Coming on back of this great article I read on investing across Geographies, I am tempted to ask ourselves the question - is Private Equity an absolute or a relative return asset class ?
Most people investing in India over the last five years would tell you that private markets have had a much higher volatility and have underperformed the public markets overall (extremely illogical, no reason why size and liquidity premium should be negative). As things stand, if I were allocating assets I would be hard pressed to answer as to why I should choose Private Markets in India over public markets or better still, why I should choose India at all ?
Going by the flights/hotel test (Indian hotels are overpriced and yet overbooked and similar is the case with flights), it seems like India is seeing a bubble, at least for the time being. So are you better off betting on a star-fund manager in India (for the uptick provided by his alpha) or are you better off investing into the beta of a new market. Tough call, is'nt ?
Even in this era of globally mobile capital and minimal information asymmetries, the first movers stand to make an inordinately high return. With internet, new age media and mobile, the window of opportunities are becoming smaller and tighter which also means the rewards for the birds that spot the window are that much higher.
However, as an institutional investor are you looking to maximize returns in the medium term (3- 5 years) or in the long term (15-20 years). It seems like a lot of people are willing to stick their neck out for the long term and back fund managers that deliver superior alpha than piggyback on the next market beta wave. I guess the underlying logic must be sustenance of outperformance in the long run than a flash of brilliance in the medium term.
~Varadha (varadha.r1@gmail.com)
Most people investing in India over the last five years would tell you that private markets have had a much higher volatility and have underperformed the public markets overall (extremely illogical, no reason why size and liquidity premium should be negative). As things stand, if I were allocating assets I would be hard pressed to answer as to why I should choose Private Markets in India over public markets or better still, why I should choose India at all ?
Going by the flights/hotel test (Indian hotels are overpriced and yet overbooked and similar is the case with flights), it seems like India is seeing a bubble, at least for the time being. So are you better off betting on a star-fund manager in India (for the uptick provided by his alpha) or are you better off investing into the beta of a new market. Tough call, is'nt ?
Even in this era of globally mobile capital and minimal information asymmetries, the first movers stand to make an inordinately high return. With internet, new age media and mobile, the window of opportunities are becoming smaller and tighter which also means the rewards for the birds that spot the window are that much higher.
However, as an institutional investor are you looking to maximize returns in the medium term (3- 5 years) or in the long term (15-20 years). It seems like a lot of people are willing to stick their neck out for the long term and back fund managers that deliver superior alpha than piggyback on the next market beta wave. I guess the underlying logic must be sustenance of outperformance in the long run than a flash of brilliance in the medium term.
~Varadha (varadha.r1@gmail.com)
2 comments:
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