Great companies have a lot in common. Chief among them is the ability to consistently produce cash flows that are stable and durable—and to capitalize on secular growth trends over the long term. Yet many great businesses seeking longer-term capital today are not well served by the traditional public and private markets.
In the public markets, smaller companies tend to miss out on the level of research coverage and trade execution enjoyed by large Fortune 500 companies, resulting in less efficient access to capital. And in the private markets, traditional private equity generally seeks a medium-term time horizon—around three to five years—creating a mismatch for management teams of established, well-run businesses focused on long-term value creation. Such companies would be better served with strategic capital to drive value over a longer horizon.
These dynamics are creating increasing demand for capital from long-term private equity (LTPE) investment strategies. LTPE is an emerging approach focused on acquiring great businesses with lower operating risk profiles. The types of assets well-suited to this style of investing sit between traditional infrastructure and traditional private equity on the risk/return spectrum (see Figure 1).