The European debt crisis offers a good opportunity to invest in private markets, said head of private equity at China Investment Corporation Linbo He.
Speaking at the Hong Kong private equity association’s China summit, he noted that private equity investments performed strongly in 1998-2005 despite a tough fundraising environment, according to the Asian Venture Capital Journal.
In contrast, performance deteriorated in 2004-2008 despite much better exit and fundraising opportunities.
“I think the current crisis is actually making European countries to think about what they are doing and forcing them to reform,” said He.
“If they keep to these reforms, we expect the crisis will make Europe stronger. Of course you need to be selective and choose projects cautiously.
“If past history can tell us about something about the future, we should have more confidence in private equity investment. Private equity has clearly outperformed public market.”
He pointed put that sovereign wealth funds are showing increasing interest in private equity investments, adding that one US endowment’s private equity portfolio had generated returns of 35.3 per cent as of the end of June.
He noted, however, that of the $3t of private equity assets as at the end of 2011 about two third was unrealised.
“Since the dispersion within private managers is huge … you need to be very careful that you should not focus too much on diversifying exposure to different managers. You really need to choose the best ones,” said He.
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