Private equity, throughout the financial crisis, has proven its ability to steer portfolio companies in difficult times, and limited partners are well placed to help promote the industry’s track record to important external stakeholders: policy makers and regulators. This is the view of Karsten Langer, a partner at mid-market investor The Riverside Company and the newly elected chairman of the European Venture Capital and Private Equity Association (EVCA).
Speaking to PEI during an EVCA conference in Brussels yesterday, Langer said limited partners in private equity funds had an incentive to help promote the industry to third parties, at a time when regulatory change was threatening to make it more expensive for investors to access the asset class.
“At EVCA, one of our priorities is to tell the positive story of what private equity and venture capital have to offer, to investors and the European economy as a whole, and we would like to invite the LPs to get more involved in this. Regulators and policy-makers should make it easier for institutional capital to reach entrepreneurial businesses, and with AIFMD and new capital adequacy rules potentially changing the way investors can allocate to private equity, LPs can play a role in making this case.”
Like most industry associations in private equity, EVCA was originally set up to represent general partners. In recent years the organisation has opened up to limited partners also. Currently some 80 LPs are members of EVCA, a number Langer would like to see at least double.
Langer also spoke of optimism at EVCA that the need for private equity to play a significant role in the European economy was now becoming more widely recognised. “Our optimism is based on the results we achieved during the crisis,” he said, citing a better-than-average default rate for private equity and venture capital-backed businesses running at below 2 percent, and a total of 16,000 European businesses having received funding from the industry since the onset of the crisis.
We’re not being hassled so much anymore. I believe in five years private equity will not just be tolerated; we will be seen as a force for good in the economy
Karsten Langer, Riverside and chairman EVCA
“Private equity has proven its ability to support portfolio companies even in severe downturns, and has shown itself to be a better custodians of businesses than other types of owner,” Langer insisted. “These facts are an enormous counterweight to what the sceptics are saying.”
Langer believes the message is beginning to be heard, and that private equity’s image is improving: “We’re not being hassled so much anymore. I believe in five years private equity will not just be tolerated; we will be seen as a force for good in the economy.”
Langer, who is based in Riverside’s European headquarters in Brussels, has been with the firm since 2006. As EVCA chairman, he is succeeding Uli Fricke of Germany’s Triangle Venture Capital Group.
Riverside is a global mid-market investor that buys companies valued at up to €200 million. Founded in 1988, the firm has invested in over 250 transactions with a total enterprise value of more than €4.6 billion.