Unlisted assets: What is BNP Paribas’ strategy for investing in private assets? Interview with David Bouchoucha

Jul 11, 2023

Six months after the creation of Private Assets, which brings together more than 100 experts in unlisted assets from the Group’s different business lines, David Bouchoucha, who heads this business unit at BNP Paribas Asset Management, tells us about the development strategy in this booming asset class. The goal? To become one of the European leaders in investing in private assets.

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Private assets are assets that are not listed or traded on a regulated market and are generally held for a long period of time. They help finance the development of unlisted companies, infrastructure projects (wind and solar farms, telecom networks, etc.), real-estate projects, or even projects undertaken by individuals.

Private-asset players have a growing need of financing for their development. There are fewer and fewer listed companies, while the number of unlisted companies is increasing exponentially, as are their financing needs. The same goes for infrastructure, which needs more and more private financing on top of public funding. The market for private assets is therefore essential in supporting the real economy. Private assets are tangible and often innovative and with potential for high returns – average of more than 10% in private equity* (source Preqin at December 2022**) – private assets playing an increasingly important role in the asset allocation strategies of institutional investors and, more recently, of individual investors. This is a true broad-based trend.

By bringing together the private asset expertise of the Group’s Investment & Protection Services business lines in a single entity, Private Assets now covers the major classes of unlisted assets, managed directly or indirectly. In direct management, this involves financing unlisted companies through minority private equity funds and corporate private debt, as well as project financing through infrastructure and real estate private debt funds, and even financing individuals through mortgage and consumer credit funds in the Netherlands. Indirect management consists of selecting external funds on the private assets market and managing funds of funds both for third-party clients and for the Group’s own account, like BNP Paribas Cardif’s euro funds. Meanwhile, we have created gateways and strengthened our collaboration and coordination with two other private asset specialists: real-estate fund managers at BNP Paribas Real Estate Investment Management (REIM) and the experts at BNP Paribas Wealth Management, who select and distribute the funds invested in private assets.

As an illiquid asset class with a high investment threshold but offering potentially attractive returns, private assets were initially reserved for professional investors, such as insurance companies, pension funds and sovereign-wealth funds. Over the past few years, they have successfully opened up far more widely to high-net-worth individuals and family offices. In 2022, BNP Paribas Wealth Management, which has had a private equity offering since 1998, raised 1 billion euros. Any individual saver can now access the asset class, for example via real-estate funds, accounting units in private equity and, since early 2021, or hybrid funds which combine listed assets and private assets. The increasing democratisation of private assets is also being fostered by a regulatory change in Europe, with ELTIF 2.0, set to enter into force in January 2024. ELTIF 2.0 will enhance the current ELTIF and make it possible to offer European individuals long-term private asset investment fund formats that are simpler and more financially accessible.

Private assets managed and advised by the Private Assets entity amounted to 30 billion euros as of the end of 2022. True, we are not among the biggest. Those are US giants that manage several hundreds of billions of euros. However, our current volumes already place us as a first-tier actor in Europe for unlisted assets. What sets us apart from our European competitors is the breadth of our know-how and our activities in private assets, combined with the strength of our integrated model – a major edge on this market! In private assets, the Group is an important investor for its clients and for its own account, an asset manager, a product distributor and as well as a provider of services. A large number of companies that need financing (in private debt) happen to be clients… of BNP Paribas’ CIB division. The Group’s ambition is to become one of the European leaders in investing in private assets with more than 50 billion in private assets managed or advised on by 2030. Our goal? We want any client in Europe or Asia considering investing in European private assets to spontaneously think of BNP Paribas. To achieve this, our development plan, which is in line with the Group’s 2025 strategic plan, is built around 4 main priorities: a sustainable approach, a broad product range, openness to all our clients and markets, and accelerated investment in technology.

The first strategic avenue is to strengthen our sustainable approach to private assets. Our goal is to become the European leader in sustainable and impact private assets. We have already integrated ESG criteria – environmental, social and governance – to a great degree, with a large number of SFDR Article 8 funds and a few Article 9 funds. We are expanding our range into venture capital funds – in cooperation with the Solar Impulse Foundation – and Article 9 infrastructure debt funds. We work hand-in-hand with ESG experts specialising in private assets at our Sustainability Centre.

Our second avenue of development is to further expand our range of private asset investment solutions, where we have the greatest expertise, in coordination with BNP Paribas’ CIB and CPBS divisions. In particular, we want to develop products that combine various sectors, step up our development in infrastructure funds, be a leader in corporate private debt, continue to offer co-investment funds in minority private equity, and complete our range of fund-of-fund solutions in private assets.

Our third avenue of development has a dual ambition: to expand our market share beyond Europe and to democratise access to our private-asset investment solutions. Accordingly, we plan to create investment solutions in private assets for our individual clients, while treading cautiously on the matter of illiquidity, while expanding distribution to Private Banking clients and our institutional investor clients. We now have a unified set-up within the Group to develop our private-asset offers and to address our clients in coordinated fashion. Geographically, our ambition is to develop our investor client base outside Europe, in particular in Asia. We have built up a solid client base there, mainly with Korean and Japanese actors, particularly in managing infrastructure private debt.

The fourth avenue of development is technology. BNP Paribas Asset Management invests for the Group’s account in start-ups that are profoundly transforming the financial industry – fintechs in particular – via its Opera Tech Ventures fund, which is not open to clients. We want to accelerate these investments in fintechs, which also help build high-value-added partnerships for all BNP Paribas’ business lines and clients.

*Past performance is not an indication of future performance.** According to Horizon IRR (Internal Rate Return) 5 years and 10 years.

Read the press release on the creation of BNP Paribas Asset Management’s Private Assets business unit

Listen to the podcast “Tapping private markets for the ecological transition and impact” (13 mn, en anglais)

Visit the BNP Paribas Asset Management website to find out more

Disclaimer

Private assets are investment opportunities that are unavailable through public markets such as stock exchanges. They enable investors to directly profit from long-term investment themes and can provide access to specialist sectors or industries, such as infrastructure, real estate, private equity and other alternatives that are difficult to access through traditional means. Private assets do, however, require careful consideration, as they tend to have high minimum investment levels and may be complex and illiquid.

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation, and conservation on behalf of funds invested in emerging markets may carry greater risk.Environmental, social and governance (ESG) investment risk: The lack of common or harmonised definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, (the Sub-Fund’s) performance may at times be better or worse than the performance of relatable funds that do not apply such standards.

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