Per Franzén: How The New Rules of Capital Are Changing Private Markets

This is a pivotal moment to be an investor. There is a tangible need to modernise and expand infrastructure globally, raise productivity in the real economy, and adopt and scale new technologies.

At the same time, retirees require increased savings and governments need private capital to complement public balance sheets.

This is all happening at a time when the drivers of risks and returns are changing. Economies are simultaneously more multipolar and interdependent. New industries that will drive global growth and reward rapid innovation are emerging. And AI promises to deliver a step-change in productivity gains.

As private markets investors, this backdrop is both energising and humbling. Private capital can play a vital role in delivering the solutions that society needs. The characteristics of our industry – long-term perspectives, governance flexibility, ability to drive hands-on transformation – are well suited to delivering returns in a rapidly changing world. But we cannot be complacent: the alpha-generating capabilities of the past are not fit for the future. We must always strive for better.

That’s why we have taken a moment to step back and reflect on the long-term implications of the secular shifts underway, to identify the challenges and opportunities ahead – and published our conclusions in a report. It is written for CEOs and CIOs with a practical mandate: deliver outcomes through a decade where historical risk-return frameworks are no longer relevant. The report offers perspectives and insights for rethinking portfolio construction, benchmark dependence, liquidity strategy, and manager selection – and the capabilities that will matter most in the years ahead to generate returns at scale.

The report is rooted in insights from across EQT’s global network and portfolio of more than 300 companies:

• We convened EQT’s investment and operating leaders across strategies, sectors, and regions to hear what is changing in sourcing, underwriting, value creation, and exits.
• We interviewed more than 30 CIOs, CEOs and partners from some of the world’s most prominent capital allocators to understand what they were seeing and the biggest challenges they were grappling with.
• We mined our global portfolio to compare how hundreds of companies are reacting in real time to the changing investment environment.
• We validated the data and insights with external research and expert partners to challenge our conclusions.

We are grateful to the partners and colleagues who contributed – inside and outside EQT – and to the senior leaders who tested these ideas with us. We hope it sparks a robust conversation, and we welcome the opportunity to exchange views in the coming weeks and months.

This article is adapted from the introduction to “The New Rules of Capital”, a report published today that considers how value is created, captured and compounded in a more complex world. Read the full report here.