Transcription of The Stock Network Interview with Pengana Private Equity Trust (ASX:PE1), Investment Specialist Will Dougall
Will Dougall: Hi, I’m Will, an investment specialist here at Pangana Capital Group. Pangana is an ASX listed diversified Australian funds manager, offering investment strategies across global and domestic equities, private equity and private credit. We’re known for developing innovative structures that help Australian investors access parts of the market that are otherwise difficult to reach.
And today I want to walk you through one of those. Before I get into it, a quick note that this is general information only and it doesn’t take your personal circumstances into account and it’s not personal financial advice. So there’s a segment of global private equity with some unusual features.
Over the long periods, it has produced returns that have compared favourably to the large end of the market. Yet the leading investors in that segment don’t take any money. And for most Australian investors, it’s generally hard to reach directly.
So I want to cover three things. What that segment is and why it’s structurally distinctive and why the leading investors in it don’t take any money and how PE1, the Pangana Private Equity Trust gives Australian investors exposure to it. So let’s start with the segment itself.
The segment is called the middle market. Broadly, it’s made up of private companies with revenues somewhere between 10 and 250 million US dollars. Companies that are big enough to be economically important but not big enough to be household names.
And there are tens of thousands of them. Just how big is that segment though? So according to research from GCM Grosvenor, citing CapIQ data as of March 2026, around 88% of North American private companies are middle market. And only 34% of 2025 private equity fundraising went to funds sized to invest there.
Reflecting the natural concentration of institutional capital in larger deals but even accounting for that, the middle market is a very large investment universe. And more importantly, it has some structural features that sets it apart from the top end of private equity. Because there’s less competition for each deal, the prices paid to acquire middle market businesses have tended to be lower than at the larger end because financing works differently at smaller deal sizes and transactions are typically used less debt.
And a good investor in the middle market has more ways to try and create value. They can help a founder-owned business scale up, they can combine smaller companies that are competitors, they can improve how a business is run day-to-day, or they can grow a company into something a larger buyer eventually wants to acquire. So there are also more ways to eventually sell a middle market investment, whether that’s to a strategic buyer, a larger private equity firm, or in some cases, through a public listing.
And those features have historically been associated with stronger returns and research from GCM using an independent Burgess data set shows that middle market buyout funds have on average produced higher returns than large cap funds across five, 10 and 15 year periods. Though as always, past performance is not a reliable indicator of a future performance. So if the middle market has these features and this history, you’d expect institutional investors to be lining up for the leading managers in this segment.
And plenty are, but they run into a specific problem which brings us to GCM Grosvenor. The specific problem here is capacity. Top tier middle market managers have become oversubscribed.
According to GCM, established managers can be selective about who they let into their funds and the investors who backed them years ago tend to roll their money into each new fund. New investors, regardless of size, are often left competing for whatever residual capacity is available. And for most institutions and for virtually every Australian investor, that means the segment where there are these structural features that exist is also the segment that’s genuinely hard to reach.
So in GCM’s framing, access to the middle market today is less about size and actually more about the relationships built over time, which is where GCM Grosvenor come in. GCM Grosvenor, they’re a global investment firm specialising in private markets. It’s listed on NASDAQ and as of 30 June, 2026, manages 97 billion USD in assets.
Its private equity practice has focused on the middle market for over 25 years with its first investment into a middle market fund manager in 1999 and its first direct middle market co-investment in 2003. As at 30 September, 2025, GCM had committed over 14 billion US dollars to middle market funds and built relationships with over 195 middle market managers. On roughly half those funds, GCM holds a governance seat, meaning it’s at the table when key portfolio decisions get made and on larger direct co-investments of at least 20 million US dollars, GCM has led the deal around 65% of the time.
And since 2003, GCM has deployed over 4 billion US dollars across more than 180 middle market co-investments as well. So that kind of position isn’t something you can really buy at scale today. It has to be built one manager relationship at a time over decades.
And that’s a phrase GCM uses about their own approach and it captures why the access is durable. GCM have been our private equity partner since PE1 listed on the ASX in 2019 and PE1 is the vehicle we built with GCM to bring this strategy to Australian investors. And now this brings us to PE1 itself.
PE1’s portfolio is allocated roughly 71% to direct co-investments alongside GCM’s manager partners, 23% to private equity funds and 5% to private credit. Underneath those broad categories sit around 100 direct co-investments, 10 primary funds, 45 secondary transactions covering more than 75 underlying funds and 26 private credit positions. All up, PE1 gives Australian investors well through exposure to over 550 underlying companies through a single ASX trade.
That diversification runs across sectors and geographies with around 37% of the portfolio in industrials with meaningful weights in financials, information technology, consumer sectors and healthcare and around 79% is invested in North American businesses with the balance across Europe, Asia and Oceania. Now to give a sense of what that exposure looks like in practice, PE1’s 10 largest positions as at 31st of July, 2026 include the world’s leading commercial space and satellite communications business in SpaceX, a German company making body armour and defence equipment, one of the largest wealth advisory networks in the US, the technology backbone of America’s Medicaid public health system, a top 20 US specialty insurance company, the National Stock Exchange of India, a global cold storage logistics leader, and China’s largest internet platform in ByteDance and a leading ride share operator across Europe and Africa. So portfolio composition changes over time and building direct exposure to a portfolio of businesses like these would be very difficult for most Australian investors.
So to wrap up, the middle market is a distinctive part of private equity and one that has some structural features that GCM’s research suggests have historically been associated with higher long-term returns than the larger end of the market. Though again, past performance is not a reliable indicator of future performance, but access to these leading managers in this segment is genuinely hard because those managers are capacity constrained and access takes decades of relationship building to earn. GCM Grosvenor have been earning it since 1999.
So PE1 is our vehicle for bringing that access to Australian investors in a single ASX-listed structure. It provides look-through exposure to over 550 underlying companies and it’s managed in partnership with a global investment firm that has focused on this part of the market for over 25 years. PE1 has fees and expenses that apply and its long-term structure means it isn’t suited to every investor.
So for more information on the trust, including its structure, fees and risk, please refer to the PDS and the target market determination and ASX announcements available at pengana.com.
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