Interview: Javier Echarri

What do you consider your single biggest achievement as secretary general of EVCA?

My biggest achievement was leading the industry in getting the Alternative Investment Fund Managers Directive (AIFMD) into a format which, while not helpful, is at least not too damaging. The truth is that nobody likes the directive as it brings additional cost burdens to the industry. But coming from where we came from, it's an achievement that we got to where we are today, particularly because the journey involved bringing the industry together to fight as one. You can't consider fighting the complex political establishment in Brussels if the whole industry doesn't stand together.

One of the best things we managed to achieve was a distinction between private equity (which works with portfolio companies for the benefit of everybody involved in the process) and purely financial asset management. Explaining our business model enabled us to highlight the complete irrelevance to us of some of the directive's most burdensome measures. However, politicians did take advantage of this distinction to place additional burdens on what we could do with our portfolio companies. Debates which should have been of an exclusively economic nature, such as the use of leverage, or disclosure policies for portfolio companies, ended up becoming a political battle.

A number of national trade bodies have faced management reshuffles over past year and a new EVCA chairman, Karsten Langer, was elected in June. Have any of their initiatives caught your attention?

The national associations are absolutely necessary in defending the rights of private equity and making sure their countries' economic environments are as positive as possible. At EVCA we have pushed for the establishment of associations in countries where they previously didn't exist. While I am convinced that the best conditions for the industry are not possible if national bodies don't work together with EVCA, I have no problem with them coming up with commercial and PR initiatives for the benefit of their own members. This often creates a bit of healthy competition between them, and also with EVCA, which pushes everyone to make sure that their products and services are better and to make sure that those that don't work are taken off the market.

I've seen some associations giving absolutely wonderful conferences, a stand-out example being the different Scandinavian associations, which all come together to put on an event once a year. I've seen others absolutely mastering their PR operations, such as the BVCA, which historically has been exemplary in its communications and in its relationship with successive UK governments, regardless of their political party. AFIC, meanwhile, has a superb status quo of understanding and collaboration with the academic world, which has promoted very in-depth analysis of the PE business in France. In Spain they've done some exceptional work in the area of investor relations.

You became managing partner of GED Capital in April. Given that GED's funds focus on both the Iberian Peninsula and Eastern Europe, what is the outlook for these regions?

Right now the industry needs to do an incredible amount of work at the level of portfolio companies in order to continue providing good returns to investors. With regards to our strategy for Spain and Portugal, we're going to focus on companies that we believe can survive the rest of the economic cycle. I can't say whether Spain is going to recover next year or the year after - there are questions as to what is going to happen regarding the country's debt, unemployment levels are very high and overall economic recovery is actually quite a lot slower than expected. So we have to go for companies that have not only survived the down cycle (which is difficult when dips in turnover have ranged from 30-50% in some cases) but which are also consolidating themselves as the strongest in their sectors.

In south-east Europe, it's a bit different, as companies there still have a very strong capacity to bounce back after an economic downturn and there's a flexibility of prices and salaries which makes the investment environment more flexible. Our first fund for south-east Europe was a portfolio that suffered because of the conflicts in the Balkans during the 1990s, but despite that, the businesses bounced back and we even managed to reap a return of 2.5x on the vehicle. We're therefore expecting a slightly faster recovery in the south-east than in south-west Europe.

Read more of this interview in the upcoming September issue of Private Equity Europe

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