Podcast: Quality is Critical in Co-Investments Amid Volatility

In this podcast, Dave Brett, Partner & Head of Co-Investments, and Michael Taylor, Partner, Co-Investments, discuss dynamics that are influencing the co-investments market with Thomas Kim, Senior Investment Officer with the San Bernardino County Employees’ Retirement Association.

Key Takeaways

• The macro environment remains uncertain, which makes it difficult to underwrite the medium- to long-term outlook for companies
• Deal flow momentum has improved over the past 12 months as business owners moderate valuation expectations, leading to improved liquidity as exit options begin to normalize
• LPs are being increasingly discerning about the private equity managers they allocate to, creating a strong bifurcation between high-quality firms that can hit fundraising targets, and under-performing managers that are struggling to raise capital
• Co-investments play a vital role in the mid and small market by providing sponsors the capital they need to complete transactions in a relatively tight timeline, allowing the lead GP to be competitive in auction processes
• Co-investments are a critical way to build lower volatility portfolios with non-dilutive diversification across time, industry and specialization, in sectors benefiting from secular growth, dislocation and change, including technology, healthcare, advanced manufacturing, and shifting consumer preferences
• Especially in periods of uncertainty, it is prudent to co-invest in durable companies in less cyclical sectors that can demonstrate expanding EBITDA margins emanating from strong and sustainable revenue growth. Adams Street’s co-investments focus is on opportunities where we believe the majority of upside potential will likely be generated by fundamental company performance rather than financial engineering

This information is not investment advice or an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information. Statements are made as of the date of this release, and there is no implication that the information contained herein is correct as of any time subsequent to such date. References herein to specific sectors, strategies, or investments are not to be considered a recommendation or solicitation for any such sector, strategy, or investment. Past performance is not a guarantee of future results. Projections or forward-looking statements contained in the Paper are only estimates and there can be no assurance that the results set forth in the projections or the events predicted will be attained, and actual results may be significantly different from the projections. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward-looking statements. Adams Street Partners, LLC is a US investment adviser governed by applicable US laws, which differ from laws in other jurisdictions.

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