Capzanine’s Laurent Bénard explains why his firm cancelled plans to open a UK office in the wake of Brexit.
What impact do you think Brexit will have?
Fortunately we’re not exposed to the UK market so far.
We had thoughts early on just thinking about whether it would be useful for us to open an office in the UK. But the Brexit momentum comes in and we decided to do not open something right now, maybe in the future.
We do think that Brexit could raise some new opportunities in the markets. But we are concerned by the consequences of Brexit, even though we’re not exposed to the UK market, but the global consequences that could have in terms of economics, macroeconomics in Europe, for sure, because there are a lot of countries which are exchanging goods with the UK and a decrease in growth in the UK could have an impact in continental Europe, even though for us definitely it’s indirect consequences. We are quite protected on that.
And the business we are looking at so far, for the last fund we have, we always had in mind: ‘Is the business exposed to the UK market?’ And so far that has not been the case. So the exposure we have in our portfolio to the UK market is really, really very small.
What other key issue(s) do you think will impact Europe’s private debt markets?
What we see, mostly, is too many new players coming into the markets. When you look about 10 to 15 years ago we were talking about more private equity funds instead of direct-lending funds. And the LPs in private equity were always looking at two main things: track record and team. And the first-time team, first-time fund was quite rare. Where actually, in the private debt market, it’s been quite different with so many new players with no story in direct lending who came out in the markets.
Actually we do really think that’s not a good … issue for the direct lending markets. And we would like LPs coming back more on track record, risk protections. The team, how they face a downturn that will be key. Because today we see a lot of liquidity coming to the markets, which has for some transactions, which are really well known in Europe and the bigger ones, an increase in leverage and a decrease in pricing. So that could be an issue that could have a bigger consequence in the overall industry.