Private equity to grow with master trusts

RETAIL investors are set to gain more exposure to private equity as master trusts increasingly embrace these investments, predicts Marcus Darville, head of Private Equity at AMP Henderson Australia.

He says super funds have traditionally been the major investors in private equity in Australia, usually allocating between three and five per cent of their assets to this investment class.

In the future, he says interest in private equity could be boosted by the “sheer weight of experience”. As investors see more deals going through, they will become more comfortable with the investment class.

But to grow further, private equity managers now have to realise some of their investments and to crystallise these returns to prove to superannuation trustees and others that they do generate returns.

Darville also expects more ASX-listed companies to de-list and to become privately owned again, thus providing additional opportunities to the private equity market.

One factor that will drive this trend is if — as has happened in the UK — fund managers continue to desert the small cap market.

Darville adds that company boards have often considered themselves the custodians of their companies, but he expects them to increasingly view their jobs as being to maximise shareholder value, a trend that could create further opportunities.

Listed returns are no longer as solid or as guaranteed as they were thought to be in the past, but unlisted companies also face liquidity issues.