Risk Capital Partners' Luke Johnson believes private equity
remains a 'seller's market' with a 'huge weight of
money to be invested'.
The entrepreneur, one of Britain's leading businessmen,
spoke in front of an audience of nearly 500 at the Guernsey Funds
Forum in London last week [12 May].
"The current climate, unlike quite a few asset classes,
which I think are struggling perhaps, is still probably more of a
seller's than a buyer's market for the right type of asset
that would appeal to private equity buyers. There is a huge weight
of money to be invested," said Mr Johnson.
He said Guernsey's private equity industry had played a part
in raising or administering a large proportion of these funds,
while the fundraising climate generally seemed as good as it had
"There's obviously been a big comeback of banks and
bonds and so forth, willing to lend to private equity deals, which
is good for the industry, as long as people don't get
overexcited," said Mr Johnson.
"There is this growing appetite, amongst many different
institutional investor types, to become Limited Partners and to
invest in this asset class, from more and more pension funds to
sovereign wealth funds and so forth. I think that the expansion of
the alternative asset class is great news. I think it's good
news for Britain, because we are a world player and it's
obviously good news for Guernsey."
Mr Johnson urged private equity managers and their firms to
continue concentrating on adding value.
"We've got to focus on adding value, making a
difference, not quick flips, and not exclusively financial
engineering. I think that game's actually over and I think that
leads to trouble politically and otherwise. I think private equity
leaves itself open to criticism if that's really how they make
their money. If you look at the returns and compare it against
other asset classes, I would argue that the outperformance derives
from added value, not from leverage and it's important that
private equity managers and firms see that, I believe."
He also warned against private equity investing in what he
described as incendiary sectors, political or otherwise, such as
"I think they make themselves open to criticism if they
invest in sensitive areas and then treat it as a purely commercial
transaction, without regard to the stakeholders as a whole,"
said Mr Johnson.
"I think private equity, to a degree, considering how much
money it manages and the amount of industry and jobs that are
connected with private equity-owned businesses, has been relatively
fortunate to date that it has not suffered even a tiny fraction of
the sort of criticism that the banks have laboured under for the
last eight years or so. I'd like to think that's because we
are investing, we are helping to create jobs and we are innovating.
But I think that the industry should be under no illusion, things
can turn. It needs to be thoughtful."
In addition to Mr Johnson's keynote speech, the Guernsey
Funds Forum hosted two panel sessions. The first looked at
innovation in the funds arena and the second focused on investor
perspectives including a focus on environment, social and
governance investment and whether the depositary should be seen as
a 'value-add' or a burden. The event, which took place at
etc. venues, 155 Bishopsgate, London, was hosted by Guernsey
Finance in conjunction with the Guernsey Investment Fund
Association (GIFA). It also saw ITV News anchor Alastair Stewart
OBE act as moderator.
Guernsey Finance Chief Executive Dominic Wheatley said the
calibre of the speakers and the content of the panel sessions, in
addition to Mr Johnson's keynote speech, had all contributed to
a successful event.
"As a whole, the event demonstrated an ongoing commitment
to the Guernsey funds sector which in turn reflects the
Island's continued relevance in the international funds
industry. It was very encouraging to hear from a number of
panellists about how Guernsey continues to evolve its offering and
is therefore able to ensure it meets industry needs. It was also
pleasing to hear Luke's detailed explanation on the economic
benefits of private equity, which reaffirms our belief that private
equity is a force for good in the economies into which Guernsey
The event was supported by the Alternative Investment Management
Association, the British Private Equity & Venture Capital
Association, Alpha Journal, Funds Europe, HFM Week and
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