“We still have large exposure in some European funds, but our goal is to diversify further by redirecting flows toward US funds,” John Penning, managing director at Luxempart, told Delano during an interview. “It is a long shot as it starts with commitments while drawdowns take place over the coming four or five years.” As such, the current 22% share in investment funds may move towards “25%, maybe 30% over time.” He did not say whether the reallocation will occur at the expense of direct investments (70% of assets as of FY23) or from its cash position (8%).

Where do you put the good assets… in your balance sheet or in the fund?

Yet Penning wants to keep a relationship with GPs having a strong knowledge of the German economy due to the vast opportunities in private investments (families or first-generation entrepreneurs). He talked enthusiastically of GPs with similar mindset for “co-investment or additional deal flows.”

Strategic plans: mindful of trends at competition

Penning has been attentive to the expansion of Eurazeo, an investment holding “like us.” He observed that the French investment firm decided to increase its assets under management beyond those on its balance sheet by setting up investment funds in which it generates management and performance fees as an investment manager.

Questioned by Delano on setting funds in which it could park some of its asset on the balance sheet, Penning said: “we are asking ourselves the question regularly during our strategic reviews” but have decided not to go ahead for now. He is also sensitive about managing perception in terms of aligned interest. “Where do you put the good assets… in your balance sheet or in the fund?”

“The experience of others shows that managing your own money versus from third parties is not the same in terms of responsibilities and mindset,” argued Penning. He did not suggest that the interests of asset managers are misaligned with their fund investors, yet he claimed that “the dynamic is: the more assets the better resulting in more fees.”

Penning suggested that once Luxempart feels it is good enough to manage more assets, it may consider raising more capital at the corporate level or “for a manco.” As discussed in our , retaining the former option would be a welcome development for the liquidity of its shares.