Calista Sourcing Club

LPEA Insight/Out Magazine: The View of Single Family Offices by Rajaa Mekouar

September 28, 2021



Stephane Pesch (SP): It has been a year since you left your role as CEO of the LPEA. What have you been up to?

RM: What I do today is in total continuity with what I used to do last year. Remember that my role as CEO was a part time job, alongside which I was developing and managing the private equity portfolio of a small group of private investors. I continued doing that until the end of 2020, when the opportunity came up to set out independently and expand my scope of work to more family offices, with the support of a strong diversified team that I have been building. Most important in our business model is that we are exclusively “buyside” i.e., our revenues are only from our investors who tend to be small to mid-sized Single Family Offices (SFOs). We emphasise Calista's ability to source, select and diligence quality deals that the investors then decide to pursue or not, thus retaining the investment decision. We feel the market still requires more transparency and experts facilitating access to good opportunities. Around this we support investors in other ancillary services related their PE/VC portfolio, most of them being Family Offices. In parallel, I'm personally glad to continue supporting the LPEA via the Board, the SFO club and of course the LPEA Insights Conference.

SP: Since you are active on the buy side, which changes have you witnessed over the past few years concerning GPs (General Partners) and LPs (Limited Partners), especially since the Global Financial Crisis?

RM: The growth of PE has been staggering. We are now at USD 7tn AUM, across the board. Let me first start with the LPs. Traditionally in PE, we always saw pension funds as the key players and decision makers. Well, they have been increasingly pushing the GPs for sustainability goals and strategies in line with the rise of ESG criteria. That's a big trend and a welcome one. In terms of the Family Offices, we are seeing them become very big contenders as PE and VC investors. They used to be fringe players and now they're really in the mainstream, especially the large ones but also smaller entrepreneurial outfits. They sometimes bypass GPs, but also partner with GPs for example in the case of co-investments or Club Deals, but I think they gained their mature status by becoming very big and important in our industry. In VC for example SFOs now account for some 30% of global VC deals (data from UBS Global FO report 2020). What I like most about Family Offices is the flexible, long term capital they bring, and the trust and transparency they require from their counterparties. On the GP side the market is increasingly polarized, with mega firms like the KKRs and the Blackstones of this world that are multi-strategy platforms managing hundreds of billions, and more and more of them getting listed, the last of which being Bridgepoint. This was not the case in 2008. These large GPs are now the bellwether of private equity and give us a good idea of future trends. I never miss the quarterly earnings calls of the “big 5” (KKR, Blackstone, Ares, Carlyle and Apollo). At the other end of the spectrum, you find strong niche players, with strong specialisation in terms of sector or segment. This means that today you have over 10,000 private equity funds globally, more than half of which are in the US. Overall, I would say that LPs have become more diversified in nature and demanding in substance, while GPs have won their credentials as value creators who capture future trends and capitalise on them.

SP: Has that been a good change for the industry?

RM: In one word, YES! I think we've become an industry where investors, GPs are extremely professional and that's why the industry sustained the COVID crisis so well. Last year, from spring until the summer, we were not quite sure how the industry would go and I felt also in my job, whether at the LPEA or at the family office, that there was a bit of a halt in investments, fundraising activity, but it lasted only a few months. The industry has learned a lot from the 2008 period and improved its act by 2014-2015. This growth in AuM and dealmaking actually continued until the start of the pandemic and then pursued its upward trend since September 2020 faster than before. This is all the more valid because technological advancements have accelerated like never before. It’s a historic moment, indeed a revolution, for our society and therefore our industry. Tech is everywhere across all stages and industries. It's reassuring from a sustainability point of view: The resilience of PE is due to its long term focus where operational support is crucial. The companies that are being sold or invested in by PE trust us. There is however also a watch out, a bit of a fear in terms of valuations. The interest rates are remaining lower than ever, while inflation is picking up and you have to ask yourself at some stage, where the balance will shift, because it's more a seller's market than a buyer’s market. Today, if you want to make a good deal, and I see it every day in my job, you really have to dig deep and perform what we call “pearl diving” to find the right companies to buy, whether it's direct or via a fund. Therefore, I would say the buy side has become stronger, more powerful, more institutional, but perhaps also more exposed to risks on the downside, if we look at the next 3 to 5 years. My golden rule is to

always carefully identify all risks and spell out how they can be mitigated. To apply this efficiently it takes trust-based relationships with the management and stakeholders. That does not happen overnight. You become better at this as an investor as you get older and

learn from your mistakes. Here again, Family Offices can hold a competitive advantage as many of the principals built their wealth after building real economy businesses that they sold. They know better.

SP: In Luxembourg too and across the board?

RM: Luxembourg has seen the buy side increase in size and substance thanks also to the efforts of LPEA. Brexit, among other reforms in Europe, have been very positive for us here. I think if we're patient and focused on the right areas, we will continue to gain importance as an ecosystem here in Luxembourg (for the buy side). I liked how you coined this in the question: “buy side” is better than “front office” because in my new business I realise more and more everyday that there is no front and back office, everybody works hand in hand and you cannot deliver a good investment without working as a group across the value chain of the investment.

