Interview with Estelle Dolla on the BFM Business program Tout pour investir on 04/12/2023, hosted by Lorraine Goumot: the President of Private Corner takes to the microphone to highlight the specific features of this asset class, and takes advantage of this audience time to share key tips for investing in the unlisted sector, particularly in private equity, infrastructure and private debt.
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Introduction
Estelle Dolla, co-founder of Private Corner, a company specializing in unlisted asset investment funds, is going to talk to financial professionals and ultimately to us, private investors, about private equity. You're going to give us some good management tips for successful private equity investments. But first, since this is the first time you've come on stage, I'd like to get your take on what private equity is today, compared to when you first entered the field some time ago, at the start of your career: what's your vision of private equity today?
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Estelle Dolla's analysis of the evolution of private equity in France
I got into private equity 20 years ago. Today, if we talk a lot about private equity, we have to remember that it's very important to invest in what we like, to invest in what we understand and to invest in things that make sense and that are essential to us, to our daily lives and to helping companies grow. There are listed companies, but the majority of companies today - SMEs, ETIs, start-ups - are not listed and need private financing to develop. And it's very important to invest in these unlisted companies with support, because beyond investing in what you like, you need to invest in what you understand, and be supported by people whose job it is to make this analysis and advise you according to your objectives. In the case of private equity, a long-term investment, it is essential to define your investment objectives with a private banking professional, based on your risk aversion and your personal, professional and family situation.
The positioning of Private Corner as such is precisely to act as a bridge between two worlds that have little or no contact with each other up until now: on the one hand, that of management companies, which have traditionally catered for institutional investors or large families, due to the minimum amounts historically required to subscribe to these funds of several million euros. On the other hand, the duo of wealth management professional and private client is converging towards the world of the institutional investor.
Unlisted: access to investment in unlisted companies
As its name suggests, unlisted investment is fairly simple to characterize: as opposed to listed companies, it's investing in unlisted companies, SMEs and ETIs on a national, European or global scale. These companies are supported by investment funds, each specializing in specific geographical areas, specific strategies and specific sectors. So it's a very, very heterogeneous ecosystem. And this makes it all the more important to be supported in positioning yourself in the right place at the right time. Another peculiarity of the unlisted sector is that it's all about diversification, without market timing.
Non-listed: an investment without market timing
It's always possible to invest in unlisted companies in order to diversify, smooth out risk and select the right players at the right time. At Private Corner, we are convinced that now is the right time to invest both in secondary investment strategies and in strategies that finance real assets, indexed to inflation. In an inflationary context, this investment strategy provides a good cushion against risk, since these investments are naturally risky. And that's why it's vital to select both the funds and the people who will help us select these investments.
A long-term investment
Investing in unlisted companies is a long-term process. As soon as you say to yourself that you're in for the long haul, you have to give yourself enough time to select the right companies in which to invest, to create value - since, depending on the cycle, you're going to see a speeding up or slowing down of capital - and then to take the time to crystallize this value so that the company can be taken over by another investment fund or by an industrialist, or so that it can be listed on the stock exchange. There's no such thing as market timing, it's always time and it's always a good time to invest. Also in your vision is the importance of putting marbles in closed products.
A closed product
When you make an unlisted investment, you're making a long-term commitment. You won't be able to get your money back right away.
There are several approaches to unlisted investing. Private Corner has a rather unique approach, which aims to be as close as possible to the experience of the institutional investor. And so, to maximize performance, it's important to be able to invest this money without needing to recover it.
Funds invested in unlisted companies are therefore locked-in: they are closed-end funds with a lifespan generally ranging from 8 to 12 years. To be precise, the period of unavailability of committed sums is generally shorter than the lifespan of the funds, since you have an investment period to be able to invest at the right time which will last from 1 to 5 years. During this period, the investment funds will deploy the money in unlisted companies, which also makes it possible to have several economic cycles in the same investment vehicle. Still in this diversification approach, during this 1 to 5 year period, the money will be deployed and then you'll have a period of value creation between the second and third year and the seventh and eighth year, depending on the entry points of the different companies.
Also, investing all the money entrusted to us means not being able to pay it back, since we have to wait until this value has crystallized and really taken hold before we can return the money to investors. The period of unavailability is therefore shorter than the life of the funds, since you will recover the proceeds from the sale of your investments as and when they are sold.
How do you manage the diversity of your investment portfolio for effective diversification?
Good investment portfolio management depends on the strategies of the funds in which you invest. If it's an unlisted asset fund with a highly concentrated strategy, you'll have just six or seven underlying companies. If it's a co-investment or secondary fund, you'll have between 60 and 1,000 companies. These are so-called core portfolio funds, in which you should invest to kick-start your policy of diversifying away from equities. If you don't invest in unlisted assets, you miss out on all the value creation that takes place before companies are listed on the markets. So it's vital to think about diversifying your portfolio into unlisted assets.
What's more, in France, less than 1% of investors' assets are invested in unlisted companies. In the USA, on the other hand, around 20% of private investors have subscribed to unlisted asset funds.
Diversifying your portfolio of unlisted assets helps to monitor risk
To monitor risk, you need to invest in the most diversified way possible, with an evolutionary approach. You'll start with portfolio fund strategies. Then, little by little, you'll be able to invest in more concentrated assets, more specific in terms of sector, geography and strategy.
When we talk about unlisted investments, we're generally talking about private equity, infrastructure and private debt. When it comes to real estate, I think the French are fairly well diversified. That's why Private Corner concentrates on these three specific investment strategies (private equity, private debt and infrastructure), strategies for which there will be times in the economic cycle when you'll have to favor certain sectors over others, in order to have the most sustainable approach possible to diversifying your wealth with unlisted assets.
2 tips for investing in unlisted assets
- Invest in areas that you understand or that will be well explained to you.
- Invest in assets that will be defensive in an inflationary context, such as infrastructures, which are essential assets on which you have good downside protection because of this inflation tax.
It's also worth noting that unlisted asset funds are aimed at private investors who are well-informed and therefore able to invest at least €100,000, with these amounts deployed over a period of 4 to 5 years. An investment in private equity, private debt or infrastructure therefore corresponds to a savings effort of around twenty thousand euros a year. In the end, it's quite feasible, and allows us to take the most rational approach possible to the cycle we're entering.
To conclude, with hindsight, the investment funds that have been invested in down cycles are those that have performed the best. So, even if there is no market timing, this is perhaps one of the best times to have an entry point into this asset class.
To find out more about our unlisted asset solutions, please do not hesitate to contact us.
