The conversation: Trends in 2021 and beyond

As the calendar marches closer to 2021, and we contemplate the past year of unrelenting and unprecedented change linked to a global pandemic, it feels like the right time to turn our sights forward, and to make sense of patterns being established now that will undoubtedly impact the next few years in private capital markets.

How will data and technology continue to evolve traditional models? What are the keys to succeeding in an increasingly competitive environment? What considerations should be given to cybersecurity concerns?

I sat down (virtually, of course) with Alice Murray, Editor of The Drawdown, to tackle all of these questions, and one area in particular kept surfacing: competition.

It’s no secret that the private funds asset management landscape is growing. Over the past several decades large capital allocators have continued to increase their investments into private funds. What had been a small, esoteric asset class 40 years ago is now one of the largest, if not the largest for many investors. With that has come a flood of new competition in the private capital markets across every asset class - private equity, growth equity, private debt, infrastructure, and real estate, among others.

What does this flood of competition mean for you? It means that you have to be unrelentingly focused on being better. That means being better at every aspect of what you do, whether that’s raising capital, sourcing new investments, or structuring deals. It also means focusing as much of your team’s time and energy as possible on those activities that are most aligned with your unique strategy and value drivers.

If you are organized and have the data on what you’ve done historically in all of your key agreements and are proactively managing your obligations to important counterparties and regulators, you’re going to be better. Investors, portfolio companies, and deal sources will see that you’re more organized, solidifying their trust in your relationship. If you can quickly benchmark against what you’ve done in the past, you’re going to be better at negotiating your most important agreements - resulting in better economic and legal terms, more favorable covenants, and ultimately better returns.

If your team has optimized your time-consuming, repetitive processes, you will have more time to focus on activities that create real value. Your goal should be to have everyone in your organization spending as much time as possible on those activities that have the largest and most direct impact on generating superior returns. If your team is bogged down by activities such as processing repetitive agreements like NDAs or basic IT issues, you are sacrificing precious time and energy away from finding new investments or supporting your portfolio companies with growth initiatives.

As we look to 2021 and beyond, private capital markets offer more opportunity than ever before, but the organizations that stand to benefit the most have at least one thing in common: they are innovating in every single area of their businesses in order to stay ahead of the competition.