply chain issues and unsatisfied appetite for chips will linger, and therefore accelerate the demand for software coders. The global developer shortage will both increase our reliance on no-code/low-code platforms [and give] rise to developer talent networks that will coalesce irrespective of country boundaries. This will ultimately lead to a realisation that a further bifurcation of the tech stack is detrimental to the global economy’s growth prospects, and will accelerate efforts to reinvigorate globalism.”
Joan Solotar, global head of private wealth solutions at Blackstone
“With the caveat that we don’t know what the new covid variant could bring, I believe 2022 is shaping up to be a strong year around the world economically. I think it’s an exciting time to be in the alternatives business in private wealth, and we are towards the beginning of what I think will be a very long growth trajectory.”
Daniel Winther, head of private equity and infrastructure at Skandia Asset Management
“GPs investing in private markets should remain privately owned. Listing publicly, or selling out control of the GP, severely hurts the interest alignment with LPs.
“Shorter fundraising cycles in combination with overallocated LPs (due to strong performance) will reduce the re-up rate, even for well-performing funds.”
David Mussafer, chairman and managing partner at Advent International
“One thing we can all agree on is that markets right now are extremely difficult to predict. With sustained levels of inflation, labour shortages, supply chain bottlenecks and more, LPs are going to look for even stronger risk mitigation strategies, and we are going to see new strategies emerge. Successful investors are going to have to find ways to mitigate risks while still remaining agile and capitalising on opportunities.”
Nalika Nanayakkara, wealth and asset management consulting leader Americas at EY
“We will continue to see a move away from primarily AUM-based fees to more hybrid fee structures.
“The trade-offs to consider: on the one hand, the hybrid structures make fees more complex and potentially yield less revenue to the firm. On the other hand, you can tie the fees to value provided, plus potentially charge the client less fees – both will lead to greater client trust. We already see RIAs increasing the adoption of these hybrid models.”
Philippe Roesch, managing partner at RIAM Alternative Investments
“What annoys me most are GPs increasing by too much the target size of their new funds, by taking advantage of the [bullish fundraising] market. I think that small caps and lower mid-market deals, as well as impact and sustainable investments, will further increase in importance in a year that might show some volatility, with large buyout and secondary funds having the opportunity to collect even more money than ever.”
Chris Ivey, head of the European private client practice at Cambridge Associates
“You have seen a trend where many of the best minds in venture capital have spun off from their venture firms in order to form new managers focused on blockchain, and you’re now seeing many of the big names in venture launch their own blockchain funds. There is a huge amount of talented people looking at the applications of the blockchain, and I can only see that continuing to develop opportunities. I think that we’re relatively early in the history in the use of blockchain, such that there are still very exciting returns to be made from investors who are able to get in in the next few years.”