A compelling time for middle-market buyouts

BY   |  TUESDAY, 13 FEB 2024    12:54PM

In most contexts, the middle seat is perhaps one of the most loathed places to be. However, if you are facing an investable landscape filled with growing uncertainty- and are (finally) convinced that trying to time the market is a bad idea- then a heightened focus on the middle-market buyout segment may be warranted. That is more than a 'hunch' or 'gut feeling', rather, that statement is based on real private market data.

This vanilla buyout strategy has performed especially well both during and after times of greater uncertainty since 2000. This is particularly the case if middle-market buyout performance is compared with returns that could have been generated by investments in public market strategies. Where does this land us?

Look no further than recent times- buyout category portfolios were up modestly in 2023, and that performance had fared quite well compared to choppier, publicly listed assets since the outset of 2022. Their relative outperformance tends to be the greatest in more volatile times, and post-turndown vintage years can offer buying opportunities. Breaking this segment down further, the data tells us that middle-market-focused buyout exposure has the potential to create even greater long-term outperformance within a balanced portfolio.