"Hard to ignore": MLC on the huge opportunity set in private equity right now

Investors who haven't considered private equity as an asset class in their portfolio are missing out on a substantial and undervalued opportunity set, says Rachael Lockyer, portfolio manager for MLC Private Equity.

This interview was filmed on 28 October 2025.

"Fundamentally, there are about 10 times more businesses in the private markets than there are in the public markets," says Lockyer. "There's a huge market for private equity." 

With equities at all-time highs, private markets are offering a substantial discount to public markets on valuations alone, but have also shown historical outperformance.

"People are understanding that fundamentally the opportunity is there to capture the value created through private equity ownership," said Lockyer.

"Public markets are fairly strongly valued at the moment, you might say. Our data shows that private markets are at a 44% discount in terms of valuation to public markets." 

For investors wanting to diversify away from the volatility and drama of the stock market, private equity is making a persuasive case, says Lockyer.  

"If you look at the difference right now between public market and private market valuations, it's hard to ignore the opportunity."

"The asset class has a really nice smoothing effect on portfolios because it doesn't have the daily fluctuations of public markets, and ultimately it's delivering better returns than any other asset class historically over time, compounded. So we think it's a very attractive asset class to be in."

Where the opportunities are

"We really like the blend between infrastructure and private equity," says Lockyer. 

"We see outsized returns being made when private equity managers invest in businesses that are small, lower-mid market private equity opportunities, but they have infrastructure-style characteristics - long-term sustainable recurring revenue and cash flows that are secured."

She points to the example of a New Zealand bus company that was looking to electrify its network. "When that business went to get sold, it had turned from a private equity investment to an infrastructure investment," said Lockyer. "If you are setting up a private equity business to sell to an infrastructure fund and you're doing it successfully, you can have a nice arbitrage in terms of your exit multiple."

In other words, if you build a private equity business with the goal of eventually selling it to an infrastructure fund, there's the ability to earn additional profit by arbitraging the valuation mismatch. 

The other big opportunity is finding companies in the so-called “sweet spot” of the manager, says Lockyer. “We are looking for businesses that have significant tailwinds in the markets in which they’re operating. They need to have a lot of growth embedded in the company already, but also potential additional growth achieved from the private equity manager’s specialist expertise."

"When we see an investment that is, we would say, in this sweet spot, where the manager’s already demonstrated a really strong track record with multiple investments historically, and the playbook seems very logical and repeatable, that’s when we go heavy on the investment"

Adding value

"In the mid-market, where we are playing in MLC's private equity program, we're buying businesses off founders who are looking for a succession plan or they're looking for a partner who can really take their business to the next level with additional capital and expertise."

"These businesses are small, but they're relevant and they're growing very fast. They're not on the public markets because they're not big enough to be on the public markets or they want to remain private."

It's where private equity managers earn their stripes. "When we see that first institutional capital go into the business – the private equity manager has years of track record behind them, and they know exactly the levers that need to be pulled," Lockyer says.