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On 19th February 2024, Portcullis, in partnership with the Family Office Club, hosted an insightful dialogue on private equity investing for family offices and industry practitioners at their new offices in Hong Leong Building. The dialogue shared valuable perspectives from two esteemed speakers: Professor Stefan Morkoetter of the University of St. Gallen and Professor Greg Brown of UNC’s Institute for Private Capital.

Professor Morkoetter shed light on how university endowments approach Private Equity (“PE”) investing. Endowments leverage their alumni networks for deal access and information. His research showed universities are more likely to invest in funds managed by their own alumni. This was true even for lesser-known schools and those with smaller PE portfolios. However, only MBA alumni ties correlate with better fund performance. When fund access is limited, alumni links become particularly valuable. Endowments provide an intriguing case study of network effects in PE investing.

Professor Brown provided an overview of private equity performance trends, challenging the notion that PE returns have declined in recent years. Drawing on comprehensive data from Burgiss, he demonstrated that PE continues to outperform public market equivalents across various benchmarks and time horizons.

Professor Brown found that PE Funds with sector and geographic specialisations tend to outperform larger funds. However, they are also less diversified and thus riskier. Conversely, larger funds are the lower performing, but also bear lower risk. He surmised that most of the risk in PE funds will be borne by the funds themselves and not investors. This is because well-advised investors will diversify that risk in their portfolio. Therefore, a valuable consideration for a well-advised investor would be to look at funds specialised for geography and sector that have managers with high skills sets in particular regions.

However, a nuanced analysis is essential. Professor Brown cautioned that differences in data sources and methodologies can lead to conflicting conclusions. Proper benchmark selection and risk adjustment are critical for accurately assessing PE performance.

Portcullis extends its thanks the Family Office Club, Professor Stefan Morkoetter and Professor Greg Brown for partnering with us to organise this thought-provoking session.  Portcullis regularly collaborates closely with research and industry experts, fostering innovation and industry-leading practice.

Portcullis is dedicated to providing clients with the knowledge needed to make informed investment decisions in our rapidly evolving markets. Engaging in these critical discussions not only strengthens our capacity to meet the needs of the families and clients we serve, but enriches our collective understanding as a community.