In brief:
- ICG CEO & CIO Benoît Durteste, speaking with Bloomberg’s Opening Trade Anchor Kriti Gupta, commented that Europe has a relatively favourable environment for investment
- He told Bloomberg TV that successful private markets firms like ICG are “choosing the best deals first” in the current market
- Gupta stated during her broadcast that “private markets are really juicy markets right now, especially in Europe”
- On France, Durteste commented “we’ve been investing [in the country] for 36 years. We’ve seen a lot of movement and government changes. It’s always been always been, for us, a really attractive country in which to invest”
Watch the interview in full
Transcript
Host of Daybreak Europe Tom Mackenzie
Earlier this month the alternative asset manager ICG, raised more than €3bn for its second European infrastructure fund. ICG said there was significant surge in demand from investors in North America. Let’s find out how it will be invested and bring in Opening Trade Anchor Kriti Gupta, who is at the IPEM private capital conference in Paris. Kriti …
Kriti Gupta
Tom, it’s a fascinating time to be here, not only because I’ve got the best assignment in Paris, but because private markets are really juicy markets right now, especially in Europe. We’ve got one of the key people, the key players involved, as you just said, ICG CIO and CEO Benoît Durteste joining me right here, overseeing about 125 billion of assets under management. We thank you so much for your time this morning. But while we’re here in Europe, we’re here in Paris, the beautiful city of Paris, there’s a lot of hype in Europe right now. A lot of international investors, especially from the States, want to deploy their money here, and they’re attaching that reason to the massive amount of fiscal spend coming out of the government; an encouraging investment environment perhaps. How long does that stick around?
Benoît Durteste
Well, I think probably for quite some time. I mean, if you look at the fiscal programmes that a number of governments have put in place, and think Germany, that’s the largest one, that’s at least a 10-year programme. So this is a 10-year horizon on that investment pace. And also, more broadly, I don’t think it’s just that. I think it’s, you know, people are just, they’re assessing risk, and they’re comparing risk, and suddenly Europe looks – oddly enough – quite stable. There may not be. I mean, you’re not thinking massive growth, but you’re also looking at – there are a lot of buffers to protect that growth level on the downside. So that makes for a relatively favourable environment for investment.
Kriti Gupta
When it comes to the environment for investment, though, because there’s so many investors coming to Europe right now trying to get that exposure to defence, AI, energy security – the many themes we’re watching – how much of that increases and affects the valuations that you’re seeing in the private markets?
Benoît Durteste
It hasn’t yet. So it may, it may, because historically, you’ve seen valuations were typically higher, sometimes much higher, in the US than Europe. So there could be a catch up. It’s possible; not seeing it yet. I’m also a bit more cautious on, you know, I think those flows of capital are coming into Europe, but they need to find the right place in which to invest. And that takes time. It’s not as though they’re suddenly awash with money. So it’ll take time to walk it through the economy and possibly valuations as well.
Kriti Gupta
Well, let’s talk about one of the key factors in that, and that feels like the geopolitical volatility, – the swirling around – certainly affecting some of the capital markets, affecting the exits that we’re seeing. There’s a thought here that there has been a real glut of exits for about – I want to say – two or three years. Correct me on that if I’m wrong, but a lot of the in the recent months coming out of just geopolitical volatility and uncertainty in the investment environment. In your perspective, where do the capital markets stand right now?
Benoît Durteste
Yeah, I think you’re right. I mean, that’s the correct assessment. It’s been three years. Actually, we’re going into the fourth year of below normal levels of general deal flow in the buyout space and exits as a result, hasn’t moved. I mean, if you’ve looked at the reports for the first half of the year, it shows it’s essentially flat on the previous year, maybe slightly down, and some of that is linked to the geopolitical environment, but it’s also linked to a bid ask spread on valuations that hasn’t yet fully converged. It will over time, but it’s a big overhang, and it probably will take a few years before everything is worked through the system.
