Buyout firms facing a slower fundraising environment are giving investors much needed respite, according to the head of private equity for Alberta Investment Management Co.

“We have seen a slowdown in fundraising a little bit and I think a lot of LPs (investors) are welcoming a bit of a breather,” said Peter Teti. The firm managed $168.3 billion at the end of 2021.

Rock-bottom interest rates prompted yield-hungry investors to pile into private equity in the last decade and encouraged buyout firms to make deals and set ever-larger fundraising goals. The industry may be facing a reckoning now as rising inflation and soaring rates trigger anxiety about a protracted recession.

Even so, Aimco will continue to commit to some existing fund managers and selectively add new ones, Teti said in an interview. At the same time, he expects a decline in capital deployment and distributions. 

Private equity makes up around 8 per cent of Aimco’s total assets under management. The firm, which invests for pension plans, endowments and government funds in Alberta, plans to increase such holdings in the coming years with the expectation that the asset class will continue to outperform other investments, Teti said.  

'CRITICAL LENS'

Aimco’s private equity holdings returned 66 per cent in 2021, boosted by unloading some investments during a period of frothy valuations. The asset manager also wagered on technology stocks in the last two years -- one of the worst hit sectors in the recent market selloff -- investing in software companies including Medallia Inc., RealPage Inc. and Visma AS.  

Public markets “painted certain technology companies” with “one brush,” but Aimco’s investments have strong underlying operating metrics, Teti said. Even so, investors are approaching private equity with more caution, he said.

“I think people want to be mindful of making investments in this environment,” Teti said.