This year’s SuperReturn International was enormous. It has almost become like Glastonbury, the UK’s famed performing arts festival. In Berlin, it was a celebration of private equity spread across several of the city’s venues and neighborhoods and was complete with appearances by Björn from ABBA (on stage to talk about music rights investing), and Fatboy Slim and Flo Rida playing sets at side events. The event’s “main stage,” the Intercontinental Hotel, spilled onto the street, with portable cabins reserved by private equity GPs to host their meetings lining a busy Budapester Strasse. Conference attendees had to plan their time carefully to make sure they could catch all the sessions they wanted to attend and join all the meetings they had scheduled.
A Burgeoning and Innovative Asset Class
The growth of SuperReturn International reflects the growth of the private markets, which according to Preqin, has seen an approximate 20% annual increase in AUM since 2017. It’s difficult to see how the event can get much larger but grow it must as new strategies and sub-asset classes continue to emerge and as the private markets continue to attract capital from largely untapped sources, including retail investors.
It was interesting to see how innovation is increasingly flowing through the industry. Alongside established PE royals at the conference, including Carlyle, Apollo, KKR and Vista Equity Partners, were an array of relative newcomers. For example, upon arrival at the Berlin airport, it was difficult not to notice the large advertisem*nt in the terminal from Moonfare, one of dozens of conference sponsors. Moonfare is a digital investment platform at the vanguard of the ‘democratization’ of private equity, bringing the asset class to more investors by pooling capital from individuals that is then invested in PE funds. The ad, displayed prominently in such a public space, seems symbolic of the mainstreaming of the private markets.
Another sponsor on prominent display at SuperReturn was NewVest, a fintech platform of index funds that track various private asset classes including private equity, private credit, infrastructure and real estate. Furthermore, first to the stage on Day One of the conference was Tanuja Randery of Amazon Web Services, who discussed the potential impact of generative AI on private equity. AI was a prominent topic throughout the conference, as delegates shared insights on the ways in which the technology will transform how, and in what, they invest.
Insights and Takeaways
In terms of other interesting takeaways, Gabriel Caillaux of General Atlantic, in a discussion on “Reinventing returns,” declared that climate investing looks to him like tech did 20 years ago. He sees it as a multi-decade investment opportunity. For a firm that has invested in the likes of Facebook, Uber and Airbnb, such comments are something to pay heed to. General Atlantic has put its money where its mouth is, acquiring sustainable infrastructure investment firm Actis at the start of the year.
A secondaries panel, one of three sessions devoted to the topic, was particularly bullish on the prospects for the emerging asset class. While secondaries still reflect only a fraction of private assets transactions, volume continues to grow rapidly. The panelists couldn’t agree on how big secondaries will get, nor how quickly, but one comment really brought home its appeal – secondaries are well protected against, and well-adjusted for mitigating, risk on the downside, with relatively few failures among secondaries investment firms.
Regarding secondaries, continuation funds were another topic of notable discussion. In a panel session on the evolution of PE and the drivers of future growth, participants were asked which strategies they are particularly interested in that perhaps they were not a few years ago. The CIO of a leading alternative asset management firm mentioned continuation funds, commenting on how industry thinking about such funds has noticeably evolved, from viewing them as “somewhat of a backwater of private equity and a tool that people were pretty suspect about,” to a vehicle that can offer attractive returns in the secondary market.
In that same panel session, while discussing relevant but perhaps unrecognized issues impacting PE, the same CIO offered an interesting insight related to the changing US demographic. “The baby boomers are now outnumbered by millennials,” he said. “The biggest age grouping in the United States is 32 years of age. No one talks about it, but it happened. It has not happened in the private equity industry. It has largely not happened in the ranks of people running private equity firms. I think they are off trend in terms of having knowledge of the consumer. I’m starting to see a dispersion between GPs who get those trends and are getting on trend and those who have not.”
Another topic of perennial interest of course is private credit. In a panel session on the size, structure and pricing of the asset class, participants commented on the continued growth of private credit across geographies and the drivers of this growth. Interestingly, an executive focused on leverage and acquisition finance commented that perhaps one of the most significant issues facing private credit investors is lack of opportunity. That is, lack of opportunity to put to work the large amounts of capital they have raised. As a result, investors are becoming very creative, “getting very deep into capital structures in different ways, making their capital more useful, more friendly, more everything, to get deployed.”
Where Next for Private Markets?
That the secondaries market and private credit stole the limelight at this year’s SuperReturn International, that a pop star discussed the investment potential of music IP, and that a soccer manager talked at length about private equity interest in sports club ownership, speaks to the phenomenal growth and maturation of the private markets since the GFC. With product innovation and the broadening appeal to new investor groups set to continue, the question must be: Has SuperReturn become too big for Berlin?
