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Institutional Investor Profile: Emmanuel Roth, Managing Director, Paris Orléans
27/09/2006. Source: AltAssets. 
Emmanuel Roth on Paris Orléans's fund and direct investments, on the firm's global investment strategy, and on being part of the Rothschild Group.  Paris Orléans is the listed holding vehicle of the France-based side of the Rothschild family. The company, holds a 50 per cent interest in the Rothschild banking group, alongside the British side of the Rothschild family.
Paris Orléans has about €350-400m committed to both direct private equity investments and private equity fund investments. Fund investments account for approximately €60m. The firm has been investing in private equity funds and directly into companies for about 15 years.
What is your investment focus?
'We have a very strong focus on Europe and particularly on France. France represents about 50 per cent of our principal investments. The rest is a mixture of other European countries, the US and Asia. Our investments in Asian companies are primarily, but not exclusively, through private equity funds.
Generally we tend to invest directly into companies in the countries and regions that we are more familiar with and we choose to invest in companies through funds in regions that we do not know that well. Historically, we did not have the resources to commit to direct investments in the US and Asia.
As for our fund investments, about a third of the capital is committed to buy-out funds, 15 per cent to venture funds, ten per cent to turnaround funds, ten per cent to mezzanine funds, seven per cent to secondaries funds, seven per cent to real estate funds, and the rest is in growth capital in developing countries.
We do about 80 per cent re-ups, 20 per cent new funds. The reason for the high percentage of new fund relationships in our portfolio is that we increasingly look for opportunities outside Western Europe, where we have not done that many deals yet.'
How do you define direct investments?
'Our direct investment portfolio includes co-investments, mezzanine investments and real estate investments. We do co-investments alongside the funds that we are invested in and also alongside other funds.'
How many investments do you make per year?
'We tend to invest in between five and ten funds a year, and make between ten and 15 direct investments per year. In terms of capital commitments, we commit between €20m and €30m in funds and between €30m and €50m in direct investments per year.'
What size of fund investments do you make?
'Our range is between €3m and €5m. We only very rarely commit more than €5m to a single fund. However, it is likely that in the future we will increasingly work more closely with other teams within the Rothschild Group and pool our efforts to be able to write bigger tickets.'
How do you find out about good investment opportunities?
'We do not actively look for funds. Many funds approach us directly, and we have increasingly been using the Rothschild Group to source interesting investment opportunities. Paris Orléans also has close relationships with a number of family offices and other institutional investors and they regularly bring fund investment opportunities to us.
Every year we meet with between 30 and 50 teams, the very experienced ones as well as the very young teams.'
How do you conduct your due diligence?
'We use both our networks within and outside the Rothschild Group for reference checks. We like to cross-check our findings with other LPs that follow a similar investment pattern.
Getting to know the teams better is an important part of our due diligence process. We meet them in our and their offices. Our approach varies a bit from team to team. The fund investment side of our business is not big enough to justify implementing a structured process through which we take every fund we look at more closely.'
Will your allocation to private equity funds increase or decrease in the future?
'The Rothschild Group has been increasing the amount of capital allocated to private equity investments, both direct and fund investments combined. Within that allocation, the percentage allocated to fund investments relative to direct investments has decreased.'
What is your appetite for first-time funds raised by first-time teams?
'We are not particularly keen on first-time funds raised by first-time teams but we could look at them from time to time.'
What do you look for in a good private equity manager?
'We want to see investment discipline. GPs should not invest if the opportunity is not right.
Good deal flow and strong connections in their regions and industry sectors are a distinct advantage. We are also very keen on seeing good track records.'
What would put you off investing in a certain fund?
'A lack of specialism would put us off, and also a lack of commitment from the team, both from a financial and a time perspective.'
Would you consider acquiring an LP stake in a fund from a fellow LP?
'This is something we did about five years ago but we were active in the secondaries market only for a relatively short period of time. We do not expect to do any more secondaries deals in the near future.'
What advice would you give to a new private equity investor?
'At the moment you have to be very selective when investing in private equity, especially in the more mature markets where prices and leverage are extremely high. You might want to wait for the next cycle.
Currently it is probably more likely to achieve truly outstanding returns in the emerging private equity markets, but you have to pick the very best funds. When you invest outside of the established private equity markets, you always have to look at the political stability of the regions where you are looking to invest.'
What are the biggest issues in the private equity industry at the moment?
'We are very concerned about the high prices and high leverage that we have seen recently. Too many funds are after the same deals.'
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