Letters: Finding the hidden gems

[Re: City sitdown: Private equity should learn to be more emotional, argues City grandee, October 5]

It’s absolutely right to say that there are opportunities for healthy returns in private equity at the moment – but Bob Sheard only touches on the biggest source of opportunity right at the end of his interesting interview: off-market businesses. He’s also right to highlight the need for investment, but we need to talk about where funds are best spent.

The biggest issue with finding these hidden gems is three-fold: the severe lack of consistent information, the inability to search through it, and the uncertainty of whether any of it is actionable.

That’s where we’re seeing sophisticated AI come in – increasingly it’s the not-so- secret weapon that separates the leading private equity investors from the pack. You then need the human touch to make sure what the AI finds is accurate, and to go the extra mile by getting the answer to the most important question in: is the company willing to sell?

Very few firms can do this in-house – it’d be a huge undertaking to have a rich, well-developed, owned database. What we’ll continue to see is more and more firms using external specialists to do the expert heavy lifting for them.

Tanguy Lesselin

Finquest