Alfi’s much anticipated annual private markets conference gets under way in Luxembourg later this month. Here we take a sneak peak of some of the key themes that will be thrashed out over two days of debate.
Sustainability and ESG, regulatory challenges, the role of tech and talent management will be the four over-arching themes at the annual Alfi Private Assets Conference which gets underway in Luxembourg later this month.
The two-day ALFI Private Assets Conference 2024, which gets underway on September 25, is one of the year’s most anticipated events in the private markets sector.
Organized by the Association of the Luxembourg Fund Industry (Alfi), the high-level gathering at Luxexpo The Box on Luxembourg’s Kirchberg plateau will bring together key stakeholders from across Europe and beyond, offering a dynamic platform to discuss the most pressing issues, opportunities, and innovations in private asset markets.
Private markets continue to play an increasingly vital role in the global financial ecosystem, with asset managers seeking diverse ways to navigate the complexities of these markets.
The ALFI Private Assets Conference is tailored to address the needs of professionals working with private equity, real estate, infrastructure, and private debt. As global financial markets evolve, Luxembourg has emerged as a central hub for private asset servicing, and the ALFI event capitalizes on this leadership by drawing some of the industry’s most influential voices to discuss how to meet investor expectations and ensure sustainable growth.
With over 1,000 decision-makers, fund managers, and service providers expected to attend, the conference presents a unique opportunity to engage with global experts and hear from thought leaders in the private assets space.
The 2024 edition of the ALFI Private Assets Conference will focus on four key areas that are shaping the future of private markets:
Sustainability and ESG Integration
One of the most prominent themes in financial markets today is the growing emphasis on sustainability and Environmental, Social, and Governance (ESG) criteria. Investors are increasingly expecting fund managers to prioritize sustainability and align their portfolios with ESG goals.
Navigating Regulatory Challenges
Private markets face ever-increasing regulatory scrutiny, particularly in Europe. The conference will address how fund managers can stay ahead of evolving regulations, including updates on the Alternative Investment Fund Managers Directive (AIFMD), the impact of the EU’s Sustainable Finance Disclosure Regulation (SFDR), and other critical legal frameworks.
The Role of Technology in Private Markets
Technological innovation is transforming every aspect of the financial services industry, and private markets are no exception. Automation, blockchain, artificial intelligence, and digital platforms are increasingly being integrated into fund management operations, enabling more efficient processes, better transparency, and enhanced decision-making capabilities. At the conference, participants will hear from industry leaders about how technology can improve performance, reduce operational risks, and help firms meet the growing demands of investors.
Talent Management and Operational Efficiency
Another major theme will be how firms can attract and retain top talent, especially in an environment that demands increasingly specialized knowledge. As private markets grow more complex, so too does the need for skilled professionals who can navigate cross-border transactions, regulatory challenges, and technological transformations.
As a sneak peak of what will be on offer, four conference attendees have written introductions or answered questions exclusively for Funds Europe about their sessions.
Navigating the Debate: The Rise of NAV Financing in Private Equity
By Elena Petrova, financial advisory partner, Deloitte Luxembourg
Net Asset Value (NAV) financing allows private equity firms to secure loans against the net asset value of assets within their portfolios. This method offers a new layer of financial flexibility, enabling firms to unlock liquidity without the immediate need to sell assets. However, it has also raised concerns, particularly among limited partners (LPs), about the potential lack of transparency and increased financial risk.
On one side of the debate, proponents argue that NAV financing provides crucial benefits, especially in a challenging economic climate where traditional exit routes like IPOs and private sales have slowed due to divergence of opinion on valuations. It allows PE firms to support new and bolt-on acquisitions, optimize portfolio company debt, and make distributions to investors. Proponents argue that while NAV financing increases leverage, the overall loan-to-value ratios remain conservative.
Conversely, critics highlight the risks associated with this financing method, particularly the opaque nature of the transactions and the potential for misalignment of interests between fund managers and investors, given the potential impact on the risk profile of the fund. Also, there is concern that increased reliance on debt could lead to heightened financial instability and additional systemic risk.
Nonetheless, NAV financing holds significant potential for growth, benefitting from the fact that it is currently underutilized within the vast private equity market. The NAV financing market is currently valued at $100 billion, with projections suggesting it could surge to over $600 billion by 2030, driven by the strategic advantages it offers to sponsors and investors if structured appropriately.
Showcasing Investment Strategies
Elena Moisei, managing director, portfolio valuation, Kroll Luxembourg
In the intricate world of private assets, investment fund strategies play a pivotal role in shaping investors’ portfolios. At the upcoming ALFI Private Assets Conference, a distinguished panel of experts will delve into the sophisticated strategies that fund managers employ to mitigate risk and drive value. This panel discussion aims to be a highlight, offering deep insights into both traditional and innovative approaches within the private assets space.
