Alternative investments
Alternative investments
Podcast
4.5.2022
As a multi-family office, our focus is on holistic and customized advice for complex wealth . The range of services is very comprehensive and includes expertise in traditional asset classes as well as alternative investments, including private equity. Each asset class has different risks and opportunities, as well as liquidity profiles. This in turn means that a combination of asset classes can improve the risk/return profile of an overall portfolio, as fluctuations in the asset classes balance each other out. For this reason, we integrate all asset classes into our advisory approach. Private equity in particular plays an essential role here, as it continues to have structural advantages over the liquid markets.
These include, for example, a concentrated ownership structure with long-term value enhancement plans and holding periods for portfolio companies of 3 to 5 years on average, which enables private equity companies to focus more on growth and operational excellence. At the same time, the illiquidity of the asset class provides our clients with Greater Stability for Your Portfolio . Especially in times of market distortions, private equity shows a strong outperformance compared to liquid markets.
One of the motivations for founding FINVIA was to make the family office segment scalable. This also includes being able to diversify private equity from smaller subscription amounts of €200,000 (for semi-professional investors). The idea behind launching our vintage program on a rolling basis each year is designed to enable us to better manage the private equity allocation according to customer requirements. Another advantage is that we can build up our clients' portfolios more quickly. With traditional funds of funds, it often takes a very long time for the subscribed capital to be invested.
In general, however, it can be said that diversification is also very sensible over investment years, as returns in the private equity market can be highly dependent on the time of investment. We therefore recommend continuous subscription to our clients.
Our selection program is actually much more concentrated than most funds of funds. However, this does not mean we lose diversification. Let's assume that each fund invests in 15 companies - with 6 funds we would then already have 90 companies, with 10 funds 150 companies. From a risk-minimizing perspective, this puts us in a good position.
But let's put this to one side for a moment. We want to build a portfolio of "best-in-class" managers, with each fund manager contributing significantly to performance. The advantage of a concentrated portfolio is that FINVIA is 100% behind each of the selected managers. Our aim is not to invest broadly in the market, but to find the best managers of each vintage. If our managers generate outperformance here, i.e. outperform the benchmark and achieve a higher return, our clients also see this at the level of our selection program. Outperformance is often not the case with other funds of funds, which means that only mediocre private equity returns are possible.
As a first step, it is important for us to know the market by talking to a large number of private equity managers. We also pay close attention to building a diversified portfolio of managers with a different focus on regions, financing levels and sectors. However, given the large number of managers, it is easy to lose track of them. This is why we at FINVIA focus on targeted selection. On the one hand, this involves establishing relationships with promising managers at an early stage - often several years before an investment is made. On the other hand, we use follow-up subscriptions, so-called re-ups, with managers in our network in which we are already invested. Even though FINVIA itself was only founded in 2020, it is important to remember that our clients have been investing in private equity funds for decades and the team has built up an extensive network over the last 15 years - a little less in my case, of course.
Before an investment is made, we put a manager through their paces. To do this, we conduct various interviews to understand the team, the strategy and, in particular, the strengths and weaknesses of a manager. This often involves 3 or 4 meetings before we start our due diligence. If a decision has been made to examine a fund more closely, a series of due diligence meetings follow in which we discuss individual investments in detail. The results of this review are then presented to our Investment Committee and only added to our PE Selection Portfolio as a fund once a positive decision has been made. We concentrate exclusively on the funds that we consider to be the best of their year without any investment pressure.
With pleasure. In the predecessor fund PE Selection 2021, we put together a complementary portfolio of seven fund managers, six of whom are already actively investing. The managers have different investment strategies and therefore complement each other well. For example, KKR Asia IV is a pan-Asian buyout fund, while TA-XIV focuses strongly on global growth companies. It is always important to us that the funds in the portfolio work well. The selected funds are now invested in over 40 portfolio companies and some of them have already made a number of add-on acquisitions. This means that a clearly positive development can already be seen.
We now want to put together another strong portfolio for PE Selection 2022 and are continuing to pursue our strategy. We have already identified a strong pipeline of managers that we consider to be best in class. Each of them has not only achieved very good returns in the past, but also complements each other in a client portfolio.
For us, the structural change is a further step towards institutionalization. As Europe's leading fund location, Luxembourg is becoming increasingly popular with professional, institutional investors, not least due to our many years of experience in dealing with alternative investment funds. In addition to German clients, we can now potentially offer our PE Selection program and/or individual fund and managed account solutions to clients from other European countries. Finally, with VP Bank we have an established and solid partner at our side, which provides us with excellent support in the implementation.
Alternative investments
4.5.2022
Fabian Richter
Private equity can make a valuable contribution to optimizing the risk/return profile of a portfolio, even in volatile times. At the launch of FINVIA PE Selection 2022 in May, we take a look at the selection of promising private equity funds. Access to suitable fund managers is of crucial importance, as Fabian Richter, Investment Analyst at FINVIA, emphasizes in an interview.
