Simple subscription to a portfolio built on strong convictions
Summary
Written transcription
Reason 5 is that we're going to build you turnkey portfolios, with a real strategy and a real vision. We're not just going to get you into a top quartile fund, which is already fantastic, or even into 6 fantastic funds. We're going to build you a portfolio around 6 funds with real coherence. Let me remind you that when you invest, when your wealth management advisor or private banker advises you on a listed allocation, he or she makes a strategic recommendation. We, on the other hand, will build you a turnkey portfolio at Altaroc. And that's very important to understand. Maurice and I will draw on dozens and dozens of years of experience to build you a diversified, balanced turnkey portfolio, built around some of our best convictions. What we see here. Here are three golden rules for portfolio construction. Rule 1 seems simple to you: identify the world's best managers and invest with them. As I said earlier, it's complicated to identify because there are 5,000 managers in the world, and you need to know just about all of them. Above all, you need access to information. It's complex and fairly opaque. You have to be able to compare funds with each other, and sometimes Private Equity managers don't manipulate the figures, but present them in the best light.
You have to know how to dissect them. And finally, you have to be able to invest in the best managers that you've identified. So rule 1, which sounds simple, is actually much more complex in unlisted markets than in listed ones. The second reason is to choose the right Private Equity segments in which to invest. At Altaroc , we have decided to focus on Growth and buyout, as I explained earlier, because these are two of the market segments with the most attractive risk/return profile. We believe that Venture Capital and Turnaround are not suitable for private clients, and we're building a diversified portfolio. So at Altaroc, we put six exceptional managers in each portfolio every year, so that the portfolio is not dependent on the performance of a single manager. Even if we choose exceptional managers, there can be manager failures. It can happen. To minimize and desensitize to this, we build a diversified portfolio around six managers. So some people say to me Frédéric, why don't you put in more managers? We could. Well, because each portfolio, when we say six managers, to be clear, six managers is about 200 lines per underlying fund, 200 companies, that's more than enough in terms of diversification. If we put in more managers, we'll have only slightly better risk diversification.
On the other hand, performance will be averaged. More and more managers. And if you remember what I said earlier, instead of delivering the performance of the best managers in the industry, we're going to tend once again towards the industry average, which is not the purpose of Altoroc We are portfolios with strong convictions, and so our firm belief, if I may say so, is that with six managers, you have a perfect portfolio. How do we choose our managers? As I explained earlier, we have simple financial rules. We said to ourselves, go on, 25 years of history minimum 15% IRR per annum over the past 20 years, twice the miss casn on cash on each Vintage, funds of at least 1 billion. Those were the minimum financial criteria. So that would take us from 5,000 fund managers a year raising money to 2,000 fund managers a year raising money. How do we choose between the 2,000 managers? Well, we have sector criteria and country criteria. So, for country criteria, I've put the little pie chart at the bottom right. The best Private Equity managers in the world are American. Not because they're smarter than us, but because they started before us. Private Equity was born in the US 60 years ago. It's a cottage industry. There's a whole ecosystem.
It's like Silicon Valley, it was born in the United States. There's a Silicon Valley ecosystem. Well, Private Equity was born in the US. There's a whole American ecosystem of Private Equity, banks, advisors, financiers, managers and stock market exits. There's a whole ecosystem that makes outperformance possible. To put it simply, the American top quartile outperforms the European top quartile by five points, which in turn outperforms the Asian top quartile by five points. So our ambition: we're agnostic in this country, we just want the best for you. 40% of our portfolio will be American, because that's where we find the best managers in the world. 40% of our portfolio will be European, because that's where we find some of the best managers in the world, and our reference currency is the euro. Finally, every year we try to find exceptional managers in the rest of the world, mainly Asia and Israel. And if we can't find exceptional managers in these regions, because they're hard to find, we'll invest in these regions via the American and European managers we've selected. In any case, the portfolio is totally global, and at least 40% of it will be American each year, because that's where we find the best performance. When you build a listed portfolio, you're obviously focused on the sectors in which you want to invest, and your advisor or banker will tell you: "You should be exposed or overexposed to this or that sector because it's going to outperform...".
the global economy". In Private Equity, it's the same thing. So we decided to overexpose ourselves to four market segments in which we have very strong convictions of secular growth. The software sector, which we call tech and techno. 50% of our portfolios are concentrated with software publishers, essentially in the cloud in SaaS mode, who sell subscriptions to their private customers on critical products. So that's half of our portfolio, and 20% of our portfolio is with healthcare companies. Because we're convinced that healthcare will be an integral part of tomorrow's world, that it's not very cyclical, that it's extremely resilient, and that there are major technological innovations underpinning new ways of consuming healthcare. And finally, 30% of our portfolio is focused on digital platforms, 10% in the world of retail, the consumer, what we call the famous B2C, and 30% in the world of services, professional services, what we call B2B, B2B or B2B2C platforms. So that's the sectoral construction of our portfolio. Because we believe that these sectors will outperform the global economy, and that they will enable us to create outperforming portfolios for you that will be less sensitive to changes in valuations.
