Letter from … Geneva

Laurent de Rosière, an investor relations-focused partner at BC Partners, was understandably wearing a smile on his face during EVCA Investors’ Forum in Geneva in March. Earlier in the week it had emerged that his firm had rounded up €4 billion, or two-thirds of the final target, for its latest fund.

de Rosière was also sporting a grin on his tie, which featured on it a winking smiley face – 😉 – in “text-speak”. It had been a while since he had donned that particular garment, he noted.

Elsewhere delegates were praising BC for its “neatly executed” fundraising exercise and commenting on the larger-than-expected first close.

The phrase “bellwether” is an over-used – and frequently inappropriate – phrase attached to post crisis fundraising efforts like BC’s. One firm’s success – and even a handful of firms’ fundraising triumphs – does not mean others will find the going easy.

Nevertheless, BC Partner’s first close, like the unseasonably warm Geneva sunshine, was a ray of light for the army of firms planning a return to the market in 2011. There have been several estimations of the number of firms that will kick off a fundraising process during 2011. The largest we have heard so far is 1,500.

The scale of this impending rush of GPs was really driven home at the Geneva event. While the on-stage programme dealt with various hot topics – performance, regulation, macroeconomics – it was marketing that dominated hallway discussions. As the statistics would suggest, almost every GP encountered was either in the process of raising a fund or planning to come to market at some point during the year.

Judging by some of the on-stage comments from the limited partner community, many will fail.

The LP toolkit has changed, said Juan Delgado-Moreira, a managing director at gatekeeper and fund of funds Hamilton Lane. Investors are more sophisticated and if you are raising capital for primary private equity investment, you are now competing against other options, such as the secondaries market and co-investment programmes.

LPs are also under a lot of pressure internally to explain the asset class better, said Steve Byrom, head of private equity at the $95 billion Australian Future Fund. This leads to slower commitments with more due diligence. “We are definitely seeing a drive towards fewer relationships to allow teams to stay on top of the relationships they have,” he said.
“There is a greater recognition,” added Byrom ominously, “that unless you can access the top of this market, [private equity] is not worth the risk.”

LPs were also unenthusiastic about first-time funds. “New teams mean an extra layer of risk,” said David Plummer, private equity manager at the $20 billion New Zealand Superannuation Fund. The only circumstances under which he looks at first-timers is if they fit into a thematic investment area identified by the fund itself, in which there are no experienced managers.

The LP panel was – needless to say – well attended, but there was little in the way of encouragement for GPs to draw from it. One observation from Delgado-Moreira may have improved their mood. Private equity, he noted, was a relatively young asset class undergoing “long-term secular growth”. The presence of Australia’s and New Zealand’s respective sovereign wealth funds on the panel – two relative newcomers to the asset class – was testament to its growing appeal.

The overriding sentiment was that the immediate prospects for fundraising seem bleak, but in the longer term there may still be cause for GPs to wear a  ;-). 

Conference diary

Gift wars

EVCA Investors’ Forum is certainly a well-regarded conference, bringing together a focused, senior-level group of delegates. The quality of the free gifts from the sponsoring firms was similarly high. Leading the pack were Cogent Partners’ laptop cases. These were pretty much gone before the end of the first day. Special mention is also merited by Unigestion’s thermal coffee mugs, CapMan’s rather dapper umbrellas and Danske Private Equity’s International Handball Federation-endorsed handballs.

Vintage Coller

When Jeremy Coller, founder and chief investment officer of Coller Capital, steps up to deliver an after dinner speech, amusement is assured. He did not disappoint at the event’s rotating networking dinner. PEI had the privilege of witnessing the 2009 winner of the Private Equity Leader award brainstorming his speech ideas earlier in the day. Despite earnest protestations from one buyout firm CEO, the plan was to poke some gentle fun at one of the fellow event sponsors: the Investment and Venture Fund of the Republic of Tatarstan. When the time came, however, the well-crafted joke Coller had prepared got somewhat lost; at the first mention of the fund’s name, the delegates from the IVFRT decided to proceed to the stage and for an impromptu Q&A about Tatarstan, starting with where the region is found.

Venturing silence

Venture capital firms in Europe often complain that their voice is not heard above the noise generated by large buyout firms. Antoine Papiernik, managing partner of venture capital firm Sofinnova Partners, felt this first-hand during a panel session on the second day, when his voice disappeared from the debate. “You see how venture is treated? You even cut my microphone,” he shouted, to the audience’s amusement.

Embracing ESG

GPs and LPs are really starting to take note of the importance of environmental, social and governance issues in portfolio companies. After all a better-run company is a more valuable company. This was a little lost on one delegate, who marked the beginning of an ESG-focused panel by tutting audibly, pulling out his iPhone and starting a game of “Angry birds”.  The education job continues.