![]() Information regarding expected market returns and market outlooks is based on the research, analysis, and opinions of the investment team of the AIP Private Markets Team. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions. The statements above reflect the opinions and views of the Morgan Stanley Alternative Investment Partners Private Markets (“AIP Private Markets Team”) as of the date hereof and not as of any future date and will not be updated or supplemented. Reserves are going to be important for single-asset investments no matter the structure. But for us, just like a, if we are expecting prolonged market challenges, we have to make sure we have reserves to support those underlying companies, to protect our position or to help those companies take advantage of a strong competitive position when others are challenged. If your experience is only committing to funds, it's not something that is obvious. Markle: When we anticipate a downturn, one of the things that we think about for our portfolios is ensuring that we have adequate reserves to support our companies. WSJ Pro: What about deals that you have already backed during more ebullient times? How are you viewing those portfolio companies? I don't think that's new for us, but now we're not the only ones asking those questions. We look very closely at leverage levels and pricing packages and how managers are structuring their deals. ![]() Markle: We have been expecting a higher-rate environment now for years, so the questions we have been asking in recent years are the same. WSJ Pro: How are rising interest rates affecting your diligence? The effect of GPs needing more co-investment capital and other really slowing down their co-investment programs has resulted in a net pickup in the number of deals we see. When things get a bit challenging for everyone else, our phone rings a bit more frequently. There's a bit of a countercyclical dynamic going on. The other dynamic is that that were planning on a fundraise or amid a fundraise are now revising their expectations about the amount of capital they are going to have to deploy, and they are turning to co-investors to help bridge that gap. What that has led to is other that were previously seeking co-investment deals have gone quiet. ![]() Markle: A couple of dynamics have influenced our deal flow in the last several months, the most significant of which has been the ‘denominator effect'. ![]() WSJ Pro: How do you see the opportunities for co-investors evolving in the face of a slowing deal market? Neha Champaneria Markle, head of AIP private-markets solutions at the firm, which deploys on average several billion dollars annually across fund commitments, co-investments and secondary transactions, spoke to WSJ Pro Private Equity's Laura Kreutzer about the outlook for co-investments in the coming year. The unit is armed with a fresh pool of capital for such transactions, after announcing last week that it raised $1.25 billion for its second multimanager co-investment fund, handily exceeding the bank's $750 million goal. The alternative investment partners' private-markets team at Morgan Stanley Investment Management has deployed nearly $4 billion directly into co-investment deals in private markets since the unit's inception in 1999, according to the firm. Morgan Stanley's Markle Sees Co-Investment Silver Lining in Slower Market Neha Champaneria Markle, head of private-markets fund-of-funds investing, says slowing deal making and rising debt costs can benefit co-investors like Morgan Stanley
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