Key Takeaways
- • Private equity has underperformed public equities, returning below the S&P 500 and MSCI ACWI over one, three, and five years, reopening debate over the value of the illiquidity premium, according to the primary source.
- • Panelists at Picton's Latam Summit, including Goldman Sachs Managing Director Nigel Beslee, Ares Partner Luca Salvato, and TPG Partner Michael Zappert, agreed that alpha is driven by company-specific factors and manager selection rather than sector or strategy themes.
- • Panelists identified AI application within portfolio companies, rather than access to the Magnificent Seven megacaps, as the more accessible value-creation opportunity for private equity.
- • Liquidity pressure is rising, with secondaries and continuation vehicles now an important part of the ecosystem, though results in that space show wide dispersion.
- • GPs are structuring vehicles more flexibly, with Leonard Green's David Kass and Goldman Sachs's GP Stakes strategy cited as examples.
Summary
Private equity has failed to keep pace with public markets, trailing the S&P 500 and the MSCI ACWI over one, three, and five years, according to the article. That performance gap has renewed questions about whether the illiquidity premium still justifies the asset class, particularly in North America, the largest and deepest market for private capital.
The question was discussed by a panel of specialists from major asset managers, convened by the Latin American distribution firm Picton at its Latam Summit before an audience of GPs and LPs. Goldman Sachs Managing Director Nigel Beslee said, "There is performance, but you have to look at where to be." He added that "nobody is aiming for median returns in PE." Investors face dispersion that is forcing greater selectivity, as competition for the most attractive assets intensifies amid high uncertainty and a technology narrative driving trading desks globally.
Ares Partner Luca Salvato argued that company-specific factors, rather than sector or strategy themes, drive alpha. He also flagged AI as a potential existential risk that is difficult to quantify historically, and stressed that the timing of exits can generate significant alpha. Panelists noted that public equities have repeatedly reached new highs, largely due to the Magnificent Seven (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), making it harder for private equity to outperform.
TPG Partner Michael Zappert said there is a "massive trend of private for longer, especially in high-growth tech companies," so LPs must carefully evaluate how to access that category. Because direct access to leading AI firms is limited, panelists saw more opportunity in AI applied within portfolio companies. Zappert said "AI is going to change every aspect of work," and Salvato said that while AI will not necessarily be a major alpha generator in itself, it will boost the companies GPs invest in.
GPs are also becoming more creative in vehicle structuring. Leonard Green Partner David Kass said the firm has remained flexible on structures when assets fit its investment philosophy. Goldman Sachs highlighted its GP Stakes strategy, which invests in stakes in specialized asset managers, as a way to diversify exposure within the asset class.
Liquidity remains a central variable. Zappert described "massive pressure for liquidity," following the strong capital inflows the asset class recorded in 2021, and said portfolios are trending toward more liquidity. Secondary funds and continuation vehicles have opened new liquidity avenues, and Kass said the industry is focused on DPI, which places pressure on portfolio management to generate distributions. Salvato said continuation vehicles "are here to stay," but warned that results in that space are highly dispersed.
The question was discussed by a panel of specialists from major asset managers, convened by the Latin American distribution firm Picton at its Latam Summit before an audience of GPs and LPs. Goldman Sachs Managing Director Nigel Beslee said, "There is performance, but you have to look at where to be." He added that "nobody is aiming for median returns in PE." Investors face dispersion that is forcing greater selectivity, as competition for the most attractive assets intensifies amid high uncertainty and a technology narrative driving trading desks globally.
Ares Partner Luca Salvato argued that company-specific factors, rather than sector or strategy themes, drive alpha. He also flagged AI as a potential existential risk that is difficult to quantify historically, and stressed that the timing of exits can generate significant alpha. Panelists noted that public equities have repeatedly reached new highs, largely due to the Magnificent Seven (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), making it harder for private equity to outperform.
TPG Partner Michael Zappert said there is a "massive trend of private for longer, especially in high-growth tech companies," so LPs must carefully evaluate how to access that category. Because direct access to leading AI firms is limited, panelists saw more opportunity in AI applied within portfolio companies. Zappert said "AI is going to change every aspect of work," and Salvato said that while AI will not necessarily be a major alpha generator in itself, it will boost the companies GPs invest in.
GPs are also becoming more creative in vehicle structuring. Leonard Green Partner David Kass said the firm has remained flexible on structures when assets fit its investment philosophy. Goldman Sachs highlighted its GP Stakes strategy, which invests in stakes in specialized asset managers, as a way to diversify exposure within the asset class.
Liquidity remains a central variable. Zappert described "massive pressure for liquidity," following the strong capital inflows the asset class recorded in 2021, and said portfolios are trending toward more liquidity. Secondary funds and continuation vehicles have opened new liquidity avenues, and Kass said the industry is focused on DPI, which places pressure on portfolio management to generate distributions. Salvato said continuation vehicles "are here to stay," but warned that results in that space are highly dispersed.
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