It's outperformed equities, and now this asset class is more accessible than ever

"Over the last decade, we have seen significantly more economic activity and, by extension, economic value being created in private markets. Really innovative, dynamic businesses don't have to go to the public markets to raise capital."

It means investors avoiding private equity as an asset class are now denying themselves access to some of the most promising opportunities available anywhere in markets. 

"There's an abundance of capital available in private markets," says Myers. "What that means is that investors who want to access that segment of the market need to do so with private allocations."

The opportunity on offer

"The most resilient private equity programmes will have a very stable base of diversified companies that are cashflow generative, that can grow earnings in resilient industries to provide that stability." 

"What that does is it allows us to take targeted exposure to more high-growth opportunities without materially changing our risk profile."

"We think it's likely that the exceptional AI businesses will continue to emerge in private form, and generate significant capital, long before they ever think about going public," he says.

"The poster children for the sector are probably OpenAI and Anthropic - both are worth hundreds of billions of dollars and they are still private. But there's a raft of less well-known companies in the private space that we're equally excited about."

For investors wanting to access truly exceptional companies earlier, private equity is increasingly the way to do so. 

The importance of manager selection

While the opportunity set in global private equity is increasingly compelling, it's not a case of a rising tide lifting all boats in the asset class. 

"In private equity, there isn't an ability to buy a benchmark or get passive-type index returns, so really outcomes are going to be driven by manager selection and manager access," says Myers. 

The divergence in performance across the asset class may be unfamiliar to investors more used to equities and other markets. 

"The difference in returns between the top cohorts and the bottom cohort is significantly wider [than public markets]," says Myers. "Even the difference between the top and the mean or the median is much wider than we are used to in public markets."

"The key is manager selection and identifying the managers that are most likely to perform going forward, because past performance doesn't necessarily indicate future performance, especially in private equity."

But getting the crucial aspect of manager selection right then opens the door to superior returns and further diversification. 

"Private equity has historically outperformed listed equities, and it has also historically done it with lower volatility and lower correlations, which means that there are portfolio construction advantages as well."

And with the asset class now more accessible than ever, through vehicles like PE1, it's a crucial consideration for investors wanting to extract as much potential as possible. 

"More and more of the economic activity is now taking place in private markets, if you only allocate to public markets, you aren't getting access to the full opportunity set. And the broader your opportunity set, theoretically, the more resilience and more complete your portfolios will be."