LPEA Insights: summary notes and video
360 GP View | 26/04/2017
This summary captures the presentations and panel discussions of the LPEA Insights – 360 GP View conference held on 26th April 2017 in the Philharmonic Luxembourg. The conference was attended by roughly 80 GP’s and 90 other Asset Managers among an audience of 330 participants with 82% coming from Luxembourg. The goal of the conference was to showcase an asset class that continues to attract new investors and deliver consistent returns. It also aimed to highlight the growing community, how it has changed in recent years and finally to honor the members of the LPEA who helped to come this far. The conference started with a get-together in the hallway of the Philharmonie Luxembourg early in the afternoon.
1. Opening & keynote speech
Before officially opening the conference, the musical trio “Les trois anches de Luxembourg” set the mood and played some excerpts from “Music for the Royal Fireworks” (G.F. Haendel, 1685 – 1759). Rajaa Mekouar (Kharis Capital) was announced as the conference host and shared some opening remarks about the goals of the conference and the wish to demystify the private equity asset class. After the president of the LPEA Jérôme Wittamer had welcomed the audience and talked about the size of the private equity market in Luxembourg, Pierre Gramegna, Luxembourg’s Ministry of finance, addressed the audience with a video message. He highlighted the growing FinTech industry in Luxembourg and the recent launch of the Green Cornerstone Bond Fund in Luxembourg which aims to fight global warming in Africa, Latin America, Eastern Europe and Central Asia. After his address the keynote speaker Mark Florman (LPEQ) took the stage. In his presentation he explained the concept of the total rate of return (TRR), which consists of the internal (IRR) and the external rate of return (ERR), with the ERR being the value that is added to society, for example by creating jobs. He also emphasised that the private equity industry has to do a better job reporting these external contributions to gain understanding and support from the society. This concept turned out to be one of the most important takeaways of the afternoon, with several panelists later referring to it and the ERR in particular.
2. What it takes to succeed in private equity
The second session and first panel discussion was moderated by Pierre Weimerskirch (Luxembourg Investment Solutions), with the panelists being Stephanie Delperdange (Sofina), Claus Mansfeldt (Swancap) and Manuel Roumain (Kharis Capital). Claus Mansfeldt placed emphasis on the selection of the investments being the main driver of fund performance and the importance of a positive track record of a fund. Manuel Roumain advised not to invest less than 10% in asset classes including private equity. Doing so is critical to feel the impact on the return and that is key to be active as an investor and do fewer deals in order to add value. Stephanie Delperdange highlighted the importance of access to the best GP’s as the main success factor for LP’s, with the challenge being how to get access to them. All panelists agreed on this challenge and furthermore called private equity a “must-have investment”.
3. Luxembourg in the global Venture Capital ecosystem
Session 3 was moderated by Gilles Dusemon (Arendt & Medernach) with the panelists being Uli Grabenwarter (European Investment Fund), Rodrigo Sepulveda Schulz (Expon Capital) and Hans-Jürgen Schmitz (Mangrove Capital Partners). Gilles Dusemon started the conversation by stating that the venture capital industry is part of the real economy and not just of the financial sector. Hans-Jürgen Schmitz used Skype’s exit as an example to show that huge venture capital-backed companies cannot just be built in the U.S. but in Europe as well and said that there are currently more than 60 unicorns in Europe. In a mostly general discussion about venture capital, Uli Grabenwarter highlighted the outperformance of venture capital versus private equity and that there is no wrong time to invest in venture capital because of its long-term orientation. Rodrigo Sepulveda Schulz stated the importance of looking at the track record of the team of partners rather than single partners alone. He also advised individuals against investing in startups themselves since the individual cannot be as selective in their investment decisions as a venture capital fund can. Furthermore, he used his own personal experience as a business angel to underline that one will miss out on many deals for financial reasons when investing alone and cautioned to only invest in startups with the help of professionals.
4. The rise of direct lending in Europe
After a short coffee break and the chance to network, it was time for the fourth session of the afternoon which was about direct lending. The panelists were Peter Gibbs (Permira Debt Managers), Chris Birt (CORDET Capital) and Edouard Guillet (IPF Partners) with Maximilien Dambax (AlterDomus) moderating the debate. Peter Gibbs talked about direct lending being a growth market, that there is still huge potential in Europe and that institutional investors like pension funds are more and more shifting their asset allocation towards direct lending. Chris Birt agreed that Europe is still catching up and explained this with direct lending being a new asset class. Edouard Guillet expressed that some pension funds still have regulatory requirements which prohibit them from investing in these funds in Luxembourg. This is changing though, which is seen as positive for the industry. The panelists furthermore agreed that significantly increasing interest rates could become a challenge in the future, but that moderate increases will probably not be harmful for the industry.
5. Luxembourg in the crossroads of Emerging Markets
Session 5 saw Julien Kinic (Idi Emerging Markets), Jean Philippe de Schrevel (Bamboo Capital) and Carlos Heneine (Quilvest Private Equity) as panelists while Anja Grenner (SGG) moderated the debate. The discussion started off with calling emerging markets “still a niche market” (Anja Grenner) and noticing, that the “audience has shrunk over the last 10 years with returns being similar to those of the U.S.” (Carlos Heneine). Asked about the reasons to invest into emerging markets, Julien Kinic mentioned that although the overall risk and performance profile is similar to the one of developed markets, there is still an existing chance to find potential national champions which he called “hidden jewels”. Jean Philippe de Schrevel used the ERR concept of Mark Florman to talk about PE investments in emerging markets having the chance to build industries and sectors in these countries. He also discussed some of the difficulties when investing in emerging markets, namely the often complicated regulatory/legal environment and the need of having specialists on the ground, something that all panelists agreed upon. Asked about emerging markets today, Carlos Heneine offered his opinion that Africa would still offer great opportunities.
6. Structuring benchmark
In a last, shortened podium discussion which was moderated by David Capocci (KPMG), Andrea Neuböck-Escher (EQT Fund Mangement) and Aurélie Comptour (Sienna Capital) talked about Luxembourg as a financial center. Aurélie Comptour stated that Luxembourg is cherished for offering stability, business-orientation and expertise for administration and banking, while Andrea Neuböck-Escher called stability and predictability Luxembourg’s major advantages and the smaller market enabling it to build connections more easily. They furthermore welcomed the increasing regulations and called it an opportunity to become more transparent.
After the last podium discussion was over, François Tesch (Luxempart) took the stage and talked about his investment philosophies as CEO of Luxempart (which is celebrating 25 years!), highlighting the long-term orientation of his investments, the geographical focus on countries in Western Europe and doing PE deals with local teams in the respective countries. He also used the moment to offer his political hope to avoid closed borders and that he is proud, that 50% of people in Luxembourg are from outside.
Last but not least, Paul Junck, Managing Director of LPEA, thanked all participants of the conference, the organisational team and said that he is looking forward to the 2nd LPEA Insights Conference in 2018.
Cocktails and canapés concluded the 1st LPEA Insights Conference which was overall a huge success and received great response from its participants with a full room.
LPEA thanks Philipp Schwarzenbart, Master of Science in Business Administration (University of Trier), for kindly assembling these notes.
For more pictures and videos visit the event webpage.