Norton, who oversaw about $US20 billion in private equity funds-of-funds for Goldman Sachs between 2002-2007, says very few funds-of-funds have the capacity to analyse and evaluate opportunities in the fashion that placement agents do. Helix formed a relationship in Australia with Les Fallick, who founded Principal Advisory, in 2003. The new areas for the firm are emerging markets, infrastructure and, in the near future, distressed debt.

Principal has a separate arrangement, with its own fund, for international opportunistic property. Lord Cecil says that emerging markets such as India are in a similar position for private equity as Europe was 10-15 years ago. “There have been only 14 major management buyouts in India, ever,” he says. “But it is encouraging that you can execute a buyout there… Money flows in private equity to economies which are not only experiencing high growth but also structural change. In India, people are now seeing this as irreversible.”

In private equity terms, some developed markets are also seen as ‘emerging’, such as Germany and Japan. The search for good distressed debt managers is difficult at the moment, because the established players already have dedicated followers, with a new-found appetite, and don’t need anyone’s help in raising money.

Watson Wyatt’s Ed Francis says the firm has a long history in private equity and in the past three years pension funds have been looking to adopt more complexity. “Most big UK funds have been through the fund-of-funds phase. Funds-of-funds are efficient but they’re expensive,” he says. “So we can have the same or better level of underlying performance with more cost efficiency.”

Watson Wyatt has about 100 client funds in the UK in private equity, out of 350 clients overall in that country, but only a dozen are doing direct private equity with individual mangers. The ratio is probably a little higher in Australia, according to Sandi Orleow, the head of private market research in Australia. This is because the Australian institutional market tends to be dominated by very large funds. Nevertheless, Watson Wyatt will focus on funds-of-funds in certain areas, such as venture capital. “Venture capital takes up a huge amount of time,” Francis says. “It is very difficult for direct investment because of the time and effort involved.” Watson Wyatt has 14 specialist researchers in private equity, four of whom are in Australia, and separate teams handling infrastructure and opportunistic property.

The main investor nervousness remains around the “weight of money” argument, Francis says, with too much money chasing too few opportunities. Echoing Helix’s move into emerging markets, Francis says that an emerging theme for Watson Wyatt is about benefiting from growing economies for years to come. “The key question with private equity will always be ‘are you with the smart money?” he says. Between 2002 and 2006, the debt/EBITDA multiples of private equity deals rose from 4.0 to 6.2. Prices, as expressed by EBITDA purchase multiples rose from 7.0 to 8.6 in the same period.