Rocky road but also an opportunity

After 24 years at the forefront of private equity investment in New Zealand, Gavin Lonergan knows a thing or two about markets.

And what he knows right now is that his world is heading into a difficult period.

The Direct Capital director rattles off the list of all the things making headlines — widespread inflation, rising interest rates, damaged supply chains, labour shortages, Covid still and now war in Ukraine — and it’s all pretty negative.

But, he says, we have had variations of these events before — the oil shocks of the 1970s, for example — and they tend to melt into the history of the “ups and downs”.

“Maybe that should be the comforting perspective,” Lonergan says in the latest episode of Continuous Disclosure, a new podcast hosted by the Herald's business reporters, with support from Fisher Funds.

“Life is volatile, business is volatile, but we get through these periods.”

While the current environment doesn’t necessarily have much effect on a private equity company’s dayto-day thinking, it is a big factor for the firms and people they invest in. “Our basic approach hasn't really changed at all,” Lonergan says.

“Covid has been a fascinating period to go through. In our portfolio, we had one company that we thought would be very negatively impacted but in the two years since it has nearly doubled its business.”

Lonergan is not keen on making predictions but he does think the economy is in for a difficult year ahead.

“Battling inflation with quite high levels of gross debt and in particular household debt . . . that becomes very challenging.

“So without saying we're going to go into a recession, I think the risks are reasonably high and it’s a time to be cautious.”

Continuous Disclosure is available on IHeartRadio, Spotify, Apple Podcasts or wherever you get your podcasts. New episodes come out every second Wednesday.