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Coronavirus crisis is redefining the role of private equity CFOs

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The Covid-19 outbreak is changing the way that businesses around the world operate – and private equity is no exception. In particular for this industry, the focus is on the role of the chief financial officer (CFO), a position that might have previously been considered out of sight and out of mind. However, as consequences of the pandemic set in, firms are beginning to embrace technology and automation, pushing the role of the CFO firmly from the back room out onto the shop floor.

As the industry begins to feel the economic impact of Covid-19, firms will need to look for a competitive edge to stay ahead – or even just keep up – in this new environment. Understanding what actions need to be taken to achieve the best results and enhance value will be essential as costs are increasingly scrutinised. And, although the adoption of technology has been slow, it is highly likely that Covid-19, among other factors, will serve as a catalyst for change.

Manual intervention
In previous years, data processes at a back-office level required significantly more manual intervention than we would expect now. The numbers were painstakingly inputted by hand, with many still relying on PDFs, Excel sheets and Google Docs. In fact, the idea that data could be used at a strategic middle- and front-office level had not yet been conceived. Now, as private equity firms face increasing pressure to improve efficiency and adopt technology into their workflows in the light of Covid-19, the realisation that managing data can actually improve performance at the portfolio company level and maximise portfolio exit results is increasing.

This idea has largely stemmed from improvements in automation and new tech platforms that are enabling more effective gathering of information as well as the intelligent reporting of data. It has given the CFO and the finance function another crucial role to play as they become a central data hub providing dealmakers and front-office teams with valuable insight.

The most obvious areas where technology can improve efficiency is within a firm’s operating and reporting systems. Processes around financial statements and investor reporting must be updated in order to improve investor communications, particularly those unsettled by potential reduced returns as a result of Covid-19.

Unsurprisingly, there has also been growing demand for reporting solutions from GPs as they call for a single point of truth, where they can assess the risk profile of their investment quickly. Additionally, where the role of the CFO once centred on crunching numbers, the focus is now on saving money, streamlining processes, facilitating fundraising and helping to bring deals to market better and faster.

Yet, more work still has to be done in order to fully modernise the back office and harness the necessary technology systems to handle data and deliver metrics that can help to streamline front- and middle-office processes. It is the largest firms, with hundreds of employees, that have begun investing in technology the fastest.

Evolution in its infancy
However, unlike the bigger institutional players, for many smaller firms the evolution of the CFO’s data model is in its infancy. The level of investment required to implement the technology needed in-house is likely to be out of scope for many. Regardless, as recession looms following the ongoing impact of the pandemic, there will inevitably be a higher scrutiny of costs and it will be essential for the finance function to use technology in order to run as efficiently as possible.

In order to avoid landing at the bottom of the pack, smaller firms must find a way to leverage technology so the CFO can take centre stage without breaking the bank. One possible solution is to strategically outsource or co-source certain elements of the back office and/or portfolio monitoring requirements. This enables smaller firms to leverage existing technology and harness data in order to underpin competitive returns and investor fundraising allocations.

For some years, private equity has toyed with the idea of technology while other industries aggressively adopted it.
Now, as bigger players fully embrace technologies’ ability to generate outsized returns, smaller firms will have to turn to technology in order to get a leg up on the competition and weather the ongoing pandemic.

Justin Partington is group head of funds at investor services firm IQ-EQ.

Source: https://www.penews.com/articles/coronavirus-crisis-is-redefining-the-role-of-private-equity-cfos-20200820

Private Equity

Carlyle invests in logistics assets as Covid-19 drives e-commerce demand

Sale-and-leaseback transaction involves 27 distribution centres in France and Germany

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Carlyle has acquired a portfolio of logistics assets in France and Germany in a sale-and-leaseback transaction, as a response to a pandemic-driven rise in e-commerce demand.

The portfolio comprises 27 high-quality distribution logistics assets totalling 158,000 square meters of space focused on parcel-delivery. The assets are located near major urban and trade areas across France and Germany, the firm said in a statement.

Marc-Antoine Bouyer, managing director on the Carlyle Europe Realty advisory team, said both countries are “core” to the firm’s investment strategy in Europe. The acquisition reflects the interest in logistics and distribution, which has seen “rapidly growing delivery volumes accelerated by strong growth in e-commerce”, he said.

The investment was made via Carlyle Europe Realty (CER), a €540m pan-European real estate fund, closed in June last year. Financial details were not disclosed.

The CER vehicle targets opportunistic investments across Europe, focusing on “buy and build” platforms in key segments such as logistics, residential, student accommodation, retail, hospitality and co-working.

The private equity house with $221bn in assets under management around the world is not alone in trying to capitalise from the accelerated shift to e-commerce in Europe.

In April, KKR took a majority stake in European investor and manager of industrial and logistics assets Mirastar. In May, the US-based firm continued its move into European logistics real estate with the acquisition of Etche France from the BMF Group and its co-founders.

