Brendan Lyons: Investing Patient Capital in Times of Illiquidity

Following a dramatic change in central bank rhetoric in 2022, and one of fastest shiftsin interest rate policy in history – small, high growth, and emerging businesses saw their valuation reset.

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Now, enter 2023, a market with much higher costs of capital, much scarcer liquidity, and generally cautious investor sentiment. Should investors be considering investment in these businesses?

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While seemingly uncomfortable, the best private market vintages usually favour conditions like those experienced in 2022 and now 2023.

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In this episode, I speak to Brendon Lyons, Head of Private Investments and Portfolio Manager of the Perennial Private Investments team. The Perennial team manages approximately $7.4B across Australian public and private markets.They have an experienced team of 66 professionals, with 16 of those sitting across private markets and listed small and micro caps. Within our industry, Perennial is renowned for its expertise across small and micro-cap investing and with the number of high growth businesses choosing to stay private forlonger, it was natural for Perennial to move into this market. 

We talk to how the macroeconomic environment has changed over the last 12-18 months, particularly with regards to lower levels of liquidity, as the cost and availability of capital becomes more expensive and scarcer, and creating opportunities in high growth, smaller and emerging businesses. The Perennial team are arguably the pioneers of Australian private to public investing, helping to professionalise and prepare private businesses for an eventual public listing and to ensure they are as ‘market ready’ as possible. Brendon highlights how the number of companies they are seeing has grown from around 300 to now 900 annually, how the types of businesses they invest in are either profitable, or at break even, and how a decades long track record has enabled the Perennial brand to attract some of the best founders, and structure deals that many others can’t. 

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