3 questions for the IPEM Community
During IPEM Paris 2024, we asked Private Markets experts from around the globe to share some industry insights by answering a few questions…
In VC We Trust
European venture capitalists are preparing to hit the boost button as they partner with the European Union to support technology investment. Far from being ‘tin eared’ the EU is all too aware of the need to accelerate tech innovation in order to avoid lagging too far behind the US and China.
Climate investing will require a different PE playbook
Climate Investing and the implications it could have on private markets portfolios has become an important part of the discussion between GPs and LPs, as the industry looks to navigate a path towards long-term, sustainable growth. In the coming years, the scope of companies that private equity firms will be allowed to invest in is likely to shrink. This will mean higher entry valuations, and it will also require buyout firms to build new equity stories; those based not purely on global consumerism but on long-term sustainable value that can thrive in what will literally be a new climate. It will, in short, require GPs to re-think the playbook and how to share value from owner to owner when transforming companies.
IPEM has increasingly acknowledged the need to provide a dynamic forum to debate many of the key issues that climate change could have on portfolio assets over the coming decades.
In the last two editions of IPEM, delegates were given the opportunity to focus exclusively on the task at hand, during the Climate Investing Summit at IPEM Paris 2023 and the Portfolio Transformation Summit at IPEM Cannes 2024. An array of sponsors provided the stage setting for industry experts to debate, share ideas and transfer knowledge via tailored presentations, including Indefi, Argos Wityu and Sweep.
Delegates attending IPEM Paris 2024 will have the opportunity to continue to shape the debate on this key topic. The Climate Summit on 11th September, 2024 will analyse the climate versus returns equation, how to deliver on both returns and results, and discuss how GPs will need to adjust business valuations and portfolios to account for climate risks. AXA Climate, Lombard Odier, Marsh and Tikehau will be the summit hosts.
Suspicious minds
Heightened criticism around Net Asset Value loans, what will suspicions mean in 2024? NAV loans have been under the spotlight of late. But Oaktree majority owned 17Capital – a NAV loan specialist – says the use of these loans by GPs to make distributions to LPs fell a whopping 90% during the last six months of 2023. So we wonder what that says about leverage and deal activity in the market today? The dividend dilemma had previously led PE firms to use NAV loan financing to compensate investors for a slower exit environment. In such an arrangement, the financing is secured against the underlying assets across a fund portfolio. The Fund Finance Association expects the market to grow from $100 billion to $600 billion by 2030. Still, if LPs increasingly harbor suspicious minds over NAV loan use for dividends, then the reported drop last year might be seen again.
Distress signal
Pain ahead for private equity and real estate, time to move into a higher gear? Oaktree Capital’s Howard Marks sees pain coming for the real estate and private equity space as firms struggle to refinance their debt. The same leverage that allowed these two asset classes to juice returns will generate disruption, impact returns, and offer up distressed investment opportunities. Speaking to Bloomberg, Marks thinks this will generate some of the best opportunities in more than a decade. Retail and office real estate owners who relied upon leverage to finance deals could hardly have expected the US Federal Reserve to hike interest rates by some 500 basis points. Now, as the time comes to renew those debt arrangements, distressed investors will hope to move into a higher gear themselves. Watch out for those distress signals over the coming years!