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| A panel discussion at the summit (Source: Thomas Seidel) |
Professionally organised by the Handelsblatt, a good 130 participants from the industry gathered at Frankfurt's Jumeirah Hotel, directly behind the Palais Thurn & Taxis for their annual conference. People like to see themselves as a driving force to help companies on their feet and drive innovations forward. But private equity is also always a tough selection process. What is no good is discarded. But it is precisely this demand for quality that the industry sees as endangered by too much money on the market.
Holger Schmieding, Chief Economist at Berenberg Bank, gave all participants an economic overview. He sees no recession for the coming year. In some sectors there would be a need for correction, but this would not turn into a general crisis. The global trade disputes instigated by the USA would be directed primarily against China. Important circles in the USA do not wish to have a dispute with Europe. Nevertheless, side effects of the US-China dispute would of course also affect Europe.
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| Holger Schmieding, chief economist Berenberg Bank (Source: Thomas Seidel) |
The United Kingdom should have four times more interest in a regulated outcome of the Brexit dispute than the European Union. Otherwise, a hard Brexit would harm Britain in particular. Italy simply has the wrong government at the moment. If at all, only the markets could discipline this government. Schmieding sees a problem rather in the oil prices. For the dollar, new interest rate hikes are expected from the FED in 2019. Overall, however, economic growth should improve again in the second half of 2019.
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| Dr. Levin Holle, German Ministry of Finance (Source: Thomas Seidel) |
Dr. Levin Holle from the German Ministry of Finance found words of softness. Yes, the financing of the real economy is important. Yes, better framework conditions for an EU capital market must be created. Yes, digitaisation is right at the top of the agenda because China is already seen as the world leader in this area. Yes, the Eurozone must be strengthened. Yes, structural reforms are important in some EU countries. Yes, the location Germany and especially Frankfurt must be supported more strongly. Yes, Germany needs to develop an equity culture.
Only Mr Levin, it was all like that a year ago. All this is well known. But nothing happened in Berlin!
A first panel discussion about the industry drew the following picture: Private equity would be regarded as a reliable long-term investor. This consideration is increasing more and more in Germany. During the last financial crisis, companies financed by private equity would have performed better and created more jobs than those classically financed.
But there are still many stumbling blocks for venture capital in Germany. The main reasons are the German mentality, supervisory rules would make it difficult, for example, for the pension fund to invest in venture capital and there is a lack of infrastructure such as in 5G. In Germany, one could even take the reforming France as an example. The government sees the lack of data security ("from a German perspective" editor's note) as a major obstacle to digitaisation.
Surprisingly, the Chinese savings rate would be 40 percent, so economists are not very concerned about the Chinese debt. It is expected that the French economy will overtake the Germans in the next decade.
There are enormous savings rates and capital, but there is no demand for investment. The recovery of public budgets depends first and foremost on a healthy labour market that produces enough taxpayers to meet public debt. (Editor's note: Such formulations show the coldness of economic thinking).
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| Johannes P. Huth, KKR (Source: Thomas Seidel) |
The overall picture is rounded off by individual voices. Johannes R. Huth of KKR (Kohlberg Kravis Roberts & Co, a large New York investment company) sees London-based private equity firms looking for opportunities to work legally in the EU. This does not have to go hand in hand with a move to Europe. As far as investments in the UK were concerned, the profit expectations had already had to be revised downwards. London has become less attractive as a location for future talent in the financial sector. Huth does not see a talent and brain drain, but the universities in England have to adapt more to the needs of students than they have done so far.
Hermann Dambach of Oaktree Capital has something positive to say about the new technologies. Their application leads to a decrease in manual tasks and a simultaneous increase in reporting, which in turn creates more time for the actual activities.
The industry sees itself in a positive development. However, there is concern about the large amount of money in circulation. The industry considers this to be dangerous and harmful. Ultimately, therefore, investments would be made in companies and areas that could hardly be profitable. This would destroy capital that could have been used more successfully elsewhere.
