The chairman and founder of JC Flowers, Christopher Flowers, is moving from New York to London in order to be closer to a market he views as key to the global economy.
“A number of our most important investments are in Europe and Asia, so I’m moving to be closer to them,” Flowers told Private Equity International in an interview from his New York office as he finalised preparations for the move to London.
“There’s a lot happening in the world at the moment, but nothing bigger than what’s happening in the Eurozone. By moving to London, I’ll be closer to that situation,” he added.
It would be calamitous if a major country was to leave the Euro
The turbulent economic and political climate in Europe – a number of governments have been, or are set to be, overthrown in response to their handling of the economic crisis – is likely to throw up significant opportunities, Flowers believes.
“It would be better for everyone if the Eurozone holds together, of course. Frankly, it would be calamitous if a major country was to leave the Euro. I don’t think it’s likely, but it could happen. European banks are going through the deleveraging process at the moment and that’s one source of deals for us. As we look at new investments in this environment, one criterion we are using is that we believe they would at least survive a Eurozone crisis.”
Flowers’ primary residence will be in London, but he emphasised he would continue to travel, both back to the US and to Asia which remain key markets for the firm and are home to some of its biggest investments.
Some of those investments haven’t exactly shot the lights out, such as German business Hypo Real Estate, or Shinsei Bank, as the firm has admitted. Private Equity International recently wrote about the Fund II portfolio.
“The biggest problem with Fund II was that we had the most calamitous market for financial institutions in the last 80 years. Having said that, we made some mistakes but we’ve learnt from those experiences,” Flowers candidly admitted.
The performance of Fund III bears that out. By February this year, the fund had generated a multiple of 1.3x capital invested, according to a source with knowledge of fund. One recent success was Brazilian bank BTG Pactual, which went public earlier this week. Flowers declined to comment on the fund's performance.
But there is more than $1 billion remaining of the $2.3 billion Fund III – plenty of capital in the current market.
The majority of the potential investments in the firm’s pipeline are Europe-based, Flowers said, although the firm is still exploring a number of opportunities in the US and Asia.
“We’re looking at cashflow companies as well as balance sheet ones. And of course we’re trying to be very careful about the amount of leverage we use,” Flowers said.