Private equity panorama

03 June 2014   Category: News, Asia, Global, Hong Kong, USA, United Kingdom, Indonesia   By Paul Mackintosh

Pantheon Ventures, one of the longest-serving entities in British private equity (PE) since its establishment in London in 1982, and an early mover in Asian markets with its Hong Kong office opening in 1992, has just announced the inception of a new vehicle to raise contributes from high-net-worth individuals (HNWIs), with the creation of Pantheon Private Wealth (Pantheon PW). “Pantheon PW represents a natural extension of Pantheon’s longstanding investment platform that has historically served large institutional investors worldwide”, runs Pantheon’s own introduction to the platform. “Pantheon PW aims to leverage the full breadth of Pantheon’s capabilities to deliver comprehensive private market investment solutions to high net worth individuals and their investment professionals”.

Pantheon is hardly a fly-by-night, nor an especially troubled platform that might need new funding sources. According to its materials, as at end December 2013, Pantheon “had over US$28 billion assets under management and 185 employees, including 69 investment professionals, located across offices in London, San Francisco, New York and Hong Kong”. The firm also lists a current limited partner (LP) base of “over 400 institutional investors, including public and private pension plans, insurance companies, endowments and foundations”.

This does point up the interesting connection of private equity and private wealth, though. For a long time, private equity has been an attractive option for a broad portfolio of individual wealth as well as family offices, and needless to say, the cut-off between these two categories as investors is not always a sharp one. Investment advisors who do work on private equity options for HNWIs usually recommend around 5-10% of the total portfolio, a similar figure to many institutional investors and particularly to family offices, with liquidity being one of the main considerations. Although HNWIs should in theory have enough private resources to lock up around 10% or less of their portfolio for seven to 15 years, liquidity remains probably more of a concern for them than for large pension funds.

Ultra-high-net-worth individuals remain in a league all of their own, though. For one thing, they may be large enough to come in to private equity deals as co-investors rather than LPs. (The structure whereby CVC took control of Indonesia’s Matahari department store chain, for instance, kept a stake for the founding Riady family empire). But also, they are quite capable of bidding as rivals to private equity funds, especially in Asia where the taipan mentality still thrives. And even in the West, one emerging trend is for single-family offices or consortiums of these to invest directly into assets, along the lines of direct investments by pension funds. Private equity firms might pause to reflect before convincing HNWI targets of the virtues of direct investment.