Kriti Gupta
So if you don’t do the traditional IPO as an exit, are there other ways to find that?
Benoît Durteste
Sure, sure. I mean, there’s been a lot. There’s been a resurgence of exits to corporates, to the industry, which hadn’t been that much the case before. And so you’re seeing – because a lot of the industrial players or corporate players are actually quite cash rich. So you’re seeing them make a move and take advantage of this environment to acquire and so that’s becoming an exit path as well. And in Europe, unlike the US, the IPO route has never been the major route for buyout exits in Europe. Maybe it will in the future, but I think for that, you need stronger capital markets and maybe a more cohesive European capital market, which I believe all governments are trying to work on, but it’s taking some time.
Kriti Gupta
Well, Benoit, about a year ago, Bloomberg, was right here at this conference. And what was kind of the sound in the room was this idea that you are seeing GPs facing a lot of pressure on the exit front from their LPs. And the thought at that point was, if the IPO markets or the capital markets broadly stay frozen, where does that money go? Since then, we’ve seen a real – specifically in the States – this idea of democratisation and access to private funds show up. Does that alleviate some of the pressure around exits?
Benoît Durteste
I’m not so sure. Because I don’t think it’s I don’t think it’s a question of capital. The capital is there. There’s capital available. Actually, some people are saying there’s quite a lot of capital sitting on the sideline, particularly for private equity. So the issue is not access to equity or debt for that matter; debt markets are quite hot right now. It’s more of a question of, are the right investments there? Is there the right balance, given the economic environment and the right valuations for people to move and proceed. There is deal flow, not like the markets completely frozen, and there is deal flow, but not the same level of deal flow that you saw four or five years ago.
Kriti Gupta
Kind of dipping their toe into the market. Perhaps, if we’re looking at a research?
Benoît Durteste
Yes they’re all choosing the best deals first and making their way through that overhang of buyout deals.
Kriti Gupta
Spoken like a true PE investor, Benoit, talk to us about the interest rate environment here, we’re starting to see a massive shift to dovish territory in the States, the ECB has already been cutting earlier this year as well. Does that make deal making better? Or should we be reading that as concern around a slowdown the economy? How do you think about that?
Benoît Durteste
No, well, actually, I think in Europe, it’s been relatively stable. It’s come down much faster, and it’s now, it’s now at a relatively stable rate. Inflation is relatively low. I mean, in France, it was at its lowest this summer in a long time. So you’re actually in a relatively stable environment, which is – that’s conducive to deals; at least that’s not what is preventing deals from getting done. And the level now, yes, it’s not the zero or even the negative that we might have seen a few years ago, but you’re at 2% so this is not something that’s preventing deals from getting done.
Kriti Gupta
A final question to you, we’re here in Paris. There’s a big question right now about the French investment landscape, specifically, as we see a government that’s kind of still trying to find its feet, we’re talking about the idea of a wealth tax being imposed as well. How are you approaching investing in France?
Benoît Durteste
Yes, there’s always been movement and noise in French politics. But if you look at what’s been happening for the past – for several years now there’s actually been quite a lot of effort from the on the part of the government, to make France more attractive for investment, and it’s worked actually. You’ve seen significant inflows into France. So that has worked. The noise around the various politics – wealth tax is not new, and that’s not a new debate in France. We had one, actually, for a while, and now there is a tax on real estate, which is a different type of wealth tax. So this is not new. That’s not what’s going to stop investment. We’ve been investing in France for 36 years. We’ve seen a lot of movement and government changes. It’s always been, for us, a really attractive country in which to invest.
Kriti Gupta
All right, we look forward to see how they’re all pans out. Benoît Durteste there, joining me here in Paris at the IPEM conference. He, of course, is the CIO and CEO over at ICG.
Go deeper
- Find out about ICG’s participation at IPEM
- Inform yourself on ICG’s latest macro economic analysis which includes a section on France
- Watch our video (in French with English subtitles) to meet our Paris-based investment teams
Back