Foundation & Endowment Money Management - Nonprofits Stick With Private Equity

Nonprofits Stick With Private Equity

Despite a tough year for valuations and plenty of liquidity concerns for many nonprofit investors, private equity continues to hold an appeal for its potential for outsized returns. FEMM Contributing Reporter Joseph D'Allegro recently spoke with Gary Robertson, senior v.p. and manager of the private equity research group at Callan Associates; Mikan Van Zanten, a partner at Robeco Private Equity; Richard Frank, ceo of Darby Overseas Investments, Franklin Templeton's private equity subsidiary; Michael Casel, director of investments at Haverford College; and Peter Martenson, a partner at placement agent Eaton Partners, about investing in the asset class.

FEMM: Should endowments and foundations invest in private equity?

Robertson: Yes. The return premium of well-managed private equity programs over publicly traded portfolios during the past 20-plus years is now well documented. It would be very difficult to argue that private equity has not benefited institutional investors, especially the early adopters. A return premium is expected to continue to persist, though it might compress slightly as the private markets become more efficient, but is still expected to be meaningful.

Frank: Endowments and foundations should stay the course but should be more discriminating--less leverage and fewer mega deals.

FEMM: What are the risks, and are the risks increasing or decreasing?

Michael Casel Casel: A year or two ago, the major risks were the unsustainably high valuations and amounts of leverage, whereas for new investments today the risk seems to be whether adequate leverage is available to produce returns comparable to ...

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Nonprofits Stick With Private Equity

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investment management