Speaking at the Conference of Major Superannuation Funds on the Gold Coast yesterday, Partners Group head of Asia investments Andreas Baumann said there is next to no listed exposure available for some of the fastest-growing emerging market industries.
"Private companies are a huge part of an economy. In fact, in the US only about five per cent of all companies are listed – all the rest are privately owned," he said.
And when it comes to emerging markets, that proportion of privately-owned companies is "even bigger", Mr Baumann added.
"In fact, private companies are among the leaders and key players in several of the most attractive industries in emerging markets," he said.
To demonstrate his point, he highlighted education in China and India; financial services in Africa; and health care in India.
"These are highly attractive sectors that often grow in the mid-teens [and at] twice the speed of the overall economy," he said.
However, there are often only a handful of public stocks to pick from in such sectors, said Mr Baumann. For example, there are only two hospital chain stocks to pick from in the Indian market, and both are trading at price/earnings ratios of 30-40 times.
"So you might reasonably ask yourself: "Is this the best relative value that you can get to access this growth?'," he said.
At the same time, however, there are over a dozen private hospital chains in India that need capital for growth and "are therefore accessible by private equity", Mr Baumann said.
"The private market universe is a huge bowl to fish in," he said. "It includes several market-leading companies – among the best companies in the most attractive sectors in emerging markets."
But the "best thing" about private equity is that it is "not constrained by public information rules", Mr Baumann said.
"There is no illegal insider information in private markets. In fact, once we zoom in on a target we turn every stone, look under the hood and really analyse a company inside and out before we make an investment," he said.
"You can't do anything like this in public markets, or you might go to jail for insider trading."
Partners Group currently manages around US$50 billion on behalf of 500 institutional funds, including $3 billion on behalf of Australian superannuation funds.
