Conference Presentation, Panel, Fireside Chat
Rise of Alternatives: Reshaping Investment Management | Middle East & Africa Summit 2023
Milken InstituteRichard Hope, Fatima Al Noaimi, Natasha Brook-Walters, K. Don Cornwell, Behdad Eghbali, Tony Minella
- Private markets are projected to maintain a critical role in asset allocation, with the sector valued at $8 trillion and expected to see a blurring of distinctions between public and private asset classes driven by GDP growth and structural changes.
- Valuation multiple excesses from the past three to four years, such as 20 times cash flow for software companies, are anticipated to correct over the remainder of the decade, leading to a period of multiple contraction over the next three to four years.
- Market conditions in the next two to three years may involve slowing growth, a soft landing, or recession, which are expected to affect private market values and create a backdrop of scarce capital for 2023 and 2024 vintages.
- Balance sheet recapitalization is planned for the rest of the decade to address B-minus debt maturities due in 2025, 2026, and 2027, with a shift toward unit tranche and private lenders replacing syndicated bank debt as the primary credit source.
- The 2024 and 2025 private equity vintages are forecasted to be viewed favorably in retrospect, with 2030 perspectives likely confirming their value despite current pressures from lower leverage, higher rates, and slower economic growth.
- Future performance strategies emphasize paying lower prices to capture upside in an environment characterized by tighter financial terms, with add-on acquisitions expected to be available at attractive values to drive accretive growth.
- Artificial intelligence deployment is expected to generate a 10% cost structure reduction and improve operating profits, with significant divergence in impact between companies adopting the technology and those that do not.
- Sports sector investments are projected to see institutional capital increase as family-owned assets seek liquidity solutions for third and fourth-generation owners, with public market equity expected to emerge over time despite current suboptimal capitalization tables.
- Valuations for sports teams are expected to continue rising and remain uncorrelated to the broader economy, supported by technology companies entering the sector and the potential for personalized broadcasting to enhance fan revenue.
- Operational optimizations include the use of AI for call centers and sales to increase service levels, as well as the application of data collection to improve player health and prevent injuries.
- Investment plans include remaining a predominantly General Partner (GP) while continuing as a Limited Partner (LP), with specific intentions to invest in the largest parking operator in North America and maintain long-term exposure to emerging markets like Brazil.
- Private equity firms are positioned to react within 60 to 90 days to optimize portfolio companies, offering a speed advantage over venture or growth investors during periods of market slowing.