Selectors discuss microfinance, Swiss regulation, and currency
The latest roundup of fund selector views finds that regulation in Switzerland and the euro/dollar exchange rate or being closely monitored, along with a boom in microfinance private equity funds.
FUND OF FUNDS SELECTION
Name: Mårten Agneskog and Malin Hallén
Title: Portfolio managers
Company: Swedbank Robur
What is the approach to meeting managers of funds being considered for inclusion in fund of fund portfolios?
We run an open-door policy at Robur. We try to meet managers who are visiting town and keep notes. The group has about 250 manager meetings annually. That means if we look at small cap, we can go back to our notes and find the interesting ones. It is partly about an ‘experience’ database, and partly about screening.
If we have a list of 20, we can screen down to ten just by talking to the managers and finding out if there have been any changes to, for example, their team. This enables us to reach the shorter list of really interesting funds.
The most important step is the individual meetings with the managers themselves, preferably in situ, and the key people in the teams. It depends slightly on the type of process in the product as to who we want to meet and who it is we should be focused on.
MICRO-FINANCE FUNDS BOOM
Name: Vincent Oswald
Title: Managing director
Company: Azure Partners
How is the micro-finance private equity fund universe developing for your Azure Global Microfinance fund of funds?
There are 40 private equity funds today. This number is growing quickly since the demand for fresh capital and skills is huge in the microfinance institutions. We see more new regional funds coming into the market. They take stakes into microfinance institutions with the objective of supporting their growth. They usually take board seats and work closely with the management of these institutions to bring strategic, governance, products and management knowledge.
As a result, the microfinance institutions not only get necessary additional capital to grow their asset base, but also a lot of professional support from these specialised investors, which ensures sustainable growth.
DEALING WITH DEAL FLOW
Name: Hanspeter Bader
Title: Head of Private Equity
Has the Mittelstand produced the kind of deal flow some private equity managers or allocators might have once expected?
Everyone expects the Mittelstand to create a lot of deal flow, but the reality is that deal flow relating to private equity remains pretty limited.
Deal activity over the past two years has been very low in Germany. One reason could be if you build your own business over many years in Europe – and arguably more so in Germany – you want to keep it rather than sell it off to private equity. You would wonder whether the employees will be well treated, or will it be sold to another company, say in Asia or the US?
German entrepreneurs have a huge amount of pride and social responsibility, and their solution is often to pass their companies down through the family, which is quite different to the US model.