“The temper is optimistic. Possibly too optimistic,” says Isabelle Scemama, the worldwide head of AXA IM Alts.
The non-public markets veteran is sitting within the marbled internal courtyard of a lodge in central Paris, surveying traders as they meet on the IPEM convention to debate the financial outlook after their summer season break.
The environment, at the very least on the general public panels, is bullish: buyout bosses level to the increase in non-public credit score and the resilience of infrastructure belongings as causes for cheer regardless of the downturn within the world financial system.
However after greater than 30 years within the options asset administration trade (of which 21 have been inside AXA IM), Scemama has lived by way of sufficient monetary crises to be cautious of the optimists.
Simply take AXA IM’s improvement of twenty-two Bishopsgate, the tallest skyscraper within the Metropolis of London, which was accomplished in 2020 in opposition to a backdrop of pandemic lockdowns, financial recessions and post-Brexit uncertainty.
“It has been by way of plenty of challenges. Brexit first, then Covid, and now an atmosphere the place there may be concern about progress and the financial atmosphere.”
Right now, the 62-storey skyscraper is nearly absolutely let at rents that AXA had forecasted earlier than these crises hit, Scemama says.
The 56-year-old provides with a sigh of aid: “It went as deliberate.”
Whereas that exact venture seems to have overcome the hurdles, many non-public market traders are actually feeling the pinch of their portfolios, as rising rates of interest and falling valuations take a toll on exercise.
“You could have asset lessons the place there are actually extra questions and scrutiny, corresponding to non-public fairness and actual property,” says Scemama, who oversees AXA IM’s €185bn various enterprise unit.
She provides: “There’s a price of capital, a price of funding, and an over-allocation of some traders. Subsequently you’ve got fewer consumers, extra questions and markets which are frozen.”
The downturn is prompting hypothesis that some non-public fairness corporations will now fall by the wayside, as traders trim their allocations and the biggest buyout retailers dominate the fundraising frenzy.
Scemama herself anticipates there can be fewer GPs out there going ahead: “We will anticipate extra consolidation as a result of there may be this want for dimension and entry to capital. Fundraising is turning into extra constrained and a number of ranges are adjusting, so that is creating an excellent atmosphere for consolidation,” she stated on a panel at IPEM.
Whereas some corporations are struggling on the fundraising path, others are raking in report money hauls: in June, TA Associates tapped traders for $16.5bn for its newest flagship fund and in July CVC broke trade information by gathering €26bn for its ninth Europe and Americas non-public fairness fund.
AXA IM itself raised roughly €15bn of web new cash in 2022, including that it anticipated to extend capital elevating for each its infrastructure and debt methods in 2023, because the enterprise continues to answer and match shifting investor necessities.
“I’m very constructive on non-public credit score for us. It’s €80bn of belongings out of €180bn, so it’s positively one thing that’s performing,” Scemama says.
The group has additionally seemed to focus on the continued progress of its recently-launched non-public wealth providing, the place 17% of revenues had been generated by third-party capital raised in 2022, with non-public traders nonetheless underweight in various asset lessons.
Having the advantage of dimension and scale will play an more and more necessary position because the downturn unravels, Scemama argues.
Smaller funds focusing simply on workplace actual property, as an illustration, can be pressured into secondary areas and have much less out there capital expenditure, she says.
“You probably have a small fund of $100m-400m, you can not diversify your portfolio throughout asset lessons.”
Consolidation will not be the one subject on Scemama’s radar: range, or the dearth of it, is just too. “When you have a look at this trade, it continues to draw extra males than females, even among the many youthful technology.
“It’s gradual and it’s difficult, due to the pool of expertise.”
She provides: “The reply for me is to work with the youthful technology. We’ve completed rather a lot, myself and my colleagues, about participating with universities in London and Paris to satisfy Girls in Enterprise associations to create consciousness.”
As for AXA IM’s personal funding route, Scemama says: “When it comes to technique, we’ll proceed to leverage on our strengths; positively infrastructure, non-public debt and actual property. We even have some extra area of interest methods, notably our affect fund.”
Scemama says the largest focus is power effectivity and decarbonisation, each in enhancing the present portfolio and making extra inexperienced infrastructure investments sooner or later.
In August, as an illustration, the agency agreed to amass a 25% stake in Iberian renewables platform Finerge from Igneo Infrastructure Companions, including publicity to the renewable power sector following its 2022 funding into the Hornsea 2 offshore wind farm within the UK.
“We’re satisfied it’s the way in which for us to overperform as a result of we now have taken a number one place on that entrance and we’re satisfied the monetary efficiency of the asset can be very a lot pushed by the ESG efficiency of the belongings.”
Lives Paris, France
IEP Paris (Sciences Po), diploma in Political Science
1989 joined BNP Paribas to work in actual property finance
2001 moved to AXA IM – Actual Belongings to develop third get together enterprise
2017 CEO of AXA IM – Actual Belongings
2020 CEO of AXA IM Alts
Pursuits and hobbies
To contact the creator of this story with suggestions or information, e mail Sebastian McCarthy