FUNDRAISING NEWS | August 19, 2024
AON highlighted areas of opportunity across PE segments - including near-term opportunities in distressed private markets - in a July presentation on the global private equity market for the Minnesota State Board of Investment (SBI).
In the buyouts and corporate finance space, AON said mid-market managers with value-creation expertise across business cycles who are targeting growing companies in fragmented markets could represent an opportunity. AON also pointed to managers focusing on value-oriented strategies and corporate carve-outs as an opportunity area.
In venture capital, AON said early stage investments remain attractive but noted it continues to closely monitor valuations. It also said the smaller end of the growth equity spectrum presents opportunities, as does the technology sector with the emergence of artificial intelligence (AI), digital health, and potential for new energy and climate-related innovations.
In leveraged loans and mezzanine, AON said capacity to scale matters. For leveraged loans, funds that can source deals directly and have the capacity to scale for large transactions, both sponsored and non-sponsored, as well as funds with extensive track records and experience navigating prior credit cycles, could present opportunities. Similarly, in the mezzanine market, AON pointed to funds with the ability to scale for large sponsored deals.
AON highlighted the distressed private markets segment as an area that could see increased opportunities in the coming months due to ongoing macroeconomic factors fueling continued market dislocations. This could be even more pronounced if default rates continue to rise. Funds able to execute operational turnarounds and with the flexibility to invest globally represent the opportunities in this space, according to AON.
Citing Jefferies, AON said LPs’ liquidity needs and the effects of slower distributions and longer holding periods should fuel continued adoption of secondaries transactions. It also expects continued demand for new-vintage-year exposure from well-regarded managers, especially where middle-market transactions are involved. Competition for transactions completing in 2024 could also be driven by improvements in GP-led secondaries pricing. Funds capable of executing complex and structured transactions, as well as those pursuing niche strategies, represent opportunities in secondaries.
AON sounded a note of caution when it comes to infrastructure, acknowledging ongoing concerns about asset availability and pricing. Despite these challenges, it said investor appetite remains, with mid-market core and value-add infrastructure offering the best relative value. Blind-pool funds may be better positioned to capitalize on market dislocations in certain sub-sectors, while greenfield strategies in the social/public-private-partnerships space could offer a premium for investors willing to take on the construction and development risk.
Finally, AON pointed to select midstream opportunities in natural resources, along with focusing on acquiring and exploiting existing oil and gas strategies over early stage exploration in the core U.S. and Canadian basins.
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Koncheng Moua is the Director of Data Management and Strategy at Dakota.
