To achieve market leading private equity returns, investors need to identify, access and build relationships with the best private equity managers.
In order to outperform the median, a private equity portfolio needs to be concentrated into relatively few relationships. Overly diversified portfolios tend to underperform the market and do not compare well with public equivalents.
In order to offer the types of relationships that will maximise information flow and deliver opportunities for co-investment, those relationships will need to be sized to suit the program.
It is critical that an investor be important to its managers and that each manager be relevant to a program.
Potentum Partners has a deep set of relationships with top tier private equity managers, which have been developed over the course of a decade, along with a deep pipeline of investment opportunities.
Potentum Partners believes that extreme alignment with its clients is necessary to give its partners confidence that they are accessing the best opportunities possible. Potentum Partners aims to be a low-cost provider, closely aligned with the interests of our investors.
A critical means of cost reduction in private equity is accessing fee and carry free co-investment. We would caution that such cost reduction is only worthwhile as long as the investor can be confident that:
- Co-investment is not being made available because a manager is seeking to lay-off risk or because it has moved into a very unfamiliar size of deal; and
- The investor is not being adversely selected. The investor needs to be sure it is seen as a core and key relationship to the manager offering the deal and that it is the first or one of the first investors to be offered it.
In order to attract quality co-investment, an investor needs both strong relationships and an ability to convince managers that it has the appetite and internal processes to move at the speed required by a competitive private sale process.
Potentum Partners has a very strong track record in co-investment, having deployed between 25% and 50% of capital deployed over the last three years in fee-free co-investment.
For further information on our investment strategies please reach out to the Potentum Partners team.