Against a backdrop of concentration on listed markets and persistent volatility, private equity is emerging as a cornerstone of long-term allocations. For Jean-Christophe Rochat, this asset class now provides a more direct means of exposure to the real economy, over and above the search for performance alone. He takes this opportunity to look at how it has developed and how it fits into the overall construction of portfolios.
What are the main areas in which you currently focus your private equity allocations?
Jean-Christophe Rochat: Our private equity allocations are currently organised around several key areas, with a very clear desire to remain anchored in the real economy. Infrastructure is a first major pillar, both in Europe and the United States. They benefit from long-term trends, whether in terms of network modernisation, energy transition or public stimulus packages.
They also offer considerable visibility over revenue flows. A second major focus is the defence sector, which is enjoying a marked resurgence of interest, particularly in Europe. The geopolitical context has highlighted structural needs in terms of sovereignty, rearmament and security, which are often met by mid-sized companies outside the listed markets.
Finally, real estate is gradually making its way back into allocations, after a phase of significant valuation adjustment. In Europe, the correction observed in the residential and commercial segments is once again creating interesting entry points. This theme is approached selectively, with particular attention paid to asset quality, location and cash flow structure.
What specific role does this private equity allocation play in the overall construction of your portfolios?
Its primary role is that of diversification, not only in terms of assets, but above all in terms of performance drivers. It gives us access to companies and projects directly linked to long-term economic, industrial or social trends, which are often uncorrelated with short-term market movements.
In an environment where listed markets are largely dominated by very large caps, particularly technology stocks, private equity offers a more balanced exposure to the real economy. It also helps to reduce certain correlations and overall portfolio volatility, even if this comes at the cost of lower liquidity.
Finally, this asset class is clearly designed to create value over the long term. It relies more on the ability of management teams to transform companies, improve their governance, operational efficiency or strategic positioning, than on tactical market arbitrage.
How do you approach the issues of liquidity and exits, both from the point of view of constructing allocations and client expectations?
Liquidity is a key issue. For many years, very favourable market conditions facilitated exits and made cash flows relatively predictable.
This situation has changed radically. Divestment cycles have lengthened, valuations have become more uncertain and exits require greater patience and selectivity. When it comes to building allocations, this implies much finer management of commitments, capital calls and timetables. It has become essential to think in terms of vintages, to avoid excessive liquidity requirements at certain times. The selection of vehicles is also crucial. Certain evergreen funds or continuation structures can offer interesting solutions, but they need to be analysed very carefully, particularly with regard to valuation, gating and real liquidity mechanisms.
On the client side, education is essential. It is crucial to align expectations, to explain that private equity is by nature illiquid and cyclical, and that value creation is a long-term process. Liquidity cannot and should never be taken for granted.
On a broader level, what major trends have you observed in portfolio construction and strategic allocation over the last five years?
Over the last five years, there has been a marked shift towards more segmented and thematic portfolios. Allocations are no longer built around large homogeneous asset classes, but increasingly around specific strategies, sectors or economic drivers. The alternative asset class has expanded significantly, notably with the rise of private debt and credit strategies, which have partially replaced some traditional fixed income exposure.
At the same time, index-based management has gained ground on core exposures, particularly in large caps, while active management is repositioning itself in more specialised, sector or niche segments. This trend also reflects a growing awareness of the limitations of traditional, highly concentrated indices, and a need for more qualitative diversification.
From your perspective as an investor, how do you see the private equity world changing over time?
Private equity is entering a new stage of maturity. The market has become highly institutionalised, with players becoming more professional, more disciplined and more selective in their investments. The democratisation of access, via evergreen structures or platforms, is broadening the investor base, but also posing new challenges in terms of liquidity and transparency.
Managers are also becoming increasingly specialised, by sector, geography or strategy. This increased granularity means that certain pockets of value can be better captured, but it also requires greater expertise in selecting partners.
What is your assessment of clients' sensitivity to private equity and private markets more generally?
Many of them already have a significant proportion of their wealth invested in illiquid assets, particularly through their businesses or property holdings. This automatically limits their ability to increase this exposure further. That said, interest in private markets is growing, particularly at a time when returns on traditional assets are more uncertain. Customers are increasingly open to these solutions, provided that the risks are clearly explained and the structures proposed offer a degree of clarity in terms of maturity and cash flows.
What criteria do you use to select your managers and private equity strategies?
The selection of managers is based above all on the quality of the teams and their ability to weather several cycles. Track record, team stability, coherent strategy and sector specialisation are all key factors. We often favour mid-sized managers or specialist boutiques that can offer real added value and access to differentiating opportunities. Transparency of reporting, quality of governance and the ability to provide clear and regular information are also essential, particularly in a long-term partnership.
What are the major differences between listed and private markets today?
Listed markets are characterised by high liquidity, strong regulatory transparency and standardised information, but also by increasing concentration on a limited number of large caps. Private markets, on the other hand, offer more direct support for companies, greater involvement in governance and value creation that is less dependent on short-term market fluctuations. The two worlds remain profoundly complementary.
Private equity often comes into play at key points in a company's life cycle - growth, transformation, transfer - before a possible return to listed markets or an industrial sale.