Bangkok Post

The Private Equity Answer to Uncertainty: Thematic Investing

Private equity (PE) firms find themselves facing a perilously uncertain landscape. But leading firms are getting ahead by focusing on emerging macro forces through thematic investment.

By Hugh MacArthur, Suvir Varma and Sharad Apte

Published on August 21, 2016
min read


This article originally appeared on Bangkok Post. As they scour the globe for their next round of investments, private equity (PE) firms find themselves facing a shifting and perilously uncertain landscape. The forces that drove business expansion and underpinned investment returns since the PE industry's earliest years are winding down, bringing the global economy to a major inflection point. China's three-decade-long surge of economic growth is over, but the transition path that China's economy will take and where it will end up remains unclear. The baby boomer generation's consumption patterns are evolving as its peak period of earnings and savings ebbs and its sizeable cohort ages into retirement. Meanwhile, how vibrant and different demand will be as the "echo boomer" millennials reach their consumption peak will not be apparent for another decade. The breakthroughs in computing and telecommunications that powered the decades-long information technology revolution have matured, but the advances in robotics, genomics, artificial intelligence and nanotechnology that will give rise to the next wave of commercial development are only just beginning to emerge from the labs. As Bain & Co reports in its Global Private Equity Report 2016, many leading PE firms are getting ahead in this challenging environment by taking a thematic approach to investing that enables them to get an early read on emerging macro forces, organise around them and incorporate a deep understanding of their potential impacts on the deals they choose to make (or walk away from). The themes that firms adopting this approach embrace are big ideas that will unfold over a decade or longer. Thematic investors take a top-down view of one or more of the macro forces they focus on and anticipate how they will play out across sectors, industries and geographies. They bring their deep analytical skills to bear, quantifying how an overarching investment theme will influence consumption patterns and capital flows, reconfigure supply chains and affect results at the individual business level. Read the full article at Bangkok Post. The article was prepared by the authors at Bain & Co as part of its Global Private Equity Report 2016.

This article originally appeared on Bangkok Post.

As they scour the globe for their next round of investments, private equity (PE) firms find themselves facing a shifting and perilously uncertain landscape. The forces that drove business expansion and underpinned investment returns since the PE industry's earliest years are winding down, bringing the global economy to a major inflection point.

China's three-decade-long surge of economic growth is over, but the transition path that China's economy will take and where it will end up remains unclear. The baby boomer generation's consumption patterns are evolving as its peak period of earnings and savings ebbs and its sizeable cohort ages into retirement. Meanwhile, how vibrant and different demand will be as the "echo boomer" millennials reach their consumption peak will not be apparent for another decade. The breakthroughs in computing and telecommunications that powered the decades-long information technology revolution have matured, but the advances in robotics, genomics, artificial intelligence and nanotechnology that will give rise to the next wave of commercial development are only just beginning to emerge from the labs.

As Bain & Co reports in its Global Private Equity Report 2016, many leading PE firms are getting ahead in this challenging environment by taking a thematic approach to investing that enables them to get an early read on emerging macro forces, organise around them and incorporate a deep understanding of their potential impacts on the deals they choose to make (or walk away from). The themes that firms adopting this approach embrace are big ideas that will unfold over a decade or longer. Thematic investors take a top-down view of one or more of the macro forces they focus on and anticipate how they will play out across sectors, industries and geographies. They bring their deep analytical skills to bear, quantifying how an overarching investment theme will influence consumption patterns and capital flows, reconfigure supply chains and affect results at the individual business level.

Read the full article at Bangkok Post.

The article was prepared by the authors at Bain & Co as part of its Global Private Equity Report 2016.