Inside Embattled Abrdn’s 5-Star Trust
Abrdn hasn’t enjoyed positive publicity lately, but the company actually has a Morningstar-rated 5-star trust. In our regular short profile, we ask Chief Investment Officer Alan Gauld of Abrn Private Equity Opportunities Trust to defend his strategy and what he would never invest in.
Energy has had a successful 2022 so far, but we tend to shy away from sectors directly linked to commodity prices. We like sectors that are supported by long-term structural trends, so there may be times when certain areas of the tech and healthcare sectors are oversold and offer an attractive entry point at this time, given their potential. long-term growth.
What is the greatest economic risk today?
An escalation of the conflict in Ukraine would have enormous human consequences and would have a disastrous impact on the global economy, exacerbating already tight energy and food prices, supply chain problems and ultimately , inflation.
Describe your investment strategy
We partner with a small group (around 15) of the best private equity managers, mainly in the European middle market, to build a well-diversified portfolio of private companies (>600). We invest through funds and direct co-investments.
Which investor do you admire?
I have always admired Sir Ronald Cohen. He was at the forefront of European private equity as co-founder of Apax Partners and upon his retirement facilitated an orderly succession, which is not always straightforward in equity partnerships investment. Since then, he has helped lead efforts to establish the impact space for private equity.
Name your favorite “Forever Stock”
I will ignore the public actions and opt for a private company in Visma. It is a cloud-based ERP software provider in the Nordics and Benelux, and we are investors alongside lead investor Hg. It has been in our portfolio for about 15 years, from one way or another, and I think he grew his revenue every quarter during that time. It is deeply embedded in the day-to-day operations of more than one million small and medium-sized enterprise (SME) customers; it would literally be one of the last things a customer would stop paying, probably right before their electricity bills! It’s also an M&A machine, which, coupled with the continued adoption of cloud-based ERP software, gives it growth potential.
What would you never invest in?
The abrn Private Equities Opportunities Trust (aPEOT) has never, in more than 20 years, invested in companies exposed to tobacco, pornography and weapons, and that will not change. There is a strong ESG consideration in everything we do these days, so any private equity firm we partner with or invest in should share this focus.
Growth or value?
At the risk of being accused of ‘fence sitting’, we aim to provide a diversified and balanced portfolio by sector, geography, maturity and investment strategy, so we have no clear long-term preference. It’s clear that the last decade has been good for growth, and it now looks like a valuable market. Going forward, we’ll probably focus a bit more on value, but we’re not trying to time the market. We put more emphasis on diversification and partnering with the best private equity firms.
House or Pension?
With the pressure of the cost of living, people are starting to cut their contributions or forgo their pensions. It is an important investment and it should not be forgotten. But, for someone who just bought a family home, I’m going with the first one! It puts a roof over your head!!
Crypto: Brilliant or bad?
Blockchain technology is brilliant, but as an investment with no physical assets or returns, crypto relies on continued growth in investor sentiment and demand. The environmental impacts of data mining must also be seriously considered. I do think, however, that it is possible to have a small amount, say 5-10%, of your personal portfolio in crypto as a higher risk investment. It will not be something that we will do in confidence!
What can be done to increase diversity in fund management?
I’ve seen great strides in private equity over the past five to ten years, with industry bodies like Level 20 helping to drive change. In private equity, there has been a strong recruitment campaign for more diversity at the junior level. Whether they can maintain this level over time as people gain experience, advance through the ranks, and personal circumstances change depends on how serious employers are about a cultural commitment to D&I. .
Have you ever engaged with a company and been particularly proud (or disappointed) of the outcome?
Our influence is more at the level of the private equity firm with which we partner on an investment rather than at the management level of the holding company. I am proud of our commitment to ESG with our private equity managers. 10 years ago, very few private equity firms even had an ESG policy. For example, a Spain-based private equity firm we work with didn’t even know what ESG meant when I first talked to them about it eight years ago. Now they have embraced it culturally, are signatories to the PRI and are driving real ESG change in their portfolio companies. It is rewarding.
What’s the best advice you’ve ever received?
There is an opportunity to learn something from everyone you work with.
What would you be if you weren’t a fund manager?
I have no idea; I think my best football days are well behind me. I love the outdoors and nature. So something that combines that with an early start and is sport related. Golf course greenkeeper?
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