In this document we provide an update on Mercer's views on the general state of the global private equity market. The views in this document are expected to help shape the portfolio construction for those Mercer clients with private equity allocations but are also likely to appeal to non-Mercer investors that are interested in knowing our headline views.

Although this four page summary is unable to go into the detail behind our view, a more detailed 24 page version of the paper (which provides additional thoughts and evidence behind our views) is separately available for $5,000. Buyers should, however, be aware that the views contained in either document should not form the sole basis of an investment decision and instead we would expect it to be used in conjunction with specific advice on appropriate next steps for the private equity allocation.

As background, we believe the rationale for investing in private equity is the expectation of achieving returns significantly in excess of those available in the quoted equity market. This expectation is based on:

• A risk premium accounting for the illiquidity of the investment
  

 

• The enhanced ability to capture the returns that arise from companies entering a phase of rapid growth - this is achieved through operational management of the companies
  

 

• The ability to exploit information inefficiencies due to the private nature of the companies
  

 

• An expectation that any leverage applied to a company will affect the expected return commensurately

Areas covered in the document are:

• Global view
• The US market
• The European market
• The Asian market
• The secondary market

How Mercer can help?

Mercer's advisory capability dates back to the mid-1990s and not only relates to building a private equity portfolio (ranging from a direct program to a one-stop-shop global provider - with all the variations in between), but our work with clients also explores the role of these strategies in a broader portfolio context and incorporates cash flow modelling to give a sense of how exposure can be expected to evolve over time.

As with our work in other alternative asset classes, we also cover performance reporting, assistance with fee/terms and mandate negotiation and ongoing monitoring of investment managers and portfolios.

With Mercer's private equity researchers covering various strategies, we offer a deep yet broad coverage of the entire universe. The global nature of the team (based in the Americas, Europe and Asia), all with significant research/asset class experience, gives us a competitive advantage in analysing available opportunities.

For those buyers looking to purchase the full version of this document please contact Marina Zoraya via email to enquire about this further.