Fundraising for private market funds is seen as a complicated task and “not fully harmonised yet,” according to Stéphane Pesch, CEO of the Luxembourg Private Equity and Venture Capital Association (LPEA). That leaves room for fast movers, such as those in Luxembourg.
Fundraising has traditionally been “underrated and underestimated”, Pesch said. That is despite the fact that fundraising serves as “the cement” between limited partners (investors) and general partners (fund managers).
He was speaking at LPEA Insights, an informational and networking event that is meant to be a forum for private equity and venture capital investors and fund managers to connect.
Resilience in rocky times
Given “recent events”--namely covid, the war in Ukraine, and rising inflation and interest rates--“lots of reactivity will be required” in the coming months, Pesch said, addressing an auditorium full of investors and fund managers. “But we can be proud of the resilience” of the PE sector in recent years.
Picking up on the theme of market turbulence, Claus Mansfeldt, chair of the LPEA and managing director of Swancap Investment Management, said in his remarks that there was “a lot of fear out there”. This could lead certain investors to “fly to cash”. Yet such a defensive position will garner “well, well below the rate of inflation” meaning investors will earn “negative real yields on your assets”.
Double due diligence
Mansfeldt reiterated that PE “outperforms public stocks most during difficult times”. He pointed to “PE’s key value add”, which he said was efficient ownership, efficient decision-making, focus on market leaders and that each deal has “full-blown due diligence”.
Many PE deals utilise leverage. Mansfeldt claimed that leverage not only boosts returns but also add “a second round of intrusive due diligence” to the screening process.
The LPEA said that more than 300 participants registered for the event.