GPs predict greater focus, flight to quality

Permira partner Veronica Eng has said ‘any manager worth its salt’ is taking a hard look at its portfolio companies and carefully broaching new investments amid today’s unprecedented financial climate. Phoenix CFO Steve Darrington, meanwhile, expects unsettled investors to flock to smaller managers.

A confluence of political issues, credit market woes and “human excess” has pushed financial markets into a “perfect storm” challenging fund managers, said Veronica Eng, a partner at Permira and member of its investment committee.

“The only thing we know,” she said, “is that the future will be challenging, and that any manager worth its salt is currently concentrating hard on its portfolio companies and being very picky about the investments it makes, whether that means by geography, sector or target returns.”

Veronica Eng

Eng, who was chairing a panel discussion yesterday at the 2008 Guernsey Funds Forum in London, also expressed concern over opportunities thrown up by devalued public markets.
“Until the trust has returned and you know exactly who your counterparties are, then public-to-privates will be very difficult,” she said.

Steve Darrington

Steve Darrington, partner and chief financial officer of Phoenix Equity Partners, added that in investors’ “flight to quality” as a result of market turbulence, limited partners will most likely gravitate towards smaller managers.
“Investors now want to see the whites of the eyes of the people who are investing their money,” he said. “They will be worried that huge organisations with hundreds of employees will be busier running their own businesses than running their investments.”

Phoenix, which targets the UK midmarket, recently funded the management buyout of hotel booking agency Expotel and simultaneously executed a bolt-on acquisition for a total of £38 million.

Permira is currently in the process taking Nasdaq-listed technology company NDS private for $3.7 billion (€5 billion), in the only deal it has announced this year.