Abstract

Growth equity compared with the traditional leveraged buyout strategy has more flexible investment structure and superior return. The growth company is more mature in its product and business stage than VC and is less dependent on leverage than mergers and acquisitions, high-quality growth companies in the current interest rate hiking environment can generate stable cash flow and beat the pressure of interest rate increasing by growing well, and avoid the potential risks brought by high leverage. Growth funds show good resilience in the crisis and will be a good supplement to the PE allocation. The risk of growth strategy is between VC and traditional buyout with overall performance increased and the characteristics significantly improved. In PE asset allocation, a portfolio structure based on mergers and acquisitions and growth exposure should gradually be formed. Suggest to optimize PE investors’ portfolio and diversify their asset allocation, evaluate excellent growth managers in addition to buyout or secondary strategies. We can still have a good expectation on Growth funds which could be a very important part to overall PE portfolio. So the independent growth funds with excellent track record, growth strategy in large alternative platforms with strong networking and brand, high-growth sector-focus funds, Asia growth opportunities are pretty good categories which investors should pay more attention to. (The article represents only the authors opinion).

Keywords: Growth Equity, Venture Capital, Leverage Buyout, Asset Under Management (AUM), Dry Powder, Internal Rate of Return(IRR), Cash flow