Considerations for Allocating to Private Capital In the next market cycle, we believe active asset management will be crucial to navigating the challenging environment created by high equity valuations and low interest rates. At Balentine, we look to spend our active management budget primarily in private capital.
Why Private Capital? In Private Capital, meaningful excess returns are more persistent than in the public markets, and true active management beyond the point of purchase takes place. In our view, this persistence is due to the high growth nature of private companies and the control managers have over the outcome.
High growth: Companies in the private markets can double or triple earnings year-over-year as they expand from ideas to country-wide products. Once a company has reached the public markets, the growth can continue but typically at a much slower pace.
Control: Private capital managers can also add value through the control they take of the company. Managers can take a long-term view on replacing management, starting or stopping a product line, or expanding into new markets all without the worry of missing a quarterly earnings number.
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