Investing in private markets like private equity, real estate, land and infrastructure can generate attractive returns and be a useful portfolio diversifier, but getting to grips with these types of investments can be a real challenge. In addition to identifying the best sectors and managers, investors are also faced with onerous administration and high minimum investment requirements making the creation of a well-diversified portfolio impossible for all but large institutional investors.
Working with family offices
In the spring of 2018, Kempen Capital Management is aiming to launch an innovative private markets solution for family offices.
Richard Jacobs, co-head of Kempen’s private markets team, says: “I’ve been advising families on investment matters for twenty years and constructing a private markets portfolio has always been the biggest challenge, which is why when Sven and I joined Kempen earlier this year, providing a solution was top of our list.”
Private markets expertise
Sven Smeets, Kempen’s other co-head, and colleague of Richard’s for 15 years at Altis prior to them both joining Kempen, says: “We already advise on around £2.6 billion of real assets for Kempen and with a team of nine private markets specialists we are well placed to help investors. Our proposed new solution will provide access to a single investment fund which will invest in a comprehensive private markets portfolio of funds covering private equity, real estate, land and infrastructure. This will give investors exposure to a carefully selected pool of managers and assets.”
With a fund approach, the operational and implementation burden will be taken on by Kempen. However, fees will only be charged on invested capital. In addition, the challenge of accessibility will be solved with a low minimum investment threshold.
Richard adds: ”We believe that for a family office, our proposed new private markets pool really is a one stop solution”.
Complementary investments
The portfolio composition will be designed to complement existing holdings families might already have in, for example, private equity and real estate. The team will avoid holdings in larger well-known funds and work with the more specialised managers that they have built relationships with over the past 15 years. For example, it is proposed that private equity will typically focus on small and mid-market buyouts, venture capital, co-investments and mezzanine opportunities, while real estate will look at the most exciting sectors like European logistics.”
Infrastructure and farmland
With infrastructure, the Kempen strategy aims to overcome the problem of multi-million pound investment commitments typical of this sector and will open up a range of new opportunities to investors. The strategy will tap into key global themes including growth in internet traffic, increasing urbanisation, growth in air traffic and new energy where demand for private capital will accelerate rapidly.
The portfolio is envisaged to be global in outlook, and land and infrastructure will also provide opportunities in North America and Asia-Pacific. Farmland is an increasingly scarce resource with demand strengthening from changing consumer patterns leading to increasing demand for grain and productivity gains are not expected to keep up with demand.
Demand for farmland is also further strengthened by the increasing use of biofuels. Land ownership is changing as an ageing population of farmers and the ongoing relocation of young people from the countryside to cities creates an increasing role for institutional investors. This in turn provides an opportunity for larger farms and more potential for efficiency gains.
Strong heritage
Kempen’s headquarters are in Amsterdam and owned by Van Lanschot Kempen, the Netherlands’ oldest private bank dating back to 1737 so there is a long history of working with family offices. Today Kempen’s success as an institutional manager for some of Europe’s largest pension funds has attracted families looking for the same institutional service.
Kempen has a strong commitment to the UK with a team of 20 based in London.
Richard says: “We are frequently in the UK either to meet managers or speak with investors and we are looking forward to talking to investors about this new idea to create value for them.”
