Bloomberg — The team running UBS Group AG’s multi-manager private equity strategy has cash on hand and says opportunities are opening up after fundraising became more difficult in the past 18 months and interest rates shot to 20-year highs.
The group, led by Markus Benzler, manages more than $40 billion in investments across tech, venture capital, private infrastructure, real estate and private debt, and says the big dip in valuations has put in reach deals that were previously overvalued.
There are “quite a lot” of opportunities, Benzler, who is based in Switzerland, said in an interview in Sao Paulo during a fundraising trip. “Valuations have come down, markets and prices are attractive.”
As some tech and crypto-related startups went out of fashion, artificial intelligence is getting the most attention, but other areas — including life science, green energy, food, education, payments and insurance startups — are on UBS’s radar, Benzler said in an interview along with Nicola Goll, who runs the multi-manager PE group in the Americas.
“We see more access on the co-investing side,” Goll said. “General partners that had no issue raising instantly or very, very quickly are now a bit more cautious, and we get attractive terms, typically no-fee no-carry for deal flow arising from the existing portfolio for highly attractive transactions.”
UBS markets the products to institutional investors such as family offices and pension funds through individually managed accounts, as well as to illiquid and semi-liquid private equity strategies that invest globally.
Benzler said the strategies can outperform by a net 100 to 600 basis points, especially in more challenging times. The group was cautious during the venture capital spending spree in the past several years, which he said is paying off now: It hasn’t had losses on venture investments.
While venture capital occupies about 20% of the private equity space and saw the most drastic “exaggerations,” the rest of the industry — from private real estate to infrastructure and lending — has been less affected despite the reduced capital base, according to Benzler.
Benzler and Goll declined to comment on specifics about the funds they manage beyond saying they were surprised at how quickly they were able to raise “a decent amount” of capital this year. Marilyn Foglia, the head of asset management for Latin America, was also on the trip.
Artificial Intelligence
On artificial intelligence, “everyone” is trying to figure it out, Goll said. She cited cloud migration, data infrastructure and security as other attractive areas.
The group tends to invest in seed and Series A rounds while avoiding pre-IPO funding. The focus is on “bootstrap” companies that can quickly shift to being cash break-even and still post strong growth when scaling back, she said.
“We’re excited about this vintage and the years to come,” Goll said. “2021 was a blowout year in terms of deployment and blown out of proportion frankly; funds invested a complete fund cycle within a year — which is not healthy.”
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