Why investor relations is the lifeblood of funds

Fundraising is increasingly seen as a strategic role in private market fund companies and is a function that can easily be performed outside the Grand Duchy. At the same time, companies may need to reconsider their approach to recruitment and retention as the shortage of staff in the sector continues to be felt.

The comments came during the LPEA Insights 2022 conference on Thursday.

Perception of the role of IR

Gilles Dusemon, a member of the LPEA board of directors and a partner at law firm Arendt & Medernach, said the investor relations function has traditionally been undervalued but has taken on greater importance, worldwide since the financial crisis of 2007/2008 and in particular in Luxembourg since the Brexit of 2016. vote. He said this was an essential function, which he would like to see more based in the Grand Duchy as Luxembourg widens more and more from the back and middle office to the front office.

Martine KerschenmeyerMartine Kerschenmeyer, director of limited partner services at Advent International, joked that she “got started in fundraising before it was a profession.” The native Luxembourger worked in London for 20 years, where IR staff were considered “second-class citizens”. These days, she said, it’s recognized that IR teams are tasked with “building long-term trust” and fostering relationships “that sometimes last longer than marriages.”

“If there’s no money coming in, you can’t invest, so there’s no business,” Caroline Kragerud, head of investor relations at Cube Infrastructure Managers, commented more candidly. .

Growing sector

Earlier this month, Preqin, a data and research company, forecast that assets under management in alternative funds would grow from $13.7 billion at the end of 2021 to $23.3 billion at the end of 2027. Assets under management in Europe are expected to grow by $2.22 billion. trn at the end of 2021 to $4.1 trn at the end of 2027.

Annual fundraising in Europe is expected to grow from $21.3 billion at the end of 2021 to $30.5 billion at the end of 2027, Preqin said.

Speaking at the ‘Fundraising from Luxembourg’ roundtable at the LPEA conference, Kragerud pointed out that assets under management in infrastructure funds (his segment) are expected to double between 2021 and 2027. Investing in infrastructure “is one of the most effective ways to tackle “decarbonization and climate change. Energy transition, renewable energy and energy efficiency projects “are hugely important today and investors are looking to be part of it.”

In a survey by her firm, Hélène Noublanche, head of investor relations at Coller Capital, said 71% of 110 private equity investors said their private equity portfolio outperformed their investments in public markets. . More than half have increased their private equity allocations in the past 2 years.

Secondary markets

Noublanche said the increase in private equity allocations will create opportunities for companies (like his) to take stakes in the secondary market, perhaps bringing some more liquidity to the notoriously illiquid category.

Kerschenmeyer noted that the current economic climate has made some investors want to “get into older vintages.” Laurent HengeschLaurent Hengeschfounding partner of Ilavska Vuillermoz Capital, observed that the larger and more successful a holding company is, the more liquidity it has in the secondary market.

Staffing Challenges

Investors and fund companies have struggled to hire and retain staff, Noublanche said to broad agreement.

This is the case in Luxembourg and elsewhere, added Kerschenmeyer. The pool of IR professionals is even more limited and when you “fish in a small pond, it becomes difficult”. Companies need to decide if they want to focus their recruitment on retraining or offshoring, she suggested.

Demonstrate good ESG approach and that companies are making a difference on climate change is a major asset in “attracting young people”, according to Kragerud.

Ilavska Vuillermoz Capital is currently research for a senior investment manager, says Hengesch. Out of 100 applications via Linkedin so far, 20 people were in India and only 1 was a woman. “We’re really struggling to find people really here.”

Appeal to a lower threshold

When it comes to serving as a fundraising hub, “Luxembourg can offer the solutions,” Dusemon said, “but we can do better.” He called for the minimum investment threshold for semi-professional or “sophisticated” investors to be lowered from €125,000 to €100,000 in Luxembourg. That would put the Grand Duchy on par with France, Ireland, Italy and the Netherlands, he said.

The change would help attract more funds targeting high net worth retail clients, he argued. The €100,000 floor could be introduced at EU level, but it would come into play in “2025 at best”, Dusemon said. Instead of waiting more than two years, he wants the Luxembourg parliament to take the step at national level. “It is a handy fruit.”

A new feeder fund in preparation

Hengesch, whose company announced earlier today that the former LSAP deputy prime minister and former economy minister Etienne SchneiderEtienne Schneider would have join its advisory board— revealed at the conference that Ilavska Vuillermoz Capital would set up a Czech feeder fund with local partners. “We saw an opportunity with private clients from Eastern Europe.” No launch date has been set.

The annual LPEA Insights conference is organized by the Luxembourg Private Equity and Venture Capital Association (LPEA), which represents approximately 370 member firms from the private market fund industry.

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