Since the start of the pandemic, the private equity industry has faced many challenges but emerged resilient and looking to the future with positive intent. To examine how the private equity industry had adapted, Investec’s latest annual GP Trends survey analysed the key trends and changes in sentiment.

In a webinar discussion to explore the report’s findings, a panel of Investec experts identified the key themes in a changing landscape. These included positive strides in environmental, societal and governance (ESG) issues, professionals “living in the moment” and being more satisfied with their careers, and the importance of adaptable financial providers for this evolving industry. 

Also, Jonathan Harvey, Head of Client Relationship Management in Investec’s Fund Solutions team, explained that things were looking optimistic for private equity returns despite it being an unusual year.

Helen Lucas, co-head UK originator Growth & Leveraged Finance, echoed Harvey’s thoughts on the impact of the pandemic but said that while the industry had made overall progress on ESG matters, work was still needed on specific issues such as pay disparity. 

Finally, Investec Private Banker Emily Cvijan said that after a period of huge disruption, it's more important than ever for professionals in the industry to partner with lenders that understand their needs and income profiles in order to access suitable borrowing options. 

Digital expansion

One of the trends that characterised the Covid-19 pandemic was the level of innovation required for businesses to carry on as usual. Private equity was no exception. The panel discussed the strides made by general partners (GPs) and limited partners (LPs) alike.

Arrowsmith kicked off this part of the discussion by highlighting the increase in digital dealmaking and flagged that 94% of survey respondents said they were now performing due diligence virtually: “We’re very close to closing a deal which has been done 100% virtually. If you had asked me two years ago whether this was possible or not, unequivocally, it would have been no.”

Lucas commented that the hybrid approach to business is the way forward and something the industry needs to get behind: “You do lose something when you can’t sit in front of a management team. Without site visits, it's hard to learn exactly how the business operates or how employees interact with each other. Undoubtedly we have saved time and the process has become more efficient. But a hybrid approach should be retained.”

Cvijan described how banks and lenders need to consider client’s preferences in how they work together: “While the shift to virtual hasn’t impacted performance, we have to consider the individual’s opinion in how they conduct business. It is led by individuals and really depends on personal preference - the banks will follow their lead. We have said to our clients: ‘Feel free to change things last minute, it’s absolutely fine by us.’”

ESG and gender diversity leads the debate

During the webinar, a consistent thread of enquiry focussed on ESG. Arrowsmith highlighted the general embracement of ESG by society and questioned the panel whether they thought private equity was keeping pace. Harvey responded with an example of how ESG is integrating into subscription lines – something considered niche last year but very much the norm now.

Harvey went on to say how the perception of ESG was changing: “the pace of change has been dominated by societal concerns. Investors are influenced very much by the man on the street and with this increased concentration on ESG, investors are shifting GPs views as well.”

Linked with the theme of ESG, the panellists debated one of the most intriguing statistics to come out of this year’s GP Trends report. Over a third of women thought they would return to a full working week, while the preferred option of men was to attend the office three days a week. Lucas attributed this to some women potentially feeling that they need to prove their commitment more than men and presenteeism is one way to achieve this.

Harvey continued on the theme of remote working: “Pre-pandemic there was a stigma attached to working from home. Covid has got rid of that, but it’s still ingrained when looking at the stats. The option of working flexibly is a huge benefit and everyone should be embracing that.”

Despite this, the report revealed that one in five women would start their own fund should they move from their current role. Lucas saw this as really positive news: “This was a stat that made us feel good and as a bank, we need to facilitate this. This shift could be in part to do with female professionals wanting to control their own environment, it’s much more flexible and they could control things such as pay disparity. It also may be a slight reflection on views on ESG.”

Private equity of the future

Looking further ahead, Arrowsmith called on the panel to give their views on what private equity might look like in the next five to 10 years. Harvey replied first: “there are multiple trends. However, I can see diversity and ESG dominating as more people take it seriously. Private equity has the ability to change a lot faster than other financial services.”

Lucas agreed: “Now that ESG is becoming less abstract, it’s beginning to become more practical for lenders. It also has a part to play in talent attraction. If fresh, bright minds perceive good in the industry, it will encourage it as well.”

Cvijan commented on how more private equity individuals are looking for financial planning services for assistance. “As professionals build up a diverse and well-managed balance sheet and various changes occur in the industry regarding income and how it's viewed, it’s beneficial to have a team to help navigate that landscape.”

Finally, Arrowsmith took a broader perspective on the industry: “Private equity’s record proves that it will grow substantially over the next decade. This will make it more open to scrutiny and regulation. In a way, it is beyond its stroppy teenager stage and now looking to become an adult. There will be more requirements needed to become good corporates such as a solid PR strategy around it.”