SP: You're working closely with single family offices (SFOs) from all over the world and successfully launched the LPEA SFO Club back in 2018 which counts now close to 30 members. What can Luxembourg do to attract and retain SFOs?

RM: I'm a strong believer that single Family Offices are the name of the game for a jurisdiction like Luxembourg. Traditionally large Family Offices are based in New York, in the US West Coast, in London, in Hong Kong, Singapore and of course Switzerland. Especially the international ones. Those in London always wanted to have a foot in Europe, or in the EU; now that the UK is not part of it anymore, I think the attractiveness of Luxembourg has just increased. The fact that the prevailing culture is to be low profile and value human relationships before transactional ones is good. Unlike Anglo-Saxon countries, to be frank. The other reason why I'm very fond of having SFOs in our country is the fact that they are trendsetters, although they don't always show themselves in the most prominent way. I saw that you've organised a few events where some of our SFO members participated and as we move towards a more open and transparent world, we will manage to leverage our relationships with SFOs as good flagbearers of Luxembourg and its advantages. The more Luxembourg is doing a great job from that standpoint, the more we will be able to communicate success stories (e.g. investments, teams being built here) and will continue to attract them. Just like the whole ecosystem in Luxembourg, SFOs strive to attract more talent. At my modest level we just managed to hire a very good talent from France, who had never been in Luxembourg, had never heard about it as a centre for doing private equity deals and business. As soon as you bring talent here and introduce them to a few influential dealmakers and show them the goodwill that prevails in Luxembourg, you achieved a big part of the job. Let's continue doing what we're doing, make this [SFO] Club more and more live. The challenge for this community is the digital world. They don't like to meet online unless it's something that they know and prefer to interact and exchange via peer-to-peer networking. My best deals always came from Family Offices. In Luxembourg there are over 100 SFOs that not everyone hears or knows about. The idea is to leverage those already present in Luxembourg and make them come more upfront and talk to the community because we have a lot of substance for them to benefit from in terms of deal making, structuring, etc.

SP: You are also closely related to our Insights Conference of October 28th which will focus on decentralization, innovation and tech investments. How do you see the evolution of VC as a sector of investment?

RM: First of all, thank you for making me part of the task force organizing the conference. As you know, I'm very attached to this conference which we co-created with Luís Galveias. I believe the LPEA Insights remains the main if not the only true business-oriented or investment-focused conference in Luxembourg. This 5th Edition is a milestone to be proud of.

It was inevitable to choose “Tech Disruption” as a theme because we saw the coming of age of tech happening with COVID. Both in terms of performance, scaling up, innovation… by every metric, venture tech has invaded our lives. Which, by the way, is what many Family Offices are investing into, especially healthcare, e-commerce, foodtech and deep tech. It seems it was never clearer that tech innovation helps improve social welfare. After COVID, nobody will ever say that tech or venture, especially in its earlier stages, is redundant. It demystified the asset class in Europe, which by the way is now performing at par or better than its US counterparts in certain segments. And we can be proud to have VC funds #madeinluxembourg confirming this with Mangrove, Expon, etc. As I learned from my friend and “godfather” of venture capital John Holloway, who was employee number four at the EIF, VC can only make us proud of the achievements of local and regional start-ups that have done extremely well across Europe.

SP: Which venture sectors are winning the race?

RM: As you can anticipate, healthcare is one of the biggest winners lately. Think that BioNTech was backed by German Family Offices, this shows a good example the pioneering role that wealthy families can play in innovation. There are many others but such investors like to remain below the radar for obvious reasons. Another sector that's key to Luxembourg and has done very well is FinTech with the digitalization of payments and more seamless service to customers, whether individual or corporate. A word of caution though as I think on the FinTech side, we may have gone overboard in certain investments that multiplied by 10 their value over the last two years alone. You have to ask yourself the question if we're not a little bit overheated. But we do need FinTech innovation, and I think that the LPEA and its partner LHoFT are helping facilitate that. Other sectors that retain our attention are related to food technologies. I think this is really like Internet was 20 years ago. We don't realize yet how protein-based meals and all kinds of fungi and lab-made food is going to change our daily life. It's going to be long in the making, but perhaps not as long as we imagined before. This is directly linked to the sustainability agenda and climate change. Because the way we eat today is not sustainable in relation to our environmental resources. Land is not duplicable. Drinking water is expensive to make. Since tech innovation is helping us shape our future for the next generations, I should quote space tech as well. If you remember a couple of years ago we invited Spire to speak on stage about how space tech is improving and in the meanwhile space innovation has become mainstream. In Luxembourg, we have a few winners in this area as well as a couple of funds also backed by the government that allow us to leverage space-based data into very down-to-earth industries, like New Space Capital that we invited several times to speak at LPEA events. It’s again like the Internet but 30 years ago, where infrastructure plays enable faster applications. So I'm very excited that we're going to

welcome a great line-up of speakers and I look forward to speaking to some of them from a “family” perspective. In one sentence, Tech Venture Capital is now mainstream and we cannot imagine that a smart investor will not allocate to that segment especially if they want to be truly exposed to value creation going forward.

