Private equity investors are scouring Australia for assets that will not be exposed to a cyclical downturn in the economy and possible recession following on from the recent wildfires and the Covid-19 outbreak.
Infrastructure is a defensive asset class and a relatively shielded place to park capital in uncertain times, Pacific Equity Partners (PEP) Director Rohan Wolfers told the Australian Venture Capital Journal conference in Sydney today.
“The idea that we’re in uncertain times is not a shock to anyone. We’re always thinking about what investments we can make in durable businesses and non-cyclically exposed businesses,” he said. “We’re seeing that the lines between infrastructure and PE are blurring a little bit. Businesses like day surgeries that were previously thought of as PE are now being pursued by infrastructure funds.”
Wolfers noted that asset prices in private markets, including infrastructure, remain high because their listed peers are trading at high multiples of around seven-eight times earnings before interest, tax, depreciation and amortization.
Nevertheless, there are “pockets of value” to be found in the Australian market, he added.
“Ultimately, sponsors who are focused on buying cyclical businesses, loading them up with debt and hoping that will generate a return will struggle compared to sponsors who have a clear investment thesis focused on transforming their businesses and unlocking capital constraints that might have existed,” he said.