Jonathan Rotolo, Head of Private Equity / Real Assets, discusses the potential benefits of an alternative investment strategy focused on real assets and asset-based private equity and what such an approach looks like in practice.
Could you describe the investment strategy of Barings’ private equity/real assets platform?
We target real assets and asset-based private equity investments, and, in certain scenarios, we can move along the continuum between these two investment styles to create substantial incremental value for our investors. Through this approach we aim to build diversified portfolios that have the downside protection and cash flow profile of something like infrastructure with the upside potential of something like lower middle market buyouts. Ultimately, we are investors, not deal makers, and have always tried to differentiate ourselves with a focus on portfolio construction and risk-adjusted returns.
What types of assets do you invest in?
We consider capital assets, infrastructure, natural resources and intangible assets as the building blocks of our portfolios. Across these asset areas, we cover a total of eight sectors and organize our sector specialist teams on the basis of this coverage model. The high number of potential targets for asset acquisition in each sector makes the overall investment universe quite robust. By focusing on these asset types and utilizing multiple investment styles, we find there is no lack of opportunity to deploy capital and, given our risk-adjusted return focus, to build efficient portfolios for our clients. In the past, we have been able to deploy our clients’ capital efficiently—with a weighted average dollar deployment of roughly three years for unconstrained client mandates.