As a multi-family office, our focus is on holistic and customized advice for complex wealth . The range of services is very comprehensive and includes expertise in traditional asset classes as well as alternative investments, including private equity. Each asset class has different risks and opportunities, as well as liquidity profiles. This in turn means that a combination of asset classes can improve the risk/return profile of an overall portfolio, as fluctuations in the asset classes balance each other out. For this reason, we integrate all asset classes into our advisory approach. Private equity in particular plays an essential role here, as it continues to have structural advantages over the liquid markets.
These include, for example, a concentrated ownership structure with long-term value enhancement plans and holding periods for portfolio companies of 3 to 5 years on average, which enables private equity companies to focus more on growth and operational excellence. At the same time, the illiquidity of the asset class provides our clients with Greater Stability for Your Portfolio . Especially in times of market distortions, private equity shows a strong outperformance compared to liquid markets.
One of the motivations for founding FINVIA was to make the family office segment scalable. This also includes being able to diversify private equity from smaller subscription amounts of €200,000 (for semi-professional investors). The idea behind launching our vintage program on a rolling basis each year is designed to enable us to better manage the private equity allocation according to customer requirements. Another advantage is that we can build up our clients' portfolios more quickly. With traditional funds of funds, it often takes a very long time for the subscribed capital to be invested.
In general, however, it can be said that diversification is also very sensible over investment years, as returns in the private equity market can be highly dependent on the time of investment. We therefore recommend continuous subscription to our clients.
Our selection program is actually much more concentrated than most funds of funds. However, this does not mean we lose diversification. Let's assume that each fund invests in 15 companies - with 6 funds we would then already have 90 companies, with 10 funds 150 companies. From a risk-minimizing perspective, this puts us in a good position.
But let's put this to one side for a moment. We want to build a portfolio of "best-in-class" managers, with each fund manager contributing significantly to performance. The advantage of a concentrated portfolio is that FINVIA is 100% behind each of the selected managers. Our aim is not to invest broadly in the market, but to find the best managers of each vintage. If our managers generate outperformance here, i.e. outperform the benchmark and achieve a higher return, our clients also see this at the level of our selection program. Outperformance is often not the case with other funds of funds, which means that only mediocre private equity returns are possible.
As a first step, it is important for us to know the market by talking to a large number of private equity managers. We also pay close attention to building a diversified portfolio of managers with a different focus on regions, financing levels and sectors. However, given the large number of managers, it is easy to lose track of them. This is why we at FINVIA focus on targeted selection. On the one hand, this involves establishing relationships with promising managers at an early stage - often several years before an investment is made. On the other hand, we use follow-up subscriptions, so-called re-ups, with managers in our network in which we are already invested. Even though FINVIA itself was only founded in 2020, it is important to remember that our clients have been investing in private equity funds for decades and the team has built up an extensive network over the last 15 years - a little less in my case, of course.
Before an investment is made, we put a manager through their paces. To do this, we conduct various interviews to understand the team, the strategy and, in particular, the strengths and weaknesses of a manager. This often involves 3 or 4 meetings before we start our due diligence. If a decision has been made to examine a fund more closely, a series of due diligence meetings follow in which we discuss individual investments in detail. The results of this review are then presented to our Investment Committee and only added to our PE Selection Portfolio as a fund once a positive decision has been made. We concentrate exclusively on the funds that we consider to be the best of their year without any investment pressure.
With pleasure. In the predecessor fund PE Selection 2021, we put together a complementary portfolio of seven fund managers, six of whom are already actively investing. The managers have different investment strategies and therefore complement each other well. For example, KKR Asia IV is a pan-Asian buyout fund, while TA-XIV focuses strongly on global growth companies. It is always important to us that the funds in the portfolio work well. The selected funds are now invested in over 40 portfolio companies and some of them have already made a number of add-on acquisitions. This means that a clearly positive development can already be seen.
We now want to put together another strong portfolio for PE Selection 2022 and are continuing to pursue our strategy. We have already identified a strong pipeline of managers that we consider to be best in class. Each of them has not only achieved very good returns in the past, but also complements each other in a client portfolio.
For us, the structural change is a further step towards institutionalization. As Europe's leading fund location, Luxembourg is becoming increasingly popular with professional, institutional investors, not least due to our many years of experience in dealing with alternative investment funds. In addition to German clients, we can now potentially offer our PE Selection program and/or individual fund and managed account solutions to clients from other European countries. Finally, with VP Bank we have an established and solid partner at our side, which provides us with excellent support in the implementation.
About the author
Fabian Richter
Fabian Richter works as an analyst in the Alternative Investments division and is responsible for the selection and review of investment managers.
Fabian Richter holds a Bachelor's degree in Business Administration from CBS, Cologne, and a Master's degree in Corporate Finance and Financial Engineering from the University of Hong Kong. Mr. Richter also holds the title of Chartered Financial Analyst (CFA®). In addition to his studies, Mr. Richter gained his first practical experience through numerous internships at private equity firms and asset managers.
He began his professional career at HQ Trust, the multi-family office of the Harald Quandt family. As an Associate Partner, he was most recently responsible for portfolio construction and manager selection in the areas of private equity and private debt.
