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Bridging the Gap Between Private Equity and Real Assets

Paine Schwartz Partners has recently unveiled its inaugural white paper titled Investing in Real Assets with a Private Equity Approach: How Food and Agribusiness Investments Can Deliver the Best of Both Worlds. This release from the global leader in sustainable food chain investing poses a compelling conversation for investors looking to marry the characteristics of private equity with the stability of real assets, particularly in the food and agribusiness sectors.

Executive Insights

Kevin Schwartz, the CEO of Paine Schwartz, emphasized the increasing investor demand for private equity returns while simultaneously seeking to minimize downside risks and achieve more stable returns. The white paper sets out a detailed exploration of how food and agribusiness investments can fulfill this demand, leveraging over 20 years of experience and success within this sector.

The document outlines that traditional boundaries seen in conventional investment strategies may be redefined. By selecting optimal business models and employing strategic approaches, it is possible to harness the strengths of both asset classes—private equity and real assets—resulting in a unique investment opportunity.

Key Takeaways from the White Paper

1. Achievable Returns: The white paper asserts that investors can indeed achieve private equity-like returns while maintaining a real asset risk profile. This can be accomplished by being selective with business models and focused on strategies that effectively bridge the strengths of the two classes.

2. Investing in Adjacent Companies: Beneficial returns may also come from investing in complementary companies that have real asset exposure without the need to own the actual assets directly. This strategy potentially leads to higher returns, exposing the investor to similar economic dynamics.

3. Hybrid Investment Structures: The white paper discusses how hybrid structures, operational improvements, moderate leverage, and value-add strategies can play pivotal roles in striking a balance between risk and return. Furthermore, sector diversification can enhance portfolio resilience and overall returns.

4. Historical Performance Evidence: Utilizing real-world examples from Paine Schwartz’s extensive portfolio—including entities like Costa Group, AgroFresh, and BLOOM FRESH—affirms that investments with direct and indirect exposure to food and agribusiness have produced results comparable to traditional private equity investments in terms of returns. These examples highlight strategies focused on operational efficiencies, market exploration, and technological advancements.

The Bigger Picture: Investing for the Future

As the white paper underscores, while challenges do exist, a well-structured and executed investment strategy that involves food and agribusiness stocks could offer a pathway for investment opportunities poised for growth. With the evolving investor landscape increasingly valuing sustainability and stable returns, the insights shared by Paine Schwartz are timely and pertinent.

Positioned as the largest private equity firm in the sustainable food chain sector with around $6.5 billion in assets under management, Paine Schwartz continues its mission to promote productivity, sustainability, and health & wellness within the agribusiness domain. The firm’s approach is proactive, thesis-driven, and primarily focused on control buyouts while maintaining exposure to growth-oriented companies.

For more detailed insights, interested parties can view and download the white paper directly from Paine Schwartz's official website.