The good momentum of the Private Equity sector (EP), both in Spain and at the global level, means for financial communication an opportunity to add value. Because EP is an asset with great competitive advantages: it generates ongoing business for managers and investors. General Partnershigh returns for investors or Limited Partnersand solutions for companies in need of financing and capacity building.
Features
The Private Equity consists of a very long-term investment in unlisted companies, both in their start-up phase and in the early stages of their development. start ups -It is either in four phases: fundraising or Venture Capital, or in more mature stages. It is carried out in four phases: fundraising, or fundraisingThe investment disbursement, maturity, and disinvestment.
Investors are preferably institutional (pension funds, insurance companies, family offices, sovereign wealth funds, etc.) or large investors from the private banking segment. Private Equity is considered an asset alternativewhich brings stability to the portfolio, and superior returns to equity and fixed income.
Benefits and key figures
PE has a medium/low correlation to the economic cycle and therefore benefits from low interest rate environments that lead to low returns in equity and fixed income. The optimal risk/return profile and high diversification protect the investor against volatility. And as with traditional management, manager expertise is key in choosing companies, sectors, or trends in the economy with sufficient growth potential to materialise into attractive returns on exit.
The figures confirm the good momentum of PE in Spain, and the rest of the world. According to the latest report presented by Funcas, since its introduction in the mid-1970s, investment commitments amounting to 44 billion euros have been executed in Spain. The expectation for this year is to reach 6,000 million euros. The sector has been growing at a rate of 10% practically since 2000.
Globally, the volume invested amounts to $2.7 trillion, representing 3% of the valuation of the equity markets. In 2018 alone, Private Equity investment vehicles have raised $680 billion in fundraisingand there is $628 billion to be spent on the Limited Partners can be reinvested following the implementation of divestments (known as dry powder).
The role of communication
During the fundraising stage, the investment policy, the maximum size of commitments or the remuneration of the management team are established. The investor expects the manager to be successful, and the manager needs some patience in order to have the flexibility to choose the strategies, assets or sectors of the PE fund that will deliver that success. Therefore, there must be a complete alignment of interests between the two.
In this context, the role that communication can play is very important. Firstly, as a tool for disseminating the benefits of SP, an asset that is still little known among the general public. And, above all, to ensure that General Partners achieve the necessary alignment with the interests of the Limited Partners during the initial phase of the investment.
The General Partners know when, how much and how they will generate value in each vehicle they manage. Communication will help them strengthen brand awareness with the qualities that will solidify the trust of their customers. Limited Partners. At the time of divestment, communication will export the achievements and strategies used, enhancing the manager's corporate reputation.
In the case of Limited Partners, communication will help position them among their clients, and in the industry, as selectors of the most efficient and effective managers in their work to optimise investments. Managers that have achieved successful PE investments that have been identified by the Limited Partners as the best experts in designing, and executing, optimal investment strategies.
Finally, companies that have benefited from an investment in SP can use communication to improve their brand image by communicating to their customers and potential customers the improvements and new business strategies they have implemented thanks to SP.
Javier Ferrer
Communications consultant specialising in the world of investment at Proa Comunicación.