Private equity, a safe haven for portfolios in times of volatility

The ABC-Funds Society Forum "Landing Private Equity: An Investment with an Impact on the Real Economy," organized at ABC headquarters with the Crescenta platform (launched at the end of 2023), analyzed this segment of the market that invests in unlisted private companies to boost their growth. This commitment to diversification and higher returns also offers greater resilience in times of particular volatility.

A generation of value in which participants emphasized the importance of financial education, at a time when Funcas has just published a study showing that more than one in four Spaniards believe they lack sufficient financial knowledge to make appropriate decisions about their money.

Alicia Miguel, editor-in-chief of Funds Society, led the talk with Ramiro Iglesias, CEO and co-founder of Crescenta, and Enrique Tellado, former CEO of EVO Banco and CEO of Intrum, in which they began by pointing out that more than 90% of Spanish companies are not listed on the stock market, and how there are increasingly more opportunities to find profitability in the field of private equity (with legal requirements, of course, such as having a minimum of 100,000 euros in personal assets and an investment of no more than 10% of financial assets to cover incidents).

In this context, Iglesias noted how this modality allows "the opening of private markets to new investors, in addition to being a lever for growth for companies, and undoubtedly has a real impact on the economy."

A context in which participants highlighted how the concept of "public" in this area does not refer to investment in public companies, but rather to the general public's access to stakes in all types of companies, under the guidance of specialized entities that can support them along the way, enabling them to participate in the growth of companies (private equity growth). "With the essential option of diversification," Tellado emphasized, "to avoid risks and foster liquidity, in an environment that allows for investment, participation in new, attractive businesses, and participation in their development."

Double-digit returns in an environment of waiting five years to see results in the next five, with new tools such as evergreen (more flexible) funds, which, as experts commented, still have a long way to go ("they have no history, and we can't talk about 'track records'"). What does seem clear are the guarantees for clients, as Tellado pointed out: "If a client has liquidity problems, we have more buyers than sellers, so it's important to diversify based on adequate information, in actions that not only add value to the individual, but also to society."

"Our mission is to provide access to specialists with proven experience over more than two decades (Iglesias added), with average annual returns of 20% versus loss ratios of less than 5%, and who are accustomed to working within logical time horizons. Therefore, data is essential for targeting the most suitable profiles, the most in-demand ones, who are capable of raising €25 billion in three months."

Attractive returns (with a minimum ticket of 10,000 euros) compared to banking options, as Tellado pointed out: "We say it allows, so to speak, to invest in cool things, things that you want to be involved in," with a program inspired, as Iglesias pointed out, "by the processes typical of family offices, of large fortunes, with various investment modalities, from those 10,000 euros to millions of euros." Some guidelines to avoid illiquidity: the liquidity inherent in assets that cannot be easily converted (for various reasons, from the particular to the general) into cash.

The example of Nordic funds (illustrative of a greater historical effort in financial education), the importance of moving unused money into the financial market (and better adapting the regulatory framework), and the impact on job creation of investments fostered by this modality were other aspects discussed at a meeting that analyzed the present and future of private equity. These were highlighted by Tellado ("this investment makes the economy more productive") and Iglesias ("betting on the democratization of access to investment to gain financial security, without having to monitor the fluctuations of your investment day after day").