Schroders Private Assets Media Summit 2021: Capturing the ‘complexity premium’

Investors now need to look beyond the ‘illiquidity premium’ and seek to harness the ‘complexity premium’, journalists at Schroders Private Assets Media Summit 2021 heard.

Historically, investors have sought to benefit from the illiquidity premium, essentially the excess returns generated from locking up their capital for the long-term.

But with many investors now having embraced the illiquidity premium, the next target is to capture the complexity premium, sources of enhanced returns which can be found in more specialised and harder-to-access private equity market segments.

Nils Rode, Chief Investment Officer, Schroders Capital, commented:

“The complexity premium refers to excess returns driven not by sacrificing liquidity, but by the level of engagement needed both in sourcing a deal, and the skills and work needed to make it a success.

“Delivering a complexity premium requires in-depth knowledge of specific areas, extensive local networks and ongoing engagement.

“These are areas that reward investors for participating in investments that are hard to replicate and Schroders Capital is well placed to help investors benefit from this.”

For example, in the private equity world, certain innovation driven or acquisition focused growth strategies can help provide investors with exposure to the complexity premium.

David Seex, Co-Head of Private Asset Sales and Head of Private Asset Solutions, Schroders Capital, commented:

“Schroders Capital offers investors a deep and extensive range of private asset investment options. Crucially, this means that we can aim to deliver the solutions which will ultimately help investors to look beyond the illiquidity premium and harness the complexity premium.”

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