To contact the author of this story with feedback or news, email Elisângela Mendonça

Source: https://www.penews.com/articles/carlyle-invests-in-logistics-assets-as-covid-19-drives-e-commerce-demand-20201026

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Private Equity

Alternative Investments/ESG: ESG Investments Are Now Mainstream And Core Portfolio Elements

Adrian Lowcock is head of personal investing at Willis Owen. He notes that ESG’s decisive outperformance during the last one, three, and five years shows the investing approach is here to stay. Lowcock points to the 94.6% return from the MSCI ACWI ESG leaders index over five years compared to the 91.3% return from the MSCI ACWI index, as validation of his opinion.

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Alternative Investments/ESG: ESG Investments Are Now Mainstream And Core Portfolio Elements

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Gone are the days when ESG was just “nice to have,” says Adrian Lowcock at Willis Owen.

Adrian Lowcock is head of personal investing at Willis Owen. He notes that ESG’s decisive outperformance during the last one, three, and five years shows the investing approach is here to stay.

Lowcock points to the 94.6% return from the MSCI ACWI ESG leaders index over five years compared to the 91.3% return from the MSCI ACWI index, as validation of his opinion. (WealthAdviser)

ESG is core now

“These funds are core holdings now. Whereas previously, ESG was a secondary consideration, a nice to have tilt to portfolios, the world has been changing. A focus on companies that do less harm to the environment, be that alternative energy, greener food production or waste reduction, is here to stay. Crucially, investors are rewarding them,” he said.

Lowcock also points to the effect of the COVID-19 pandemic. It showed to locked-down citizens the effect of human activity on their environment.

“ESG investing is now a huge part of investing common sense, with many areas that responsible and ethical funds avoid being invested in “old” economy industries in decline,” he notes.

How the digital age is adding more power to ESG’s elbow

Lowcock also observes that advances in digital technology help companies more accurately track their environmental behavior and therefore, be more accountable for their actions.

Investors also benefit because technology helps make their opportunities more “cost-effective.”

Lowcock exhorts investors not to miss the ESG bus.

“Investors who are not on board {these trends} are going to miss out over the long term.”

Related Story:  How To See Through The “Ethical Veneer” (Bancroft Wealth)

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Source: https://dailyalts.com/alternative-investments-esg-esg-investments-are-now-mainstream-and-core-portfolio-elements/

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Private Equity

Digital Assets: JPMorgan Issues Bullish Bitcoin Analysis

JPMorgan (NYSE: JPM) analysts issued a note on Friday that said millennials’ preference for cryptocurrency over gold could lend a bullish tailwind to bitcoin in the coming years. Millennials would constitute an important segment of the investment fraternity and that could tip the scales in favor of BTC versus the yellow metal.

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Digital Assets: JPMorgan Issues Bullish Bitcoin Analysis

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Analysts at JPMorgan say bitcoin (BTC) will benefit at the expense of gold.

JPMorgan (NYSE: JPM) analysts issued a note on Friday that said millennials’ preference for cryptocurrency over gold could lend a bullish tailwind to bitcoin in the coming years. Millennials would constitute an important segment of the investment fraternity and that could tip the scales in favor of BTC versus the yellow metal. (MARKETS INSIDER)

Bitcoin playing catch-up with gold?

While the physical gold market commands a value of $2.6 trillion including ETFs, bitcoin is only a tiny fraction of that. (The market cap of BTC is just $243 billion, according to Bitcoin.com).

“The potential long-term upside for bitcoin is considerable as it competes more intensely with gold as an ‘alternative’ currency we believe, given that Millenials would become over time a more important component of investors’ universe,” JPMorgan wrote in their analysis.

“Even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the bitcoin price,” the analysts said.

To reach the equivalent of the gold market, bitcoin would have to surge more than 10X from its current price levels.

Adoption too could work in favor of BTC

JPM also said that in the long run, there could be more new use cases for bitcoin – beyond its restricted role as a store of value similar to gold.

Rising crypto adoption could, therefore, add to BTC’s allure compared to the precious metal.

“The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value,” JPMorgan said.

Meanwhile, Raoul Pal says gold breaking down

Bitcoin has been on a roll in recent weeks, with Square’s $50 million investment and PayPal’s move to integrate the cryptocurrency into its platform.

Technically, the crypto gave a powerful buy signal when it cleared the $12,000 level on high volume.

Coin Telegraph quoted Real Vision CEO Raoul Pal’s tweet as follows:

“Gold is breaking down versus bitcoin, as expected cc: @michael_saylor Everyone take note. The next thing I’m expecting is the correlations between BTC and the dollar and BTC vs equities to break down too… let’s see. #Bitcoin.”

Related Story:  “Front-Running Opportunity Of A Lifetime” (Raoul Pal)

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Source: https://dailyalts.com/digital-assets-jpmorgan-issues-bullish-bitcoin-analysis/

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