Founded in 2000, Equitis Gestion is one of France’s leading private equity management companies and sees big opportunities ahead as both non-PE groups and US PE groups look to invest in the European markets.
Philippe Bertin (pictured), Managing Partner and one of the three founders of Equitis, tells Private Equity Wire that currently the firm is setting up funds for a variety of new people such as life insurance companies, who want to enter the private equity market where the proposed returns on investments are higher than in traditional markets.
“Also, we’ve just made three funds for private banking organisations. In France, there is clearly an appetite among institutions to enter the private equity space with bespoke and dedicated vehicles, which is not easy for them. For example, a private bank might have liquidity constraints. We can help with this as the management company to the fund by creating liquidity every 15 days, which is unusual for private equity investing,” says Bertin.
Equitis will be featuring at the forthcoming IPEM event (https://www.ipem-market.com) in Cannes, 24th to 26th January, during which it will be presenting the two core components of its business.
As Bertin explains: “We are specialized in two areas. The first is fiduciary management. We are the number one fiduciary manager in France with around EUR4 billion in assets under management.
“The second is more dedicated to the private equity business, where we specialize in managing advised funds. Each fund that we manage has an investment adviser who recommends investments to the management company. They source deals, analyse the opportunities in the market, and if something looks good, they give us a recommendation to invest.
“After that, we manage the fund from an administrative and regulatory perspective.”
The management company function has grown in prominence in recent years as a result of the AIFM Directive, which requires alternative fund managers running onshore regulated AIFs to either become their own AIFM or appoint a third party AIFM; which effectively carries out the same role as a management company under the UCITS regime.
Equitis does not raise any funds itself. It solely hosts funds on behalf of third party PE managers who are too small to justify the cost of establishing and operating their own management company. Almost all of the PE funds it works with are registered with the French regulator, the AMF, and they are all AIFMD-compliant onshore funds.
Philippe says that the range of AUM management goes from funds raising EUR10 million up to EUR200-250 million.
“Our market and our activity is driven by the fact that market regulation is getting more complex and increasing costs, skills and expertise needed to stay on top of it all,” says Bertin. “When you are a fund manager with an AUM of EUR100-150 million, you will have to set up a management company with all this competence in-house. It’s awfully expensive and therefore much more efficient to outsource all of the administrative and regulatory aspects to complying with AIFMD.
“For larger funds it is a different situation. If you have EUR500 million or EUR1 billion in AUM, you don’t need to worry as you’ll have the resources necessary to establish your own management company. Even if you are a big player, though, you might still choose to outsource some of your accounting, valuation and other processes. Firms like Partners Group or Ardian are already outsourcing part of their activities.
“As a PE management company, we see a big growth market here in Europe.”
He confirms that Equitis has initiated a number of contacts with large PE groups in the US. With market valuations proving more attractive, and competition to complete on deals less intense than the US, some managers are considering setting up regulated PE vehicles in Europe and as Bertin is quick to state: “It offers a lot of potential for us.”
The management company, as a concept, is alien to US managers. After all, they’ve never had to navigate the UCITS (and latterly AIFMD) market as domestic European PE groups have. As such, it takes longer for US groups to get comfortable with the idea of outsourcing.
When asked what any mid-sized PE manager (European or otherwise) should consider when wishing to appoint a third party AIFM, Philippe makes two points:
“Firstly, a total absence of conflict of interest needs to be in place. I would say that is the most important criterion. Almost all of the management companies operating in France also run their own internal funds. We, on the other hand, manage more than 30 funds, each one of which is externally managed so we do not have any kind of conflicts.
“The second key point is the AIFM’s experience. We have been managing funds now for nearly 20 years and we have sharp, skilled experience in handling regulatory issues. We have several fund promoters who have come to us and said, ‘We like how you worked for our first fund, please now help us with the second fund we are launching’. For example, we handle two funds for Morgan Stanley, which shows that experience counts for something.”
To further expand its capabilities on the fiduciary side, in 2016 Equitis joined forces with Luxembourg-headquartered financial group SGG. This has created a number of synergies. Not only does it allow SGG to avail of a French fiduciary to support clients across Europe and to build upon the French ManCo service model Equitis has honed over the years, it also allows Equitis to widen its client base beyond the French market.
“We already have several common clients that we are jointly working with so the partnership with SGG has worked out very well. They bring the savoir-faire to operating in Luxembourg, which we previously didn’t have. It is very different to the French regulated market,” remarks Bertin.
Equitis works with a wide range of funds including VC funds, growth funds, infrastructure funds and renewable energy funds.
“The two Morgan Stanley funds are infrastructure funds. We have funds investing in listed assets and we also have capacity to work with loan funds. The only funds we don’t work with are those investing in direct real estate. We can manage funds that invest in SPVs (which act as a shield between the asset and the fund) but not funds with direct real estate investments,” concludes Bertin.
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