Why Collaboration Matters in Private Markets Investing

Information is key to making smart investing decisions. The more data an investment manager has, the better their ability to evaluate investment opportunities. For public market investment managers, there are many sources of information available. However, when it comes to private markets, data and information are harder to come by. Private market managers often need to rely on their relationships and market insights to help inform their decision-making.

This makes timely and accurate information even more essential when investing in private equity, private credit or private real assets. Given the value—and scarcity—of information, collaboration across asset classes is an important way that private markets managers can enhance their investment process.

The power of collaboration

When private markets investment managers are looking for opportunities, collaboration broadens their choices and helps them create value in three critical ways:

Superior idea generation and sourcing

A private markets manager who sees the big picture is better positioned to identify attractive investments. The direct lending arm of a firm can source potential opportunities for the private equity business to consider. The private equity manager can deliver information about industry peers that can inform the private credit team’s decisions about whether and how to lend to a company.

Interconnected business units can highlight industry trends and areas of conviction across the entire private markets ecosystem. In turn, this knowledge enables managers to be more selective, uncover opportunities where others have not, and avoid potential pitfalls.

More expansive due diligence

The information advantage that comes from access to more data can also be a powerful risk mitigator. For instance, direct lenders must closely manage credit risk. The insight they gain, both within companies and across their industries, can offer valuable context that enables better risk management for the private equity and private real assets teams.

With every deal or financing, managers gain valuable insights and context about companies, geographies and industries. A non-siloed team can generate and share analytics that allow everyone to identify the highest-conviction opportunities.

Illustration showing three people running upwards on a sparkline

Faster speed to market

Successful private markets investing depends on the ability to act on opportunities before anyone else. When opportunity knocks, a collaborative firm can respond more quickly than a fragmented manager can. For example, one side of the house might identify a supply-demand imbalance in an industry that it believes will persist regardless of the current market or economic environment. This can lead to potential deal flow across the firm’s capabilities.

With information at their fingertips, managers can move more quickly than a firm that must start at square one. Real-time information about how companies and industries are doing on a daily, weekly and monthly basis enables managers to draw actionable investment conclusions and transact on them in a timely manner.

Collaboration leads to better outcomes

Financial professionals waking in hallway outside a conference room

Skilled investing is about connecting the dots. The more dots a manager sees, the more effective the decision-making will be. Private markets investment managers who have clarity over multiple asset classes—and processes in place to share information—are more likely to achieve durable results across market cycles.

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AccessAres is your resource for education and information about the private markets. Talk to us to learn more about these important asset classes.

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AccessAres is the thought-leadership and educational division of Ares Wealth Management Solutions. The materials distributed by AccessAres are for informational purposes only and do not constitute investment advice or a recommendation to buy, sell or hold any security, investment strategy or market sector. Ares Wealth Management Solutions is a global brand of Ares Management Corporation.

Important Information:

This material is for informational purposes only and is neither an offer to sell nor a solicitation to purchase any related securities. Investing in private markets investments involves a high degree of risk including, but not limited to:

Risk of substantial loss of principal - direct Investments in private companies and investments, involve a high degree of business and financial risk that can result in substantial losses
Illiquidity risk - investments are not listed on any securities exchange and may not be readily liquidated, therefore it may be impossible to get your money back
Valuation risks - the risk that the securities are valued at prices the seller is unable to obtain upon sale due to factors such as incomplete data, market instability, human error, or no readily available market quotations, and other factors
Risk related to private companies – these companies are generally not subject to SEC reporting requirements, are not required to maintain accounting records in accordance with generally accepted accounting principles and are not required to maintain effective internal controls over financial reporting. As a result, there is the risk that investors may invest based on incomplete or inaccurate information, which can adversely affect performance. Private companies may also have limited financial resources, shorter operating histories, more asset concentration risk, narrower product lines and smaller market shares that can make such private companies more vulnerable to competitors’ actions and market conditions

Financial advisors must carefully consider the risks and other suitability details in determining appropriate investments for their individual clients’ portfolios.

These materials may contain “forward-looking” information that is not purely historical in nature, and such information may include, among other things, projections, forecasts or estimates of cash flows, yields or returns, scenario analyses and proposed or expected portfolio composition. The forward-looking information contained herein is based upon certain assumptions about future events or conditions and is intended only to illustrate hypothetical results under those assumptions (not all of which will be specified herein). Not all relevant events or conditions may have been considered in developing such assumptions.The success or achievement of various results and objectives is dependent upon a multitude of factors, many of which are beyond the control of Ares. No representations are made as to the accuracy of such estimates or projections or that such projections will be realized. Actual events or conditions are unlikely to be consistent with, and may differ materially from, those assumed. Prospective investors should not view the past performance of Ares as indicative of future results. Ares does not undertake any obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise.

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