LPs: Open to meetings with CEE managers

Investors are willing to forgive the region’s exposure to EU systemic risk for fund managers with the right track records, delegates heard at a recent industry conference.

Good news for GPs trying to raise a Central and Eastern European focused fund: LPs are keen to increase their exposure to the region. 

Several investors expressed their interest in the region during a panel discussion at a Central and Eastern European conference hosted by the British Private Equity & Venture Capital Association in London on Wednesday. 

“We are looking to be more active [in the region],” Ed Claessen, a principal at the European Investment Fund (EIF), said. “The CEE portfolio is performing quite well. Average returns are about 10 percent, which has been quite ok.” 

However LPs qualified their interest in the region by saying ultimately a commitment comes down to finding GPs with demonstrable strong past performance.   

“We would invest in all these [CEE] countries but it’s really about the track-record of the GP. Even in difficult countries or in crisis times, good GPs with the right strategies can make very good returns, so I wouldn’t say we favour countries over others,” Claessen said. 

Fund of funds manager Pantheon also expects to increase its allocation in the region, Leon Haddass, a principal at the firm, said. “In Russia and CEE we are actively looking at GPs,” he said. Regional funds focused on Warsaw and Poland have recently caught the firm’s eye, “because it is such an institutional market now with a very liquid stock exchange and very much on the landscape of the trade buyers to come and to make purchases there,” Haddass said.  

The region has been able to attract more capital in recent years, Daniel Green, an investment director at Greenpark Capital, who led the panel, said. “In 2012, there was $5 billion of capital raised for Central and Eastern Europe and CIS countries' private equity funds. That was a big jump from previous years; [when] $2 billion [was raised]. But despite falling short of the $6 billion raised in 2008, numbers nevertheless point to increasing interest from investors,” he said. 

CEE has however felt the effects of the Eurozone crisis, which has left some international LPs feeling wary about the region, LPs said. “[They feel] CEE is part of Europe, and Europe is in crisis, so [their approach is] not [to] look at it. In my view that could be quite unfair. CEE doesn’t have the euro and the economies are continuing to grow,” Claessen said. This sentiment was echoed by Anne Fossemalle, director at the European Bank of Reconstruction and Development (EBRD). “CEE has definitely been affected by the eurozone crisis, but the economies continue to grow,” she said. EBRD remains the largest investor in the region, she added.