We attended SuperReturn Berlin, and here’s what we learned.
In an effort to better understand the private capital market from the best in the world and to connect with other investors, we attended SuperBerlin Berlin, one of the world’s largest gatherings of private capital, attracting over 4,000 General Partners and Limited Partners. Here are the key insights gathered from this event.
The Rise of Private Credit
Private credit is currently in a golden period. Due to the current interest rate environment, private credit returns are becoming more competitive. Just in October 2022, Blackstone reported that private credit has been outperforming public market equivalents. Funds are starting to notice this window of opportunity and have expressed interest in extending their focus to private credit.
The Untapped Opportunity in Private Investor Base
Large funds are gradually recognizing the importance in bringing in non-institutional investors, such as family offices and retail accredited investors, because they represent one of the biggest growth areas for liquidity A report by Bain reveal that individual investors, despite holding roughly 50% of global assets under management (AUM), represent just 16% of AUM held by alternative investment funds. However, the funds do face a few sets of challenges. They need to adjust their strategies to cater to their different return and liquidity preferences, as many individual investors (unlike institutional ones like pension funds) may not have $5M of capital to deploy with a 7 year time horizon. In addition, larger funds need to build new capabilities and infrastructure to cater to these new investors: customer service, marketing & branding, scaled customer service.
Shift Towards Large Cap Credit Opportunities by Large Funds
The conference had a significant representation from larger funds (with$1B+ AUM), many of which expressed an interest in financing large corporations, as banks have been retreating even from such lending given the climate. These investments often offer more security and can even have a secondary market due to their size ($300M to $1.5B). This also could lead to a situation where high-quality mid and small cap companies have an even harder time accessing the capital that they require, increasing the demand and need for new private investors to enter into the private credit space.
The Potential of Blockchain-based Solutions
The conference highlighted an intrigue around blockchain-based solutions for alternative assets, especially for democratizing access to these asset classes. While some are skeptical of digital assets, many are still open to exploring their potential. This is understandable, given the recent volatility in the market. However, the underlying technology does offer some key advantages, such as lower costs for cross-border transactions, which could be a major benefit for the world of private capital.
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Disclaimer: This is not financial or investment advice and should not be interpreted as such. Please do your own research on investments and financial decisions before partaking in any ideas or ventures depicted in this publication.
