Accessing inaccessible funds

So the third reason to invest at Altaroc is that we give you access to funds that are very, very difficult to invest in because they are the biggest funds in the world. So, I'd like to explain myself here. If you remembered one thing earlier, it's that the average performance of global Private Equity was around twelve and a half percent per annum over the long term. Net of fees, net of everything. Our ambition at Altaroc is not to expose you to the global Private Equity average, but to expose you to what we call top-quartile performance. There are 5,000 Private Equity funds raising money worldwide every year. The top quartile is made up of the top 25% of funds worldwide, i.e. around 1,250 funds. What is the performance of these 1,250 market-leading managers? Well, you can see it here, on... We've shown it over ten years, fifteen years, 20 years, to avoid any discussion. What do we see? We can see that these exceptional managers have delivered, I'd say, between 20 and 24% net per annum over a very long period. Absolutely remarkable. Our ambition at Altaroc is to expose you not to the average performance of the market, but to the performance of the industry's top quartile. So there are two things I'd like you to remember about first-quartile performance. First, in absolute terms, it's insane. We're talking about 20 to 24% net performance per year, net of all fees, unbeatable in relative terms.

Now, when I compare the performance of the top quartile of funds with the fund average, if I take 20%, come on, we'll say 20% for the top quartile and twelve and a half for 100 or 12% for the Private Equity average. There's about an 8% performance gap between a first-quartile manager and the market average. Our ambition at Altaroc is to expose you to the top quartile, i.e. to beat the market average of 8% per year by 800 basis points. So there's a huge performance gap between the top managers and the market average, which you don't find on listed markets. On listed markets, the gap between a very good manager and the market average is around 100,850 pips. In Private Equity, the difference is about 800 beeps. So for those of you who remember what I said earlier, there's about a 7% gap between the PE average and the listed markets, and an 8% gap between the top quartile and the Private Equity average. This means that, per transition, there is a performance gap of around 15% between the top quartile and the listed markets over the long term, 15% per year, of course. So our ambition at Altaroc is not just to expose you to the average of Private Equity, which in itself would be magnificent, but to expose you to the performance of the world's best managers, i.e. the top quartile of global Private Equity.

So why do you need us to do this? And why can't you do it on your own? I'd say there are four reasons. The first is that these managers are difficult to identify. The Private Equity industry is opaque and difficult to access. It's a very institutional world, which until now has only been designed for institutional investors. So identifying the very best managers is a complex business. Secondly, as I said in the introduction to my presentation, the entry ticket for these funds is at least $10 million, and even $50 or $75 million for the best managers. These are clearly not the kind of sums that private clients will be able or willing to invest in a single manager. The third reason is that these managers are all oversubscribed. So I'm often asked, Frédéric, what does this mean? Does that mean there's no room? It means that all the institutional investors who supported these funds in their past funds, all want to come back, so there's no room for new subscribers. So it's not possible to get into these funds. These funds are oversubscribed. There's a huge access issue. Accessibility is impossible. They're highly desirable, but inaccessible. And finally, the last reason is that these managers don't want private clients.

They don't know how to manage them. They don't need them, they don't know how to manage them, and they don't have the technology or the regulatory approvals to go and get them. So, for you private clients, access to these top-quartile global managers is virtually impossible. So Maurice and I have a few advantages over you. Firstly, Maurice has been in this industry for 50 years, and I've been in it for 33. So between the two of us, we know the industry intimately. I've put Dimitri here. Dimitri Bernard spent ten years in Private Equity fund selection, five years at Ardian, five years at Indosuez where he was in charge of European fund selection. We also have a new recruit who will be joining us in this exercise. He'll be joining us shortly. He was head of Private Equity at one of the world's biggest life insurers, one of the biggest American life insurers. So he'll be a wonderful complement to the operational expertise that Maurice and I have as fund managers, with his incredible expertise as fund selectors. And when he tells you that the Altaroc portfolios are of exceptional quality, and that he himself had difficulty sourcing investments of this quality, it'll speak even louder than when Maurice and I say it. So we have very demanding selection criteria at Altaroc. We look for managers with more than 25 years' history, because we believe it takes at least 25 years to know whether a manager is extraordinary.

We want managers who have lived through major economic crises. We want to know how these managers performed in these incredible crises. We also want to know how these managers behaved in terms of governance and how they managed to retain talent. Because whoever manages your capital over the next ten years is not the 70-year-old partner with a 40-year track record. It's the young partner he's trusted, who's 55 or 50 or 45 or 40. So, we want to make sure that the historical partners have been able to hand over the reins. And to do that, we need time, we need to see how these firms have performed. And above all, we want firms that have put in place exceptional processes, culture and governance. And that takes time. It's a business that requires a great deal of experience and expertise. That's why our number 1 criterion is 25 years' track record. Secondly, of course, an exceptional track record. We want managers who, over the past 20 years, have delivered at least 15% net IRR per annum on all their funds, and at least twice the cash outlay on each vintage. Finally, we want managers who raise at least 1 billion per fund. It's not that we don't like smaller managers, it's that they're obviously riskier because smaller managers will depend on one or two partners, and we don't want intuitu personae risk.

So we went for managers who raised at least 1 billion. That's it for the strict minimum financial criteria. And then we have a whole series of extra-financial criteria: strategy, coherence of strategy, shared vision of strategy, quality of teams, track-record by sector, by country, by partner, alignment of partners' interests. How much do partners, managers and directors invest in their funds? Obviously, the terms and conditions of the fund, and then the segments in which the fund is positioned. Are we very convinced of the segments in which they are positioned, the countries in which they want to invest? Here are all the financial and extra-financial criteria that Maurice, Dimitri and I have today, and then tomorrow, our colleague, I'd like to come back to an important point: we spend about four months carrying out internal due diligence on the managers we know, to make sure we haven't missed anything. We visit them in their home country, in their home office, and we spend time with all the key partners of these funds to make sure that we know them inside out, that we've got the strategy right, and that we're on the same wavelength as them. And finally, I can say that to get into these funds, we almost physically fight for space, because it's very, very, very difficult to get in. That's why Altaroc may be of interest to you.

‍