SP: Private Equity is coming of age. What are the trends that you see shaping the industry over the next five years?

RM: I wouldn't be surprised to see private markets exceed USD 20 trillion of AuM by 2030. As long as there's liquidity in the markets it will benefit the industry to some extent. Even if the interest rates start going up because of inflation and there's a squeeze on the LBO side of the market - which we know still represents 2/3 of PE investments (in terms of value). Sustainability will become the name of the game brought as a “collateral benefit” of COVID. I am not supporting COVID of course. It caused tremendous loss and grievance including the loss of a valuable asset of our community, the Head of LuxFlag Sachin Vankalas who was himself a pioneer in sustainability. But remember how just 2-3 years ago, we were still very skeptical in terms of how fast the adoption of sustainability standards was going to reach us. Now there is no more discussion, no more “if”. Today we discuss the “how”, whether we get a taxonomy of green finance or not, I think it's going to happen. And in terms of “when, the time is now. Tangibly speaking, LPs continue to put positive pressure on their GPs to come up with a scheme but honestly, every literature I receive on funds nowadays, contains a big part of ESG strategies and how they are being implemented, tracked and monitored. There's more and more signatories of the UNPRI (United Nations Principles for Responsible Investments), more firms also signing up and picking what are the principles of the 17 SDG (Sustainable Investment Goals) that match them the most. That’s a good starting point. While I'm not an expert at ESG or green finance, I think it just makes sense. Personally I feel a duty to contribute at my own level, hence embracing the opportunity to join the Selection Committee of the ICFA1 which promotes Climate Change fund initiatives in Luxembourg. And especially for Family Offices, I would say, they are by design a sustainable player because the values that are integrated in the way they invest go beyond pure financial returns. Any business today has to reflect upon both the financial and quantitative KPIs but also upon the values that they promote. This is how we're going to be make our lives perennial for future generations. Two last trends for the next 5 years:

1. Infrastructure is going to become bigger as the world needs to upgrade its rails, ports and energy producing assets

2. Asia, especially the South Eastern part, which is not yet very apparent on our radar here, is absolutely the winner of the next decade when it comes to generating growth and innovation.

SP: Would you include retailisation of PE as one of the trends?

RM: You're right, absolutely! Retailisation is also rolling out as we speak with the expansion of players like Moonfare and Liqid that offer access to affluent investors to PE funds. In the US the SEC now enables retail investors to invest in PE. And why not? If you look at retail trading and on the stock markets and the abuses and excesses that it has led to, you must wonder why we should not be able, with the right advisor to allow high net worth individuals

to come into PE. I think the EU regulator will have to pay attention and I think the rise of cryptocurrencies is going to force that as well. I don't think however that PE should be for Mr. and Mrs. Main Street. I think the barrier to entry remains high and unless an individual investor retains professional without advice, I see it difficult to join the bandwagon of PE without advice. There is one player in Europe that's playing quite a pioneer role in retailisation. BPI France, the public bank, is now offering retail investors the opportunity to invest in retail funds that are curated and come therefore with a government “stamp”, thus providing a degree of reassurance in terms of what you're investing into. The other important thing is what kind of target returns are communicated to these investors. The main rationale behind this is that with such low interest rates, if you generate 6% to 10% from your PE portfolio, you're very happy. So will this last? I think so. But again, a word of caution, I wouldn't allow Mr. and Mrs. Main Street to invest in PE directly. It’s maybe not retailisation but democratization. Private banks around us here in Luxembourg are jumping in offering it to their clients but these are not retail investors, they are still high net worth individuals considered retail because they're not well versed into financial transactions. Unless you're a sophisticated finance professional with direct experience in the sector, I would encourage any non savvy prospective PE investor to engage with an expert adviser before investing. The key is to remember the illiquid nature of PE as an investment class.

SP: LPEA’s Private Equity for Women (PE4W) Club which you founded in 2019 brings together over 100 participants today. Which further initiatives could be pushed forward to have more women in PE?

RM: I'm glad that the PE4W club is well and alive despite not being able to meet physically lately. However I think it's a must to continue making efforts, perhaps joining forces with other female communities in Luxembourg. There are many initiatives to be started but if I had to keep one in mind, is to have more men joining in. I think women alone without men, it's just like men without women, it doesn't work. I don't know what it takes beyond repeating and insisting and persisting. When men will stop thinking, “it's not for me, it's only women”, they will understand that throughout our careers as women we kept going to events and meetings with men only without thinking this. That's the SDG principle that I relate to the most: Diversity. Let's find initiatives that promote the two working together hand in hand even more.

1. International Climate Finance Accelerator (

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