Why this US$77 billion investor is investing in more defence when others are chasing growth

Fund Profile

• Name of the fund and ASX ticker: Pengana Private Equity Trust (ASX: PE1)
• Asset Class: Global private equity
• Investment objective: The Trust seeks to generate, over an investment horizon of at least 10 years, attractive returns and capital growth through a selective and diversified approach to private markets investments, including private equity, private credit, and other opportunistic investments.
• Link to fund page: (VIEW LINK)

The formula for gaining outsized returns in public markets over the last 12 months has been remarkably simple. Buy the Magnificent Seven, and for the most part, don't touch it. If you really wanted to show off, you could have sold Tesla at its highs in July and Apple at its highs in December. 

That formula is made all the more remarkable when you consider how many risks and black swan events investors have endured in the last 12 months - geopolitical conflicts, the collapse of several key financial institutions, and the massive repricing in interest rate expectations.

But one of the leading investors in the private markets space is actually trending the other way - investing in healthcare, industrials, and insurance firms ("mature businesses") as a way of playing defence rather than offence. 

"For the last year or two, we have really moved away from investments that we think are too sensitive to the economic cycle," says Fred Pollock, GCM Grosvenor CIO and Portfolio Manager for the Pengana Private Equity Trust. 

"It feels like we're closer to the end of a cycle rather than a beginning. It's hard to envision us not enduring some sort of downturn over the next seven or eight years," Pollock adds.

The fund also says it's finding value in European companies as well as the Japanese market - the latter due to positive changes in market regulation and increasing earnings quality among Japanese corporates.

But the fund has made growth investments before...

Although Pollock and the fund he runs could be perceived as more defensive or value-oriented, they have made growth investments before. One such recent example occupied some chatter last year when it IPO'd in a tough stock market - Instacart (NASDAQ: CART).

"It has experienced the real ups and downs of the growth market," Pollock recalls. "It went public into a market that was trading on very low multiples. Our journey there has been pretty good but my suspicion is that it will be the next couple of years that will decide the fate of those kinds of investments," Pollock says. 

Tune into the rest of this interview to find out how Pollock is looking at markets today and how he views the return profile of private equity going forward.

Access to Australia's only Global Private Equity stock

The Pengana Private Equity Trust (ASX: PE1) is a diversified portfolio of global private equity investments, managed by one of the largest and longest continually operating allocators to alternative investments in the world. Visit their website to learn more.

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Pengana Private Equity Trust (PE1)

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