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The listening chairman

The BVCA's new chairman, Edmund Truell, has a packed in-tray, brimming with tasks such as encouraging pension funds to invest in private equity and lobbying the government on red tape. Still, he tells us, he's on the hunt for more problems to tackle.

Private equity firms unable to raise enough money to hit their targets for new funds, firms scaling back their international reach, venture capitalists finding it almost impossible to exit their investments as the stock market slumps. Not quite disaster movie stuff. But you might expect some venture capitalists to start looking rather worried, scratch their heads and wonder when all the gloom is going to end.

Not so. There may be a hint of caution in their voices, but most venture capitalists will give you the line of ‘remember that private equity is a long-term business, what we're seeing now is a blip. Just look at the upside…' In this respect, Edmund Truell, the British Venture Capital Association's new chairman for the next year and chief executive of Duke Street Capital, is no exception to the general mould.

‘The performance of venture funds in the first six months of the year won't be good,' he admits. ‘That's down to the knock-on effect of the stock market downturn. There have been fewer realisations - exits are down 40 per cent on last year. That can only mean less spectacular returns. But in the long run, it won't be hard for us. The gap between the returns in private and public equities is widening. Public equity returns are getting lower.'

Besides, he adds, private equity is getting far more attention from institutional investors who may have been wary of the asset class in the past. ‘There's a lot of interest among investors new to private equity. Pension funds, for example, are really starting to look at private equity. They have started listening to what we at the BVCA have been saying.' It's a start, but there's still a long way to go on this front. A report by the London Business School published last year found that a staggering 40 per cent of pension funds had never invested in private equity. And figures released by the National Association of Pension Funds at the beginning of the year reported a slight drop in the percentage of UK pension funds that currently invest in private equity - down to 23 per cent in 2000 from 24 per cent in 1999. It did note, however, that the total amount invested rose slightly.

It's this reticence among pension funds to commit to private equity that prompted the BVCA to form a joint working party with the NAPF last year. The idea is that the two organisations can work together to remove some of the mystery that many pension funds still feel surrounds private equity. Much of the bridge-building between the two bodies was done while Truell headed up the BVCA's investor relations side last year. His successor, 3i's Michael Queen, will continue the work. Plus, there will be more BVCA seminars for pension schemes, adds Truell.

Experienced and accessible
Truell can claim to be one of the industry's old hands. He worked for Banker's Trust asset-based leveraged buy-out group in New York and London before becoming co-founder of Duke Street's predecessor firm Hambro European Ventures back in 1988. He was appointed chief executive of the firm in 1994.

But the role of chairman of a national industry representative body must be very different from his other day job. How does he see his chairmanship? ‘My job is to act as a conduit and a spokesman for the private equity industry,' he says. ‘I see my role chiefly as a listener. I listen to what people outside the BVCA have to say, hear what the concerns of NAPF members are, for example. I want to learn what people think. Find out what the private equity industry is doing right and what it's doing wrong. I want people to e-mail me, ring me, just to tell me what they think.'

Still, he already has plenty to be getting on with even without people voicing their concerns and adding to his ‘to do' list. Earlier in the year, the BVCA started admitting institutions as members. It now has plans to open up to individual members in addition to its current corporate members. ‘That way, we can help individual members with their training and continuous development needs,' Truell explains.

There is also a working group that is currently looking at limited partnership agreements. ‘We want to make it easier for limited partners to sign up,' says Truell. ‘The agreements need to be made clearer for investors and the process of going through them can be extremely time-consuming, so we're looking at whether there is any way that we can simplify them.' To complement these efforts, the BVCA is also publishing a guide to limited partnership agreements later in the year.

And then there's the knotty problem of performance figures. ‘We want to continue our campaign for transparency,' he says.  ‘We're putting increasing pressure on general partners to submit their performance statistics to us. We already receive data from 96 per cent of our members; our aim is to receive the data from 100 per cent of our members. We'd also like to see the rest of Europe reporting to the same standard as we do in the UK - currently it doesn't.'

Time to cut red tape
That's not to mention the lobbying that the BVCA is undertaking. ‘Our big message to government is to cut bureaucracy,' says Truell. He's referring to a number of issues here. One of these is the way that insurance companies are taxed. The current regulations mean that those investing in private equity funds must do computations on each of those funds' portfolio companies - that could be as many as 400 companies in some cases. Another is that, under FSA rules, venture capitalists have to adhere to six different sets of regulations. And yet another is that there are 36 different bands of taxation under CGT rules. ‘If I can't work out on a single spread sheet what my CGT will be, what am I to tell an owner-manager of a business?' says Truell. ‘Chancellor Gordon Brown says his intention is to help growing businesses, but his carefully crafted wheezes often cause more trouble than they're worth. The people who run the businesses we invest in haven't got time to take a masters degree in taxation just to satisfy the Inland Revenue.'

Truell would like to see the same level of lobbying happening at a European level, too. After all, many UK private equity firms invest and operate on a pan-European level. EVCA chairman Edoardo Bugnone has said that he is working on a campaign to improve Europe's entrepreneurial and investment environment to boost the private equity industry across the continent. And not before time, as far as Truell is concerned. ‘We'd like to help EVCA lobby Brussels,' he says. ‘We've been very successful in the UK, but it hasn't been the same in Europe. Historically, EVCA hasn't been as good on this front.'

So much to do…
Truell's in-tray is pretty full. It can't be easy juggling his new responsibilities with those of running a high-profile private equity firm. For one thing, Truell only ever sees his family at the weekends. He admits that sometimes it can be hard, but accepts that it's one of the costs of success. So, how much of all this would he like to have consigned to his out-tray by the time he hands over the chairmanship? Not an easy question to answer. Many of these projects are ongoing and will run on well past next June's handover. ‘You have to be quite modest about what you can achieve in a year,' says Truell. ‘If I can help ensure that we make steps towards creating the right environment for private equity, then I'll be happy that I've achieved at least part of my purpose.'

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