In preparation for the Alternative Investor Conference (AIC), the BAI's annual industry conference on May 14 and 15, investors in a survey repeatedly expressed concerns over investment opportunities and rising asset prices in the PE business. At the same time, there are specific challenges related to risk management, in particular portfolio monitoring down to the operating company level, and to performance measurement and comparability for PE funds.
In the BAI's view, conclusions for the industry are on the one hand the development of new value drivers and growth strategies; opportunities can be generated through enhanced integration of portfolio companies, but also co-investment strategies, which have the potential to raise new synergies not just for the managers but also for investors. On the other hand, it is also important to work on improving the transparency and availability of data, which are of great importance to many investors, not only with regard to regulatory reporting obligations, such as the look-through under Solvency.
BAI Managing Director Frank Dornseifer explains this as follows: "The private equity industry is in the process of developing new geographies and technologies. Demand from institutional investors continues unabated. Now it is time to develop new value drivers and growth strategies. Asia, and China in particular, is already a major growth area for PE activity, and Africa is also starting to get on the radar. At the same time, the increased use of Big Data, Artificial Intelligence, etc. has diverse potential, for example in the selection and monitoring of portfolio companies. Private equity will therefore remain an interesting and attractive asset class in the future. At the same time, however, the industry is also called upon to increase transparency vis-à-vis investors and to provide more data that will be used for benchmarking fund and manager selection".
Supervision and politics have also recognised the role and importance of the PE sector. The EU Commission will shortly adopt an implementing regulation for the Solvency II Directive, which includes improvements for the capital charge for unlisted equities and long-term equities in the portfolio of insurance companies. Last year, in the course of the preceding consultation procedure, the BAI submitted its own proposal for a risk-based capital charge approach which reflects more accurately the true risk/return profile of private equity than the current standard model under the Solvency Directive.
You can find more information regarding Private Equity on the section “main topics”: bvai.de/en/main-topics-of-the-association-work.html.
The agenda of BAI Alternative Investor Conference (AIC) 2019 is available at ai-conference.com/en/agenda-2019/agenda-2019.html.
Bundesverband Alternative Investments e.V. (BAI)
Frank Dornseifer, Managing Director
Poppelsdorfer Allee 106
follow us on twitter: www.twitter.com/bai_ev