- Tawfik, welcome.
Just outline for me, if you would,
some of the challenges facing the
private equity industry at the moment.
- The private equity industry
is coming off two incredible decades, you know.
We called it the golden age of private capital,
but a lot of things have changed
in the last 12 to 18 months after the pandemic, you know.
We have high interest rates,
which means that leverage is not easy to get, you know.
We don't have free money basically to do deals.
Inflation puts a lot of pressure
on companies to continue to improve
their cost performance in particular.
We have dislocations of the supply chain
a little bit of a reversal of globalization.
So there's no shortage of challenges
that the industry is facing.
On top of that, the fundraising environment
has been a little bit harder, you know.
Some funds are still able to raise
significant amounts of capital,
but others are finding it a lot tougher
than it was a year and a half ago.
- What are the key trends
that you are witnessing at the moment?
- So we see a few trends.
The first one is that big capital suppliers
are looking for big customers.
And this is no different than any industry
where suppliers and customers come together.
The second one is some of the new strategies
that are emerging at scale.
Think about private credit for example.
This is a great time to have a private credit strategy.
Infrastructure, which is an asset class
where most providers of capital have been underallocated,
continues to see a lot of appetite.
And then we have other parts of the private capital world
that are a little bit more challenged.
Commercial real estate would be one of them.
Venture capital is another where I don't think
we have recovered from the highs of 18 months ago.
So it's a little bit of a story of haves and have nots
within what we commonly call private equity.
- Which of those trends do you think
presents the biggest opportunities?
- I think the credit strategies.
I mean, you know, when you think about the last
20 years, low interest rates.
So when you have money that's quasi-free,
you can make any valuation work.
I think we've entered a different era
where credit strategies are going to become crucial
and balance sheet optimization
is going to become important again.
And so the ability to provide capital up and down
the capital structure becomes really attractive.
That also gives a little bit of diversification for the LPs.
So my bet is on private credit.
- Will the good times ever return? As they were?
- I think so. I think so.
I'm not sure we will see as good times
as we have seen maybe in the last few years.
But this industry has a role to play
in capital formation.
We have public markets. We have private markets.
I also think that a lot of appetite exists within retail
to actually provide capital to private equity.
So it might not be as good as it was a few years ago
but I'm very bullish on the industry for the next decade.
- Tawfik, thank you so much. - Always a pleasure.