You recently opened a New York office. What was the reasoning behind that?
First, we have invested in the US right from our first fund, so purely on that basis it made a lot of sense to be there. Second, we realised there were low-profile mid-market funds which we would get to see late in the day if we were not on the ground. We realised an office would provide an opportunity to interact with GPs and influence them. Third, we have a co-investment programme for Europe but always knew there would also be opportunities in the US – we simply couldn't do them from a distance. Since having the office, we have done four co-investments in the US. Fourth, it's a way of attracting the right people. Young people like to have the opportunity to work in New York. It's a competitive edge being based in Copenhagen, which is not a centre of world finance.
What's the size of the team in New York – and are there any plans to increase it?
We have five people in the New York office, including Klaus [partner Klaus Ruhne] and three colleagues that worked in Copenhagen for a couple of years. We have no need to add to the team in the short term, but we are always interested in the right people.
What's your take on the market at present?
In general we're very optimistic. It's not a market for those who try to time it. Also, you have to make sure you don't have all your eggs in one basket. The LBO segment looks a bit tricky and we're not very keen to build new relationships in that space. But we have a couple of LBO funds in the portfolio that are sector focussed and we think they'll do well.
What sort of year do you think it will be for fundraising?
2008 is not turning out to be particularly quiet. My expectation is that there may be as many funds raising capital, but not as high a total raised. Most LBO funds were raised in 2006 and 2007 and, given market conditions, we wouldn't expect them to be deploying much capital. But we are seeing a lot of new funds coming out of Russia and Eastern Europe.
Because of the demands of so many funds being in the market, this has surely put pressure on the due diligence you conduct. How have you responded to this?
We've changed things a little in the way we conduct due diligence on re-ups. We realised we had such a lot of information already about existing fund relationships from the available data and from our presence on advisory boards that we knew them very well and it didn't make sense to conduct due diligence from scratch. That was a small change in our process, and it has enabled us to do more screening of other funds.
In light of a tougher market, would you expect to see LPs having more negotiating power when it comes to terms and conditions?
I would like to say yes but we've not seen decreasing returns from private equity and, as long as that's the case and there's all this new money coming into the asset class, I don't see how GPs will be forced to make meaningful adjustments. A lot of LPs are in the process of trying to build their programmes. You need a drop in private equity returns in general, and for that to spill over into lower demand. In general, I think we will see lower returns – but I don't know how much of a change that will bring.