Focusing on pockets of growth
Portfolio construction is critical, as Katja Salovaara, Senior Investment Officer - Private Equity for New York City Retirement Systems, pointed out. Diversification is one strand, identifying growth opportunities in specific sectors is another.
“I think there are certainly opportunities that we see to lean in,” she said, highlighting the PE sector’s access to opportunities for higher growth than public markets. “I think we're very fortunate on the private equity side to be able to access faster-growing sectors and companies.”
Mark Lyon, Head of Equities and Alternatives, Border to Coast Pensions Partnership, explained that the sector was unlikely to see the same levels of returns from multiple expansion as it has done in recent years. The same applies to debt levels. Growth, therefore, has to come from operational value, Lyon said. This can be realised through buy-and-build strategies, margin growth, cost synergies and more efficient operations.