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p r i v at e e q u i t y
Luxembourg, the hub for Private Equity/Venture Capital Text Quentin Deuxant
Private Equity/Venture Capital (PE/VC) as an investment asset class is on the rise globally, with Luxembourg at the forefront of this trend. The country continues to attract more operators over the years, be they institutional or private investors. The LPEA, the association that represents the PE/VC sector, is working hard to achieve this.
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E/VC, a generic expression that groups together investments in unlisted companies, has been on the rise over the past decade. Luxembourg is doing well in this booming market, even though this segment was almost non-existent 20 years ago, with hundreds of billions of assets under management or supervision out of Luxembourg. Rajaa MekouarSchneider, who, in September 2019, became CEO of the LPEA (Luxembourg Private Equity & Venture Capital Association) after having been its chairwoman, vows to build on this positive momentum. “As an association that supports the development of stakeholders in this sector, we have set ourselves some very concrete objectives by 2025,” she explains. “For example, we hope to have 500 members by this date, which means doubling from the current 260 – we had 60 new members in 2019. To beef up resources and respond to increased demand, we doubled our executive team since September and have conducted a comprehensive review whose conclusions are now being implemented to ensure relevance, efficiency, transparency and accountability towards our growing community.” LUXEMBOURG AS AN INTERNATIONAL HUB Above all, the CEO of the LPEA intends to make Luxembourg even
better known among foreign investors. “When we organise events abroad, we establish partnerships with the local PE/VC organisation in order to attract the right audience and leverage personal networks as I have long-time PE/VC experience across Europe,” continues Mekouar-Schneider. “These partners obviously know their local ecosystem very well and this allows us to have a more targeted impact. Lately, we have operated in this way in Madrid, Zurich and Paris, and it has worked very well.” The very varied nature of the industry, which implicates fund managers as well as family offices, private banks, pension funds or the wealthy themselves, means it must succeed in attracting the attention of as many stakeholders as possible during these events that are short. That said, the Grand Duchy already appears to be an essential hub for all financial operators who wish to domicile an investment fund dedicated to private equity in Europe. “Our financial industry is one of the few that are by nature and design outward looking. By essence, we are ‘cross-border’, providing solutions and skills that bridge several ecosystems,” says Rajaa Mekouar-Schneider. “Obviously, the factors that explain the success of Luxembourg as a financial centre in general also apply to the success of the PE/VC sector: the country is
stable from a macro-economic point of view (it has a triple A rating) and a political point of view, with only eight prime ministers since World War II. To this list of advantages, I would add that the private and public spheres work hand in hand in Luxembourg. I think it really is unique, having spent most of my career outside Luxembourg. Singapore is perhaps the closest example to this successful publicprivate partnership mindset.”
5
trillion dollars in assets under management worldwide
260
LPEA’s members
5,000
employees in the PE/VC sector
THE APPEAL OF PRIVATE MARKETS Beyond what’s happening in Luxembourg, PE/VC is also a promising industry globally. Structural reasons explain this attraction, starting with perhaps the relative caution of new generations vs stock market investments. PE/VC consists in investing in the real economy, in businesses – from start-ups to large companies – that are supported with a long-term horizon and aligned interests amongst all stakeholders. “This does not preclude many start-ups that reach a certain maturity and size from seeking IPO listings, which remains a glorified path towards exit, but it is one fraught with pitfalls as recently shown by the WeWork story,” says Rajaa Mekouar-Schneider. Another trend underpinning PE/VC growth is the succession issues many SMEs face, especially