*This story is written in partnership with MLC Asset Management

In a trend expected to become increasingly mainstream, market analysts have noticed a much larger pool of money being funnelled into private equity in an effort to achieve better market diversification.

The shift toward private equity is playing a crucial role in the nation’s economic recovery as businesses get a shot in the arm to expand and grow though a range of state and federal government grants, while generating material gains for investors in return.

Investing in private equity provides a pathway to growth not available in public markets, enabling investors to leverage the detailed analysis that private equity funds conduct ahead of a deal, head of research at SQM Research, Rob da Silva explains.

Investors also appreciate that private equity can withstand market volatility during a downdraft such as the pandemic.

“Investors are realising that private equity has the potential to balance out market volatility due to the way these products are structured and valued over time. This sector tends not to be as volatile as what you’d see in public markets, which helps smooth out the returns,” da Silva says. “Also, private equity covers a huge part of the economic activity, giving investors the opportunity to tap into pockets of growth that you just don’t necessarily get direct exposure to in public markets.”

Rob da Silva

With listed share market investments dominating many investors’ portfolios, private equity can help diversify their Australian and international shares investments and enhance risk-adjusted returns.

In times of economic uncertainty, private equity can help small businesses to become attractive acquisition targets for strategic acquirers or public market investors.

Private equity investors can also help businesses by providing industry expertise when navigating unchartered territory, such as the pandemic.

The deep dive

MLC Asset Management has one of the most established global private equity programs in Australia, with 10 experienced investment professionals based across New York and Sydney.

With $6 billion AUM in private equity alone, MLC Asset Management has deployed capital into the private equity sector each year since 1997, resulting in long-established and difficult to replicate relationships with some of the most successful private equity firms in the world, some of which are otherwise closed to new investors.

Private equity is nimble and adds value by providing founders with additional senior management capacity, expertise and capital to scale their businesses sustainably, MLC’s Private Equity portfolio manager Rachael Lockyer says.