Michael Moore's Outlook on not taking international investors for granted

High up on the 20th floor of a smart office building in Singapore, the narrow strip of water down below is a sight to behold.

Arguably there are stretches of ocean which are more dramatic. And set against the spectacular architecture of the buildings dotted across the reclaimed land, this sea channel might be dismissed as pretty unremarkable.

But for one extraordinary, compelling feature.

There in front of your eyes, meandering along the 400-mile-long Straits of Malacca and Singapore, is today’s share of the 90,000 ships which pass this way annually. Carrying about 40% of the world’s physical trade along the route.

Think M25, Spaghetti Junction and the Edinburgh city by-pass superimposed on one another. The traffic speeds are probably not much different, but the chaos if it goes wrong just a little bit bigger.

This juxtaposition of the world’s visible trade and the frenetic hub of invisible trade which the city state hosts is striking.

And looking out to the horizon, and the equator not far beyond it, you get a decent perspective on what the UK is competing against internationally, both literally and figuratively.

Twice a year the BVCA travels to different parts of the world with a cross section of the UK’s private capital industry. We highlight the investment opportunities which can be unlocked through a variety of strategies and across a range of sectors and markets.

Up close with the potential fund investors there are constant reminders that they have plenty of choice about where to put their capital. But there’s a welcome receptiveness for European private capital opportunities, nonetheless.

That was certainly the case wherever we travelled this year. In late winter we were across in Toronto, New York and San Francisco. Now in early spring we passed through Tokyo, Seoul and, finally, Singapore.

These cities sit in what are consistently the two most important fund-raising geographies for BVCA members outside Europe: in 2022 North America was the source of nearly 30% of new capital, and Asia Pacific just over 15%.

This time round we had a heavy focus on the UK’s leadership in areas such as impact, fintech, edtech, deep tech, life sciences and SAAS, straddling both venture and growth equity opportunities. And as in previous years we had a strong returns track record to demonstrate.

So, even in straitened times for fund raising, there were good conversations to have with the pension and sovereign wealth funds who dominate the UK industry’s macro cap table in these parts.

But these trips were, nevertheless, a reminder that the choice of strategy, sector, geography and, crucially, fund manager, pre-supposes that investors see that the country’s investment fundamentals are already in place.

Economic stability? World-class regulation? Investment community gravitational pull? Policy predictability? The best private equity and venture capital managers on the planet cannot hope to attract fund commitments to the UK, or elsewhere in Europe, if any of these boxes are left unticked.

And the pass marks for these ‘fit for investment’ tests keep changing: G7 status is not enough on its own; a centuries-old track record of looking after the world’s capital, ditto; there’s little credit for decades of attracting the best global investment talent if taxation is uncertain; and unpredictable policy frameworks for emerging or evolving sectors of the economy will also seriously dampen inward investment flows.

We cannot take anything for granted. Especially after a few years of politics mimicking meteorology, from the Brexit hurricane and the mini-budget tornado to this year’s election squalls.

There is a decent case to make that the most serious political uncertainties of recent times are behind us. And that the core strengths of the UK remain undiminished. But, for sure, we cannot assume that everyone gets that. Or accepts our assertions at face value.

So the vigour with which we have seen ministers and officials promoting our investment agenda is encouraging. Likewise, what looks like a cross-party consensus on the need for stability and boring predictability across the policy agenda (however noisily it may be expressed in an election year). This needs to last.

Back on the 20th floor of the Singapore office block, I marvelled at the grace and purpose of the ships passing below, and the sense of seeing the world economy thrumming along in real time.

But I was heartened to turn around, sensing a different buzz, to see a conference room full of switched-on institutional investors, the third such group in as many days.

And, ready to engage with them, a team of European private capital managers who had caught their attention and offered compelling narratives about the investment strategies available back home.

In the end that was the most gratifying sight of all.

Michael Moore
Chief Executive, BVCA

This article was originally published on 9 April 2024 on the Private Equity News website here.