Private Equity’s attractive and steady long-term returns seduce newcomers to the asset class
Fuchs & Associés and the LPEA hosted a Private Equity conference including a world class panel to discuss key trends
Private equity (PE) is gaining momentum globally amongst all investor types, from pension funds to family offices, as the “alternative” within the alternative investments industry. With decaying across public markets and heightened volatility, investors are making a shift to private equity and increasing allocations to the asset class in their portfolios.
Today, family offices in the US are already allocating up to 26% of their portfolio to PE while public pension funds dedicated up to 29% of total AuM to the asset class. Why is that? Attractive steady long-term returns over the past 20 years. According to 2015 data from Cambridge Associates, the CA Europe Private Equity Index Internal Rate of Return outperformed the MSCI Europe Index by over 3.85 points on any level. The difference being greater in the long term as well as if considering the Top 2 Quartile Funds. Data for the US reveals similar returns on a 5-year horizon.
With such positive trends marking PE and expected to continue, it is no wonder that Fuchs & Associés, which is launching a new PE platform, felt compelled to host a joint conference with the LPEA, under the title “Investing in Private Equity, The Long Term Investor Journey”. The conference attracted the interest of a significant number of Luxembourg-based family offices and asset managers who were present. They could meet distinguished guest speaker, Ian Prideaux, CIO of Grosvenor Estate, the Investment Office of the family of the Duke of Westminster, who has a significant allocation to PE as part of its multi asset class portfolio.
“As it stands, despite growing international interest for ‘real economy’ investments, PE remains a rarity in the portfolio of asset managers in Luxembourg as they seem to lack access to appropriate solutions and information to the asset class” says Rajaa Mekouar, Head of PE of Fuchs & Associés, who recently moved to Luxembourg from London where she built a 15-year long career in PE.
According to her, it is important to go “back to basics” and demystify PE as a viable investment alternative: “The objective of today’s event with the LPEA is to clarify the picture for and provide action oriented data to the many asset managers and family offices present in Luxembourg that are keen to diversify from public markets in a low return environment but are not too familiar yet with PE”.
Ian Prideaux based his presentation on Cambridge Associates statistics, which showed the importance of manager selection and thorough data analysis to build an attractive portfolio, thereby securing higher returns and lower volatility for the investor.
To further illustrate opportunities in PE, a “surprise” guest was invited – Target Global VC’s general partner Yaron Valler, to go through the “seven deadly sins of family office venture investment” who warned investors of the risks of misallocating to PE based on irrational approaches. “It is not unusual to see family offices chasing shiny, trendy, expensive deals which turn out to conflict with one’s investment strategy and resources at some point in time” says Valler.
The presentations were followed by an interactive panel moderated by Mekouar, which included the participation of Luxembourg-based GPs such as Stephanie Delperdange, Head of the Luxembourg office of SOFINA (a family office of Belgian origin) and Matthias Ummenhofer, Co-founder of mojo.capital. The panellists shared their views and experience in terms of sourcing, funding and managing PE/VC investments. One of the outcomes was that PE investing requires long term patient capital and active involvement in the management of the investments including manager selection. The “illiquidity premium” of PE is a reality.
Jerome Wittamer, President of LPEA and founding partner of Expon Capital, who concluded the conference, highlighted the need to “first learn to thrive on the growing superabundance of capital which leads to lower returns accross every risk category leaving investors with only 2 choices : either accept much lower returns or take more risks”. Quoting a report from Bain & Company, he finally pointed at the need for the wealth management industry to “dare embrace the PE-VC asset class and, in a world where the power is shifting from owners of capital to owners of good investment ideas, select those with the skills for spotting promissing longer-term investments“.
This was the first event co-organised by LPEA and Fuchs & Associés, one of its members, and is likely to have follow-ons on the back of this initial success and high demand from participants.
For those wishing to learn more about LPEA and Fuchs Groups please contact:
Rajaa Mekouar, Fuchs & Associés
Head of Private Equity
M: +352 691 20 15 50
(“PE for the individual investor” by RMekouar/ Fuchs & Associés)
Jerome Wittamer, LPEA
T: +352 28 68 19 – 602