The panel will discuss a range of strategies, from traditional asset classes to exotic. Attendees can expect to hear insights on non-standard and niche strategies applied to investments in private equity, venture capital, real estate, infrastructure, and other alternative asset classes.
Key topics will include the use of technology and data analytics in investment decision-making, the growing importance of environmental, social and governance (ESG) factors, and the liquidity need of evergreen funds. The panel will also highlight secondary transactions, which provide liquidity to original investors, and continuation funds, which extend the holding period of top-performing assets.
In light of current market conditions, the discussion will address postponed exits due to a lack of transactions and high interest rates, emphasizing the need for strategic flexibility and patience. All of these factors create new challenges for the valuation process of investment portfolios. Measuring and communicating value and value creation to investors remains one of the top priorities for fund managers.
Private markets have been slower than other financial sectors to embrace AI. Are the signs of this changing?
Thomas Chevalier, executive director, Temenos Multifonds
We certainly see more asset managers and fund administrators in private markets being more open to AI tools for their core business (ie. decision-making and investment operations) when first adoption was more around less business critical functions (such as marketing and communication). AI now helps firms to work smarter, stay competitive, and minimize risks incurred by human errors. However, there are challenges that need to be addressed before AI can be widely adopted across the industry.
First is the concern of data privacy and security risks. Regulators are still assessing their approaches to compliance requirements. Firms using AI need to ensure they have full explainability and an audit trail for both the data inputs and the models. The second is the availability of data. It’s difficult to feed client information into AI models due to the various restrictions around data protection in the financial space. It’s important for firms to communicate clearly with clients about how their data is being used. Proper governance and control mechanisms have to be implemented regarding how AI handles those data securely. At Temenos Multifonds, we are using Explainable AI(XAI) on top of an exception-driven process that can help fund administrators easily identify false positives and provide transparent, human explanations about exception decisions.
How has the macroeconomic environment affected the pace of fundraising?
Maryam Longrus, head of new initiatives Capital Markets, FIS Global
Since 2022, fundraising has been battered by the drop in public markets and decoupled performance of private markets impacting investor allocations due to the denominator effect. Lower valuations and higher interest rates slowed exits and hence distributions back to investors to free capital for other fundraises. Interest rates have an unequal impact across GPs and strategies, challenging small to mid-size managers and buyout funds, respectively, but fuelling private credit funds. As valuations normalize, the flock to well-known managers is tempered by an increased focus on diversification in the face of continued geopolitical and environmental risks. Many managers increased strategic focus on the investor experience, leveraging modern technologies to improve the end-to-end experience from fundraising to investor reporting to increasing the pace and efficiency of the diligence phase and increasing their competitive advantage.
Private markets have been slower than other financial sectors to embrace AI. Are the signs of this changing?
Private markets are generally a conservative and measured culture taking great care of proprietary data, all of which tempers the race to adopt the latest in cutting-edge technology. Many firms immediately realized the prerequisite needs, focusing first on modernizing outdated databases and undertaking critical transformations in data strategy. This strategic focus on data has illuminated opportunities to implement applications leveraging AI in highly practical and precise applications, such as data scraping and collection. The proliferation of these practical applications is leading to further exploration for other use cases such as investment strategy, risk management and portfolio management.
How has the macroeconomic environment affected the pace of fundraising?
Veronika Zukova, head of product development private equity real estate, Societe Generale Securities Services Luxembourg
Earlier in the year, both Preqin and Pitchbook indicated that it takes longer for European Private Equity (PE) funds to raise capital. Macro uncertainty and weak deals environment certainly affected PE. However, in terms of overall capital raised trend, European PE managers fared better than the US ones as the European Central Bank (ECB) kept the interest rates lower than the Fed. 5 of the 10 largest PE funds closed in H1 were raised by European firms.
The June and September ECB rate cut should have a positive impact on deals/exits, which in turn should positively influence fundraising in H2 for PE, Real Estate and Infra asset classes. Of course, there is still the uncertainty about the Fed September decision and the US elections, which can influence the outcome for 2024.
Our own deal flow indicates that the fund launches via Luxembourg didn’t slow down despite variations in uncertainty, due to various macro and industry specific trends. We have been as busy as ever, except the usual slowdown in August.
Throughout 2024, we observed an increased interest in private debt strategies, which is in line with the macroeconomic environment, and the evolution of this asset class and rise of novel strategies, especially in Europe. As we have anticipated this trend, boosting our capabilities to service different debt fund strategies has been our strategic priority for several years.
