2017 was another great year for the worldwide private equity and venture capital industry with fundraising beating previous records. This year, however, seems to be a tipping point for the global economy – the Federal Reserve has signalled that it will be increasing the interest rates over the next years beginning now and ending a period of record low interest rates. The ECB is of course following closely these steps and might also increase interest rates.
The low interest rates have proven to be a double-edged sword for our industry. On the one hand, more money has been raised by PE managers as PE stood out as an “alternative” asset class to many investors. On the other hand, all assets have seen a price-increase going along with an overvaluation that is making target companies more expensive. This has in turn increased the pressure on private equity managers to add value to already highly valued portfolio companies and has sometimes resulted in less than optimal multiples.
In the financial world, 2017 was the year of cryptocurrencies – countless initial coin offerings raised an estimated 5 billion USD over the course of the year. Although some token sales were certainly not to be taken seriously, a lot of money was raised for entrepreneurial projects. This trend has not gone unnoticed in the PE/VC world: a number of start-ups and companies that would typically “knock on the door” of VC firms have decided to raise their own money bypassing traditional VC investors and raising enough seed and growth money for their projects through ICOs.
Impact Investing is another rising trend with more and more of our industry’s players getting involved in it. PE/VC firms make a financial impact and create jobs in the real economy. Going beyond the purely financial impact, “Impact” PE/VC firms also strive to make a non-financial impact by design by for example creating not only more jobs but also better jobs.
The private equity and venture capital industry in Luxembourg continues to be on the rise – LPEA now counts more than 160 members and the 19 largest PE houses of the world have a presence in Luxembourg. Through its unique positioning and a global strategy as a financial place, Luxembourg continues to brand itself as a prime location for the global private equity business.
The LPEA continues to promote the industry at home and abroad – as you will certainly also notice from the summary of events in this Annual Report for 2017 – and continuously dialogues with relevant public authorities for the benefit of the industry and the private-equity supported creation of jobs.
MESSAGE FROM THE MANAGING DIRECTOR
Dear Members of LPEA,
The Association has had a very active year 2017, full of roadshows, conferences, GP workshops, technical committee meetings and dialogues with stakeholders. All this activity is necessary since private equity does not promote itself without the engagement of the people working in it. One of the highlights of the year was the very successful first edition of the GP Insights conference in April – the first of its kind since it focussed one hundred percent on the investment side of the business and represented therefore a very welcome change from the many events focussing on rather technical aspects. Another highlight was the start of an educational campaign in November targeting the general population in Luxembourg. The goal was simple – make people understand that private equity is a type of investment whose benefits – such as the creation of jobs in the real economy – can be felt by the population at large.
This year will also be a special year in Luxembourg and for our Association: general elections are taking place as well as Board elections at the level of the LPEA. One of the unwritten rules of the Association is to emphasise the importance of combining tradition with renewal. Old and new faces will be joining the Board this year strengthening the future outlook for our industry.
Community-building is and will remain a keyword for the LPEA – our goal is to bring the industry representatives together and give private equity in Luxembourg a voice. The LPEA also launched a young private equity leaders’ initiative last year. So far, more than 100 young professionals from our Member firms have joined the “Young Leaders” in various working groups. The initiative has proven to be a forum for the exchange of ideas and community-building for a younger generation of private equity professionals that are bringing in fresh ideas and who represent the future of our industry in Luxembourg.
A quickly changing global business environment and increased competition between jurisdictions vying for businesses means that Luxembourg needs its voice to be heard. More and more countries across Europe recognize the importance of creating a favourable business environment for new types of businesses and Luxembourg is certainly one of them. The rise of space and financial technologies as well as cybersecurity gives an idea of the shape of Luxembourg’s future knowledge economy. For this type of industries, more knowledge workers will be needed and attracting more talent from abroad is one of the major challenges that lies ahead for our industry as well.
The industry is moving into the right direction and our growing active member base contributes to ever improving the environment for PE/VC businesses in Luxembourg.
Luxembourg Private Equity
and Venture Capital Association