Video transcript
Tyler Glover: Today, we’re going to be speaking about alternative investment perspectives and specifically our insights across the private alternatives landscape, namely in areas such as private equity and venture capital, private real estate, and private credit. And private capital fundraising really had slowed fairly dramatically in 2020 as a consequence of the global pandemic. In turn, there’s overall a potential for a revitalization in fundraising and economic activity in 2021 as well as potential deal activity, which we’ve already begun to see here in recent months.
So, public equities, overall, have performed very well in recent years and generally speaking since the global financial crisis. Stock prices and overall market capitalization have grown pretty substantially but the number of publicly listed businesses has really shrunk fairly dramatically in the last 20 to 30 years. Private equity and venture capital have really supported capital investment into private businesses, so allowing for enhancing operations, streamlining and executing strategy, funding growth, among other things. One phenomenon of note is that businesses may stay private longer before exploring public market options.
In summary, from an investment standpoint we see private equity and venture capital as opportunities for one to access a unique set of risk-reward opportunities and also potentially enhance long-term reward potential for investment strategies. And really creating a valuable compliment to traditional asset classes.
So, on real estate we look across the real estate continuum from debt-oriented strategies to equity-oriented strategies and really the various disciplines within each category. There can be quite a bit of difference in terms of potential risk or reward or income and thus tradeoffs from one to the next. In 2020, looking at real estate overall, it was a unique year for a number of reasons. In some channels creating challenges and, or pricing dislocations and in others we actually saw some level of a tail wind or a speeding up of a secular theme. So, one example of that would be in office there’s more emphasis placed on agility and flexibility relative to how the space may have been looked at more traditionally. In retail, clearly things like consumer behavior have already been playing a part but e-commerce, omnichannel, clearly there’s a new set of dynamics that are being brought into the discussion today and will continue in the future. Residential, there are demographic considerations. So an aging population overall and then also if we look at preferences across generations.
We believe as a whole that a diversified private real estate sleeve can enhance an investment portfolio by creating both diversification, again relative to traditional assets, but also as a component that can help enhance return or potential income stream for an investor.
Finally, private credit in and of itself is a broad category and we see it as a form of alternative financing typically involving investment in debt that is not issued or traded on the public markets. Private credit may provide diversification or returns enhancement as a compliment to traditional income-oriented strategies. In some ways, the private credit category has proliferated and grown, and we’ve seen it expand as an alternative to traditional forms of debt financing. One example would be the shift we’ve seen in the corporate loan market toward non-bank and fund entities and away from traditional global banks. There is certainly a different set of dynamics and characteristics relative to traditional investments, liquidity risk, credit risk, sourcing. These are all things that should be carefully weighed when it comes to private debt investing.
We believe that there will be ongoing development and optionality for high-net-worth investors when it comes to private credit solutions.