Three questions with IKEA-related investment arm’s new PE head

Simon Faure, who left M&G in March after around 16 years at the Prudential unit, speaks to PEI about his role at IH International Advisors.

Simon Faure, an investment director and almost two-decade veteran at M&G Private Funds Investment, left the firm in March to join IH International Advisors, the investment advisory group of Interogo Holding.

Interogo Holding is a Switzerland-based investment business that is a subsidiary of Interogo Foundation, the controlling shareholder of Inter IKEA Group.

Faure joined M&G in 2004 and until recently led its roughly £4 billion ($5.6 billion; €4.7 billion) private equity portfolio.

At IH International, which advises a portfolio of €3 billion of assets, he is responsible for private equity funds and co-investments strategies. Private Equity International caught up with him on his new role and the main challenge he sees for private equity in 2021.

Why did you take up the role at IH International Advisors?

I was at M&G for more than 16 years. I had a lot of fun there and there are many aspects of the place I will miss.

Simon Faure
Faure: where there is disruption, there is always opportunity

I decided that I would take on this challenge at IH International late last summer. When it came along, I thought it was a very exciting opportunity for a number of reasons. I think they’re an interesting profile of LP. Whilst we are not part of IKEA, we do have a strong connection to the mission and values of the founder of that business. These tie in well with some of the themes that I spent a long time on at the end of my time at M&G – investing with sustainability and responsibility in mind and marrying capital with a market opportunity in the private space, which I think is well-positioned to deliver change in the real world. We have a strong capital base, scale and a long-term mindset which should make us an attractive partner with GPs.

I’ve built teams before and I’m coming in to manage an existing team. It was an opportunity to bring some insight from the wider market and perspective from a third-party capital asset management environment and to be really focussed on our stakeholders’ interests.

What are your priorities at IH International?

It’s to develop an investment strategy which works at a higher scale and leverages our relationships and skillset whilst ensuring we are a responsible investor of capital and continue to enhance our resources to do that job as best we can.

IH International is focused mainly on primary fund investments and with an increasingly higher weighting in co-investments than we’ve had in the past. Our current allocation matches the overall size of the private equity markets. Slightly less than half of the portfolio is exposed in the US, and the rest between Europe and Asia as well as the rest of the world. But we do have quite an interest in Asia as a larger growing market.

The near-term plan is to rebalance the strategy this year – it’s more a tweaking at the edges than a major overhaul. I also want to focus on markets and regions that we really want to play in, given the scale of capital in those markets, and to balance that with investability, ie, there’s reasonable liquidity, stability from a currency perspective and effective rule of law – all those components you need to mitigate some of the risks from being in long-term exposures.

In Europe, we’re clearly seeing more capability in the venture capital space and expect more interesting opportunities. And in the US, I think it would be largely similar to how we have been exposed in the past, again with an appetite for VC.

What’s your main concern about investing in PE?

The amount of capital flowing into private equity is growing. We’re still not back at the highs of committed capital in 2006-07, but we’ve been in a very steady, decent curve. Average deal sizes are growing and there are clearly some sectors where pricing is full. This has reflected a drive to target companies that are showing high resilience and predictability in such uncertain times, and we have to be cautious about current valuations and pacing. On the plus side, we are committing to funds that will be investing over the coming years. And where there is disruption, there is always opportunity.

Funds are performing well enough to raise and are coming back to market oversubscribed, even when exits have been slow. Investors need to take the time to look through their GPs’ portfolios and say, “What is the profile of these companies? Are these businesses leaders in their market? Are they resilient and are they strategically valuable to a future owner? Is it trading to budget, is it a covid issue or something else?” This is why we look closely into whether GPs are really focused on investing in businesses which are ‘need to own’ and deserve premium valuations, and not on those that will be challenged and unattractive when trouble arrives.