Inflation and higher interest rates are driving a “flight to quality” in the private equity industry, with experienced managers poised to “shine,” according to the chairman of Europe at BC Partners.
“The more experienced managers will differentiate themselves in this market,” Nikos Stathopoulos said in an interview with Bloomberg TV at the SuperReturn International conference in Berlin.
Stathopoulos said the private equity industry was equipped to deal with periods of higher interest rates, having done so before the “abnormal” decade of near-zero percent rates. “It has been proven that we can go through cycles and manage investing and still make good investments.”
But he echoed comments from Apollo Global Management Inc. co-president Scott Kleinman at SuperReturn that firms needed to focus more on operational management of their portfolio companies amid the challenging business conditions.
“We need to become more cognizant of the fact that both inflation and interest rates will remain higher and longer,” Stathopoulos said. “We need to have more active ownership in our portfolio, we need to manage our debt maturities more, we need to manage business and focus on operations.”
BC Partners, one of Europe’s oldest and best-known private equity firms, last year overhauled its leadership after an underwhelming fundraising round. The firm raised €6.9 billion (approximately $7.4 billion) in committed capital across all related vehicles for its 11th flagship fund, below the €8.5 billion (about $9.2 billion) it had originally sought, even after extending the fundraising by several months.
One sector the firm is steering clear of at present is consumer, with the rising cost of living hitting levels of spending. BC Partners has taken a deliberate view not to hold assets that have direct consumer exposure, according to Stathopoulos.
“It’s obvious that the inflationary environment has hit consumers and consumer pricing,” he said. “A very small percent of our portfolio is directly consumer focus.”
