What we did in lockdown: the diary of a private equity manager


A bit more exercise, breakfast with the kids more regularly… not everything about lockdown was bad. The time I’m used to losing to the commute was certainly used more effectively.

For those lucky enough to continue working throughout, the pandemic was disruptive, but also reshaped priorities in ways I suspect many hope will stick.

For equity investors there were several parallels. Certainly there were challenges, but also a number of opportunities to be explored. For private equity managers in particular, the opportunities broadly occupied one of two camps.

Some otherwise robust companies suffered brutal but temporary demand shocks. For investors with patience to spare, some of these companies could recover strongly with a little TLC (tender loving capital). These are the mispriced growth opportunities.

The other opportunity set comprised those companies exposed to robust themes or dynamics that the pandemic only accelerated, or truly embedded. Online retail, for example, did not just pick up, for the vulnerable it was nothing short of a lifeline. These are high growth companies that benefit from a rapid and lasting change in consumer behaviour.

What did we do?

The key to identifying the best opportunities was sorting the effects of the pandemic into those that would endure, those that were transient, and how to be on the right side of each.

Mispriced growth

For example, education services fell away as schools closed and universities suspended classes, but were always going to come back. That is not to say remote learning will not persist and become more normal in the future, but it will be an additional feature rather than the norm. Face-to-face learning, collaboration, practical learning – thinking of sciences and medicine in particular - are not going to disappear. As a result, we invested into leading UK training and education specialist Learning Curve. It has grown rapidly since its foundation in 2004 and uses a flexible model offering both online and face-to-face delivery.

Similarly, we do believe – and have for some time – that greater flexibility in working from home will become more conventional. Even so, there was a point – let’s call it “peak panic” – during which the future of office-based jobs were questioned. We always felt this was excessive. Where else would we get our gossip?

Water dispenser usage fell off a cliff as workers stayed at home, but in our view the long-term drivers remained intact. Purified and clean water and plumbed in dispensers are far better for the environment, and reduce single use plastic bottles. Some of the concern surrounding future occupancy in buildings is justified, but we can be sure water facilities are always required.

We engaged with the theme with an investment in Waterlogic – a leading global provider of purified drinking water dispensers, headquartered in the UK. Our investment will help Waterlogic with an extended investment horizon, adding capital to continue executing on its ambitions via organic and acquisition led growth.

High growth from lasting change

An aspect of the pandemic we do not expect to roll back is cashless payments. Online trading boomed in lockdown and its growth only set to continue. Payments solutions are the critical plumbing that sits between merchants and customers, and Rapyd is another company that attracted investment from us during the pandemic.

Rapyd offers fast local payments anywhere in the world, enabling companies across the globe to access markets quicker than ever before. The financing we offered will be used to double its engineering and product teams, while new customers can adopt the service faster than ever before.

All of the above are examples of our total dependence on fast, stable digital infrastructure, which was laid bare in 2020. Predictability of network performance is crucial to next generation communications, and artificial intelligence is vital to finding failure patterns to prevent outages by automating repairs.

Our investment in Bristol-based Graphcore exposes us to the Intelligence Processing Unit (IPU), a new type of microprocessor specifically designed from the ground up to meet the needs of current and next-gen artificial intelligence applications. Arguably Graphcore’s products are the most wide-ranging in terms of application, with its technologies expected to be transformative across all industries. Whether you are a medical researcher, roboticist or building autonomous cars, the next phase for technology will depend on AI.

Hybrid investment

These investments are an illustrative handful. Our approach supports both businesses challenged by pandemic disruption and those whose growth has been supercharged by Covid-19. Both types of opportunity highlight the exciting growth only accessible through an extensive private equity network. However, it’s also important to recognise how important nurturing capital can be to businesses. Whether its those that deserve to survive a tough period or to lift next generation businesses onto their feet for the first time, private equity can offer critical support.

This article was published on in August 2021. Any company references are for illustrative purposes only and are not a recommendation to buy and/or sell, or an opinion as to the value of that company’s shares. The article is not intended to provide, and should not be relied on, for investment advice or research. Please note that the value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested. This is not a recommendation and you should speak to your adviser before making any investment decision.

Listen to Paul Lamacraft on the Investor Download podcast. New episodes are available every Thursday from wherever you get your podcast.