Change afoot as PE adapts to market environment
Neuberger Berman Private Equity: Best Fund of Funds — Manager Activity and interest in private equity has remained strong and though demand has been uneven following the Covid-19 outbreak, appetite for the asset class is set to remain high and the fundraising market strong. The industry also has the potential to play a leading role in bringing about more holistic change on the environmental and social front.
“In this environment, access to top-quality funds will be critical. Valuations for well-positioned and attractive companies will remain elevated and asset selection and value-add post investment will be crucial for general partners (GPs) to drive attractive long-term returns,” explains Joana Rocha Scaff (pictured), Managing Director of Neuberger Berman, Head of Europe Private Equity. “PE returns will likely continue to outperform public markets in the long-term, with near-term GP valuations correlating with public markets, albeit with lower volatility. Cash calls and distributions will remain significant, given continued new investment and realisation volumes.”
NB Private Equity manages over USD100 billion of investor commitments across primary funds, co-investments, secondary investments, private credit and specialty strategies, through both commingled funds and custom accounts for larger investors.
Rocha Scaff outlines how the competitive landscape is changing within PE: “LP demand has become more uneven throughout Covid, hastening a trend by LPs to focus the majority of their capital on a core set of GP relationships. This will present challenges for less established GPs, further accelerate competition among LPs for access to the most well-established funds, and present opportunities for LPs to identify and select emerging managers.”
In Rocha Scaff view, today’s GPs are much better positioned to face these and other challenges, notably as a result of prior crisis experiences. Today’s strong PE firms have highly experienced and tested teams, deep investing, operating and capital markets resources and the mindset and pattern recognition to move urgently and decisively.
Fundamentally, PE has become more strategic to LPs over time, and strong demand for the asset class has been, and will be, underpinned by the asset class’ continued attractive performance; its different profile to public markets allowing for active, long term value creation, and LPs’ long-term approach to building attractive PE portfolios.
From its perspective, NB Private Equity aims to expand alternatives offerings to meet institutional needs within compelling pockets of market opportunity, including credit, growth capital and infrastructure. The firm also plans to develop new products and vehicles that allow non-institutional investors to access alternatives.
“We will also expand our client base, investment and support team presence globally, strengthening our presence even further in Europe and Asia, in particular,” says Rocha Scaff. The firm’s objectives also include continued investment in strategic client partnerships and its operating platforms and IT systems.
NB Private Equity is also committed to enhancing its ability to onboard teams with a range of complexity and diversity. The need to focus on such areas has been highlighted in the past year.
Rocha Scaff comments: “The crisis has exposed critical issues related to the handling of environmental and social aspects. ESG and diversity issues rose to the forefront and remain a key challenge, and opportunity, for both GPs and LPs to address. We are optimistic that progress is being made, and that PE will have a strong role in steering positive and long-lasting change in both these areas.”
Joana Rocha Scaff, Managing Director, Neuberger Berman
Joana Rocha Scaff is a Managing Director of Neuberger Berman, Head of Europe Private Equity and a member of the Private Investment Portfolios, Co-Investment, and Secondary Investment Committees. She is also a member of Neuberger Berman’s ESG Advisory Committee. Joana has over 20 years of experience in financial markets, the majority of which in private equity investing and prior to that in investment banking. She has been with the firm since 2005. Prior to NB Private Equity, Joana worked in the investment banking division of Lehman Brothers, and prior to that at Citigroup Global Markets and Espirito Santo Investment Bank. She advised on corporate transactions including M&A, financial restructurings and public equity and debt offerings in the US, Europe and Brazil. Joana received her MBA from Columbia Business School and her BA in Business Management and Administration from the Universidade Catolica of Lisbon. Joana is the current Vice Chair of the LP Committee of the BVCA – British Private Equity Association and a member of the Limited Partner Advisory Committee of multiple European private equity funds.