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Magazine Issues » July-August 2020

Specialist fund administrators directory 2020: Covid-19, private equity and liquidity

File storageWe present a directory of specialist administrators that took part in Funds Europe’s latest survey and ask senior executives about their experiences of the coronavirus pandemic.

 

 

 

 


Claude-Joseph PechCLAUDE-JOSEPH PECH, HEAD OF BUSINESS DEVELOPMENT AND CLIENT RELATIONSHIP MANAGEMENT, BANQUE PICTET & CIE

How would you describe the impact of Covid-19 on private market investments and what is the outlook for the sector?
Illiquid funds (private equity and real estate) continue to raise money because of the long-term approach and the decorrelation with the market. Obviously Covid-19 will have a significant impact on certain sectors and PE [private equity] funds could experience significant repricing. Currently, private debt has a momentum and with the current crisis, the trend will accelerate. This is most probably the winning asset class post-Covid-19. We have seen that booming in the US, Europe will follow. However, small size or first-time funds will struggle to raise money. In times of uncertainty, investors feel more comfortable with large funds and good brand names.

How is the use of liquidity management tools in private market investment funds evolving?
Liquidity has always been an issue for investors contemplating private assets. However, we noted it is now part of standard asset allocation gridline for institutional or HNWI [high-net-worth individuals] who are more relaxed about lock-up clauses, reduced redemption frequency and gating. Low or negative interest rates on cash and fixed income probably favoured private assets allocation for cash-rich investors. As long-term and diversification approach applies, investors have indeed accepted that these funds operate differently from plain vanilla.

Banque Pictet & Cie
Route des Acacias 60 
Geneva 73 
1211, Switzerland 
www.group.pictet
+41 58 3232323

Country of origin: Switzerland
When founded: 1805
Number of employees: 4,700
Total assets under administration: $240.5 billion
Total assets under administration in Europe: $240.5 billion
Senior executives: Claude-Joseph Pech (Luxembourg), head of BD & CRM – Pictet Asset Services; Michèle Berger (Luxembourg), CEO – management company; Bettina Graeber (Luxembourg), head of institutional client relationship management


Michael JohnsonMICHAEL JOHNSON, GROUP HEAD OF FUND SERVICES, CRESTBRIDGE

How would you describe the impact of Covid-19 on private market investments and what is the outlook for the sector?
Covid-19 has undoubtedly had a monumental impact on private market investments; as of the start of June, Morningstar Direct data indicates the average private equity investment trust is down 20.1%. However, the outlook is not as bleak as it would appear; private equity has a great track record of performing well in crises, and GPs were able to successfully navigate the great financial crash. I’ve no doubt this result can be replicated, not least because allocations to sectors most affected by the virus – retail, hospitality, leisure – stand at 50% of its level before the great recession, according to BCG. With this in mind, PE managers look set to make a heroic bounce back. 

How is the use of liquidity management tools in private market investment funds evolving?
There has been a definite increase in the use of cashflow-forecasting tools. These allow GPs to measure their cashflows for the short term in a much faster and more precise way than doing so manually, thereby alleviating their administrative burdens. ERP – or enterprise resource planning – systems were on the rise before Covid, and the pandemic has served as a catalyst for their rise. Staying on top of cashflow is integral to the successful management of private market portfolios.

Crestbridge
47 Esplanade City
St Helier JE1 0BD
Jersey
crestbridge.com
[email protected]

Country of origin: Jersey
When founded: 1998
Number of employees: 300+
Total assets under administration: $132.2 billion
Total assets under administration in Europe: $127.1 billion
Senior executives: Michael Johnson (Jersey), group head of fund services; Michael Newton (Luxembourg), head of client delivery services


Stephanie MillerSTEPHANIE MILLER, CHIEF EXECUTIVE OFFICER, INTERTRUST GROUP

How would you describe the impact of Covid-19 on private market investments and what is the outlook for the sector?
Following a survey we recently conducted with around 150 private equity managers globally (‘Intertrust Global Private Equity Outlook 2020’), it revealed that many private equity managers have paused as they wait for the global economy to reboot, with many focused on managing their current portfolio. Financing markets have been effectively closed and that will impact private equity transaction volumes; however, it is important to say that many are focused on their war chests and are just waiting for the capital markets to rebound before moving forward with deals and restructurings.

Across every sector, GPs are going to face challenges within their existing portfolios and many will have to inject cash to ensure businesses survive – and hopefully thrive – as the environment normalises. Despite the disruption, our survey also revealed that 32% think the environment for private equity will improve and 47% said they’re optimistic the industry will be able to face the pandemic and come out stronger.

Intertrust Group
Prins Bernhardplein 200
Amsterdam
1097 JB
The Netherlands
www.intertrustgroup.com
[email protected]
+44 20 7398 6300

Country of origin: The Netherlands
When founded: 1952
Number of employees: 3,500+
Total assets under administration: $460 billion
Total assets under administration in Europe: n/a
Senior executives: Ian Lynch (Dublin), chief commercial officer; Chitra Baskar (New Jersey), global head of transformation and operations; Lee Godfrey (Luxembourg), managing director, Western Europe


Justin PartingtonJUSTIN PARTINGTON, GROUP HEAD OF FUNDS, IQ-EQ

How would you describe the impact of Covid-19 on private market investments and what is the outlook for the sector?
Covid-19 has undeniably impacted certain private market investments, particularly those in sectors such as hospitality, leisure, travel and retail. However, the general feeling is that any short or medium-term impact will likely rectify itself over the longer term.

For private equity, the longer investment horizons should enable most funds to weather the storm, though depending on sector exposure, certain portfolios may experience a significant dip in returns in the meantime. Given that some commentators believe a return to normal trading levels won’t be achieved until 2024, exits in affected sectors may be pushed out beyond that date. Meanwhile, there is rising investor interest in sectors like health services and technology.

Notably, Covid-19 disruption is creating opportunities for some private market investors. Difficulties over valuations have stalled certain transactions, particularly those involving institutional purchasers. As such, other buyers, such as family offices, are closing deals where previously they may not have been able to compete.

How is the use of liquidity management tools in private market investment funds evolving?
With subscription line financing having grown in recent years, this tool is now widely used. Many managers and portfolio companies have fully drawn down available credit facilities in anticipation of a potential liquidity crunch. A number of managers have created a pool of liquidity at the fund level that could be lent to the underlying portfolio companies on a case-by-case basis. As the majority of funds invested in illiquid private market assets are closed to redemptions, this issue is not a major discussion point. For the handful of managers with a hybrid, open-ended fund investing in illiquid assets, redemption periods tend to be longer – also to prevent a ‘fire sale’ of illiquid assets in a market dislocation.

IQ-EQ
412F, route d’Esch
L-2086 Luxembourg
www.iqeq.com
[email protected]
+352 466 1111

Number of employees: 3,000+
Total assets under administration: $500 billion
Total assets under administration in Europe: n/d
Senior executives: Serge Krancenblum (Luxembourg), group executive chairman; Mark Pesco (Jersey), group chief executive officer; Justin Partington (Luxembourg), group head of funds

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