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Inflationary market conditions creating opportunities & challenges for GPs

18 November 2022

As published by Delano Magazine and written by Aaron Grunwald

The Association of the Luxembourg Fund Industry holds its Private Assets Conference 22-23 November 2022.

In advance of the event, Delano spoke with Pierre Weimerskirch, regional head, Luxembourg at Apex Group. He moderates the “GP perspectives: translating trends into investment strategies and returns” panel, Tuesday 22 November at 9:50am.

What do you want the audience to get most from the “GP perspectives: translating trends into investment strategies and returns” session?

Pierre Weimerskirch: Alfi’s Private Asset Conference is always a must attend event for anyone in the industry, focusing on the topics which are crucial to the continuing success of the asset class in Luxembourg.

The current macroeconomic conditions pose new challenges to PE managers. The objective of the panel is to address these challenges and discuss with the panellists how they respond in terms of products and strategies and hence provide the audience with valuable insights about how the managers assess the current situation and position themselves in this new environment.

From your point of view, what impact will inflation and interest rates have on GP decisions in the coming year?

With investors operating in a low interest rate environment for so long, the current inflationary market conditions will create new opportunities as well as challenges for GPs in the year ahead.

With all expecting that central banks’ tightening agendas will continue to raise rates until inflation shows signs of slowing, the private markets offer attractive returns for institutional investors. Asset classes such as private debt and real assets, which have traditionally offered some protection against market volatility and interest rate rises, remain attractive. As bank lending tightens, private debt will offer investors more flexible financing and structuring characteristics than the public markets.

The raising and deployment of capital through Luxembourg-based funds remains healthy. However, we may see a slowing of activity in the final quarter, as many sit on their money in anticipation of a market and asset valuation correction in the coming months.

What impact will inflation and interest rates have on your own firm?

We do not anticipate that these macroeconomic conditions will have a notable impact on our business--we have passed the operational and financial stress test of covid-19 with flying colours, and the now combined businesses of Apex Group and Sanne Group have a robust suite of solutions, as well as a diverse client base by geography and asset class which will enable us to drive further growth.

Aside from your own panel at the ALFI event, which session are you most looking forward to hearing, and why?

I am looking forward to attending: “LP onboarding: what to expect and how to accommodate” [Tuesday 22 November at 11:30am]. As the private markets become more accessible, our clients are dealing with higher volumes of LPs, making it more important than ever to streamline their onboarding processes. Having the right technology and expertise in place to enable the automation of those processes and mitigate risks, is critical. Technology has an exciting opportunity to improve the LP experience, increase efficiency and transparency, and reduce time to market.

One theme which I expect to run throughout all the sessions is the ten-year anniversary of AIFMD, which will allow us to reflect on the past decade, as well as look ahead to the next big changes facing our industry.

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