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Information is power in volatile markets

17 Feb 2015

Uncertain and volatile times in Europe signal an opportunity to realise returns for investors otherwise made challenging in an era of low yields. We are entering a new stage for investors, where information will be the key to returns.

In my 30 years in private equity, first as an investor, then a manager and most recently as a consultant, I have seen all kinds of market conditions and know the role private equity can play in the good times and in slow economic growth periods like we´re facing now.

It would be foolish to suggest that Europe is still on the recovery path. After a promising start to 2014 and a welcome return of economic growth, it is clear that a year later many economies across the continent have slipped backwards. But I also know there are always opportunities to be found. I have seen the most astute private equity managers hunt out new investments in difficult times as these and the experience to secure successful exits when the market turns.

Indeed, despite the economic and political uncertainty gripping the continent, this can be a good time for European private equity to sell investments and return money to investors. Low oil prices are pushing down costs for manufacturers, while the weakening euro is benefitting exporters who sell their products and services overseas. Those tailwinds will make European companies more profitable and more appealing to overseas buyers. The weak euro will also make investments into those companies look relatively cheap to international groups – corporations awash with cash, and private equity firms with dollar-denominated funds to deploy.

It truly is a time ripe of opportunity for the private equity industry to deliver to its investors. One that requires even more dialogue between investors and private equity managers.  I will be chairing the Invest Europe Investors’ Forum in Geneva next month and I look forward to engaging in insightful dialogue with the investor and fund manager audience on the outlook for Europe and its companies. Information is power and I hope to come away with a better understanding of where these industry practitioners see the risks in these volatile markets. I also want to be able to see opportunities more clearly – which countries are attractive, and which sectors are hot.

The private equity industry has come a long way in my three decades in the industry. When I started investing, €10m was a large buyout. Now, they are measured in the billions – and €10m might only cover the costs of environmental due diligence!

The crucial role that private equity and venture capital plays in adding value to economies has only intensified. In these low-interest rate times, investors are relying on private equity and venture capital to deliver great returns. Moreover, European companies need strong and supportive backers to maximise their potential and help drive economic growth. I look forward to meeting you in Geneva on 18-19 March to discuss these topics and many more.

Jonny Maxwell, Senior Advisor, GMT Communications Partners LLP

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