Five Minutes with Wladimir Mollof

ACG Group has built itself into a significant limited partner through portfolio acquisitions on the secondary market. The fund of fund's president Wladimir Mollof shares his views on the GP-LP relationship and the future of the private equity industry.

ACG Group is now managing €2.1 billion in fund of fund assets, and €1.4 billion in direct private equity. What is ACG’s future strategy?

“[The idea is] to become a private equity asset manager. I don’t know where we will go, which size we will reach, but I don’t think we are going to stop. 2013 is really a year of integrating all of the newly acquired portfolios: to exploit the synergies, the complementarities between the teams, the back offices etc. We very much would like to open an office in London [as well]. And we may create a partnership with a foreign player in fund of funds and direct private equity.”

How has ACG Group’s position changed in recent years? Does size matter?

“It’s not so much size for size per se but a certain size gives you credibility and that’s what I was looking for. About 4 years ago, we had tried to raise funds in the Middle East for instance. Frankly, when we were approaching some of the large capital providers with our size at the time, it was a laugh. So then I also realised we needed to be a certain size. We [now] have nearly €4 billion assets under management. It will help us to access the good funds, but also in attracting investors in our funds. For some investors we were just too small before.”

Wladimir
Mollof

How have you seen the GP-LP relationship change in recent years?

“There were times when an LP was investing in a fund and was coming once a year to a general assembly with the investors and then back again the following year and nothing in between. These times have changed. There is more pressure on management fees and on performance. LPs are pushing for distributions and increased liquidity, which is definitely affecting the industry. Hopefully funds will improve, in terms of transparency, governance and their relationship with investors. It’s tough on the managers, but I think it’s for the better.”

Which other trends do you see?

“Increasingly, large investors are going for dedicated funds, because that changes the relationship between the investor and the manager completely. I think this trend will increase. It’s becoming like in private banking, where you manage directly for one investor and you see him more often. You have regular meetings and total transparency. If an investor wants to invest in private equity, why be just one among 10, 20, 30, 50 investors in one fund? Why not have your own vehicle? Then you can impact the strategy from the beginning. This is what we have been doing for a number of years. For Generali, [an insurer], instead of being one investor in a fund, we have set up funds specifically for them. It’s mainly large investors that will go for this, because you need a large allocation for this. The bare minimum would be €30 million.”

How do you see the future of the industry?

“I think this crisis is leading back to the fundamentals of the private equity business. For many years, value creation was primarily done through leverage. This has changed dramatically and now we are back to more development capital, more equity investments (…) to create value in companies. And that was in fact the initial model. It’s a rebirth in my view.”