During the decade before the pandemic (more precisely, until mid-2019), private equity funds, i.e., those that invest in non-public companies, achieved an average rate of return of more than 15% - as per the calculations by Josha Lerner from Harvard and the consulting company Bain & Co.
The above means that PE funds were among the most profitable classes of assets in the world during that period. It was possible to achieve slightly higher rates of return on Wall Street but much lower on other major stock markets. However, over a 20-year horizon, PE funds had no competition. Unfortunately, typically, only large institutional investors who are able to freeze multi-million amounts for several years, had access to the private market. The trend has been changing lately, which is one of the manifestations of a broader phenomenon: the democratisation of the capital market.
The above was one of the topics of the debate during the Economic Forum in Karpacz "Investing in capital markets in a period of increased uncertainty - how do the best do it?".
- The private equity funds are typically addressed to institutional investors because they require a commitment of large sums of money for relatively long periods of time. The most important clients are American and Canadian pension funds, national investment funds of the richest countries or large insurance companies. There has been an innovation observed in the industry for several years - entities (such as Moonfare) allow retail investors to invest relatively small amounts of capital and then entrust an already significant pool to PE funds. Consequently, the latter become available to everyone - explained in Karpacz Krzysztof Krawczyk, a partner of a global fund CVC Capital Partners.
However, as Krzysztof Krawczyk stressed, for some companies that manage PE funds, especially smaller ones, the high interest of investors may also be a trap. - According to conducted research, for example by prof. Lerner from Harvard, when managers of funds have too much money at their disposal, they may start to act in a less disciplined way which may lower rates of return in the long run - said the representative of CVC that owns, i.a., PKP Energetyka and a chain of convenience stores Żabka in Poland.
