Primaries take the lead: How Rachael Lockyer sees the future of private equity

At the recent Investment Leaders Forum in New Zealand, Rachael Lockyer, head of Australia at MLC Private Equity, delivered a pointed and data-rich thesis on the enduring value of private equity ‘primaries,’ as in, initial-stake investments. With MLC’s 28-year heritage in the asset class and a portfolio that spans co-investments, secondaries and funds-of-funds, Lockyer’s perspective holds weight. She argued that amid an evolving landscape, increasingly crowded with capital and complexity, the true engine of private equity value remains unchanged, early entry and operational transformation.

Lockyer began by reaffirming a long-held truth within private markets, that the first institutional capital into a business remains the most potent. “Being the first institutional capital is transformative,” she said. “It involves improving management, enhancing governance, aligning incentives, and accelerating the business model, often within the first 100 days”. This early intervention, she said, is where 89 per cent of total value creation in buyout investments is typically generated.

This conviction is not merely philosophical. MLC’s own co-investment data shows that earnings before interest, taxes, depreciation and amortisation (EBITDA) growth accounts for more than 80 per cent of value creation across its funds. By contrast, other traditional levers like multiple expansion and leverage have waned in importance, not least due to increased competition and unpredictable interest rates. “Multiple arbitrage is harder to rely on now. And leverage, given interest rate volatility over a typical seven-year hold, is too uncertain to be your alpha driver,” she noted.

In contrast to this primary thesis, Lockyer cast an eye towards the secondaries market. While once a reliable hunting ground for alpha via discounts to net asset value (NAV), competition has recently eroded those margins. “The average discount on secondaries has dropped from 21 per cent in 2020 to just 7 per cent in the first half of 2025,” she said. “And that narrows the value creation window substantially”. Fundraising in the secondaries space, she noted, rose 51 per cent in the first half of 2025, the busiest half-year on record.

What is lost in secondaries, according to Lockyer, is the alpha that comes from operational uplift. In primary investments, private equity managers are able to install governance, build dashboards, replace underperforming leadership, and cut legacy costs, often within months of acquisition. “You’d be surprised how many founder-run businesses don’t even have a CFO,” she observed. “They consider it a cost centre. We’ve doubled EBITDA simply by cutting unprofitable customers in year one”.

Her case studies brought this into sharp relief. One involved a textbook buy-and-build strategy by a healthcare-focused private equity firm that grew from 53 to 221 sites across four US states, delivering a four times cash-on-cash return in five years. Seventy-two per cent of EBITDA growth occurred within the first three years, underlining her thesis that the early period is disproportionately productive.

A local example, NZ Bus, showed a similar pattern. The company tripled its EBITDA in just two-and-a-half years after depot relocation, renegotiated contracts, and preparation for electrification of its fleet. MLC backed the investment alongside manager Next Capital, and Lockyer highlighted that 81 per cent of value uplift came in the first 24 months.

The formula Lockyer laid out is methodical and intensive. In year one, value is unlocked through a ‘100-day plan’ focused on setting operational foundations. In years two and three, revenues are scaled, adjacent businesses acquired, and markets expanded. From years four to seven, the business is polished and packaged for exit. “By the time they reach the start line, discussions have begun, diligence is done, and the internal rate of return (IRR) clock is ticking,” she said.

What enables this acceleration is alignment of incentives. Managers are not only compensated through performance fees, but are also asked to co-invest in the businesses they manage. “They often mortgage their homes to invest in the company. Management teams, on exit, often get five times the value creation the private equity sponsor gets,” Lockyer noted.

For advisers and allocators, her message was clear: don’t chase returns in crowded corners. “You are not buying someone else’s headache. You are investing early and unlocking growth with partners who are incentivised to do the same,” she said. Primaries, in her view, deliver superior alpha by entering when the business most needs transformation, and before it’s been optimised by someone else.

Lockyer concluded by urging investors to reassess portfolio construction in the face of this shifting return profile. “We’ve looked across our program and the story is the same, early exposure equals higher value capture,” she said. “That’s where we’ve had the most success.”

In a market increasingly defined by excess capital and thinning margins, Lockyer’s fidelity to the basics, first money in, operational change, and strong alignment, sounds less like orthodoxy and more like a rebuke. The simplicity is strategic. And for those who are listening, the message is clear, real alpha comes early.

Laurence Parker-Brown

Laurence Parker-Brown is head of content at The Inside Network and managing editor of The Inside Adviser and Investor Strategy News.