Alternative Viewpoints: HF and PE Managers Square Off on Implications of Credit Squeeze
Sergio Miguez Martin, CAIA
Fri., May 09 - AllAboutAlpha.com
"HF and PE Managers Square Off on Implications of Credit Squeeze", posted May 9 on AllAboutAlpha.com
Sergio Miguez Martin, CAIA
The former head of the pension for a large US state has suggested the value provided by funds of funds has increased as a result of market turbulence. Al Samper, former Head of Virginia Retirement System told a gathering of the Chartered Alternative Investment Analysts Association in Madrid recently that protection against the idiosyncratic risks of single strategy hedge funds is more important than ever for institutional investors. He also told the audience that a long term investment horizon was a prerequisite for adding alternatives to a traditional portfolio.
Samper was a member of a panel discussing the different views taken by hedge funds and private equity funds on the recent credit crisis.
Catherine Lewis, a partner with London-based private equity firm Parish Capital, said there was now a significant alpha-generation potential for small private equity funds that focus on niche sectors. In this segment, she said, transactions are less likely to be over-leveraged and are therefore more likely to flourish in the current credit environment. Lewis said that the illiquidity crisis facing credit markets was leading to a marked slowdown in new investment activity, a return to more conservative deal structures, postponed exits and smaller IRRs.
However, she pointed out that smaller pools of capital allow managers to wait for more suitable deal opportunities - an advantage vs. larger firms such as the KKRs of the world. In addition, she said that new expectations are leading to more logical risk and return parameters.