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Benoit De Kerleau
Managing Partner, Global Head of Strategy
Flexstone Partners
Céline Ferrand
Institutional Sales, France
Natixis Investment Managers
Private equity can offer access to high-return opportunities unlike any other asset class for long term investors not seeking liquidity. A skilled asset manager can help investors unlock the full potential of this asset class.
Private equity has captured the imagination of institutional investors in recent years, delivering attractive returns and access to a broad, often under-tapped investment universe. In today’s low-yield environment, private markets beckon those in search of diversification and long-term growth.
The foremost appeal of private equity is financial performance. Many funds target a 20% internal rate of return or higher, which is a higher risk-adjusted returns than most asset classes (public or even private, such as private debt and infrastructure) although not achieved by all funds.
But the appeal goes beyond performance. Private equity opens doors to innovative solutions to today’s most pressing challenges, from the energy transition to ageing populations to technological advancement. These opportunities align with institutional investors’ longer investment horizons, and are often too nascent to be accessed on public markets. Moreover, the sheer breadth of opportunity in private equity is unmatched – only about 10-20% of companies are listed in any given country, meaning the vast majority of the global economy operates privately1. To access these industry leaders and innovators, investors must turn to private equity.
However, not all private companies are suitable investment opportunities for private equity funds, and accessing the most performing funds is also far from straightforward for investors. The difference between a well-managed fund and one that falters can be enormous, and the most skilled general partners (GPs) are often oversubscribed and selective when it comes to accepting new Limited Partners (LPs). For institutional investors, an experienced asset manager can be a lifeline, liaising with the standout GPs and securing access to the funds that exemplify private equity’s potential.
This is where private equity specialists such as Flexstone Partners, an affiliate of Natixis Investment Managers, step in, bridging the gap between ambition and execution to reap the benefits private equity has to offer.
Private equity thrives on exclusivity. By its very nature, the industry operates behind closed doors, where information is closely guarded by GPs and company stakeholders, who are eager to protect their competitive edge.
“It sounds simple, but it’s important to remember that private equity is private,” says Benoit De Kerleau, Managing Partner and Global Head of Strategy at Flexstone Partners. “For institutional investors, without people on the ground, the best deals are hard to identify, and even harder to access.”
This is where expertise and local presence is critical. Best performing private equity funds are often oversubscribed, and the standout GPs do need to court investors. Gaining access takes more than capital; it requires deep industry knowledge, strong relationships, and a proactive approach to market mapping. For most institutional investors, who typically have just a handful of professionals investing across all asset classes, with none or limited number of individuals dedicated to private equity, this level of engagement is simply not feasible.
Asset managers act as a conduit, channelling institutional capital towards the private equity opportunities where it's most likely to spark. Flexstone understands this is not merely a question of access – it's about identifying the opportunities that suit each client’s specific needs. Portfolio construction is also key to successful strategy in private equity, it is tailored to each client at Flexstone.
“We take a partnership approach, sitting down together to understand our clients’ needs, their requirements, and where they’re constrained,” says Celine Ferrand, Institutional Sales for Natixis IM in France. “We co-design a private equity strategy, which we implement with whatever level of involvement the client would like.”
Private equity is ultimately a people business, and Flexstone’s team is expert in conducting due diligence to understand the people behind the funds.
“Who are the good dealmakers in the investment team? Are they going to stay with the GP long term? Are they well-supported?” asks Benoit. “Alongside those assessments, there are legal, administrative and regulatory needs, which are becoming more complex and which we take off our clients’ hands.”
Among the best GPs, Flexstone seeks out global opportunities in the small- and mid-cap segment, which means betting on growth. Unlike strategies that rely more heavily on leverage, these companies offer real-world growth potential. This approach can generate more resilient returns amid economic volatility – particularly important given private equity’s longer-term time horizon.
In private equity, the work doesn’t stop at selecting the right funds and GPs. Once an investment decision is made, maintaining a private equity portfolio takes careful cashflow management, capital calls, distributions, and ongoing oversight. For institutional investors juggling complex portfolios, alongside the day-to-day tasks of their core businesses, this phase is also challenging.
Benoit cites capital calls as just one example of the administrative side of private equity: “With 10 to 20 underlying funds, you might not have capital calls every day, but often enough and with limited notice and you don’t want to miss them. Distributions also need to be tracked and may be reinvested, which takes a sophisticated platform and infrastructure.” This is without mentioning the burden of dealing with legally complex subscription documents and ever-growing regulatory, KYC and AML constraints.
Flexstone’s asset management capabilities extend to this management and monitoring stage. From participating in fund AGMs to reviewing legal documents, Flexstone’s team handles the menial but crucial tasks of private equity investment, meaning institutional investors can stay focused on their broader strategy and asset allocation.
Another challenge of investment is data interpretation. The information provided by private equity fund administrators arrives in different formats, languages, and reporting styles, making it difficult to understand or treat in an effective way. “Our job is to translate that avalanche of information into cohesive insights that are tailored to each client’s needs. When crises hit – the outbreak of Covid-19 or the Ukraine war, for instance – we can pinpoint which assets are affected and give clients specific advice” says Benoit.
This data, when correctly structured, can also be used to inform institutional investors’ broader business strategies. For instance, it may reveal significant economic trend, support tracking of the organisation’s environmental goals, or illuminate another opportunity. In the ESG field, collecting and formatting data also requires specific tools but proves necessary to report on meaningful non-financial performance.
Flexstone’s bespoke approach is integral to everything the firm does. In fact, 75% of the firm’s work is carried out via segregated managed accounts – one for each client, tailored specifically to their priorities and constraints. “It’s really a partnership between Flexstone and our client,” says Celine.
Risk management is essential at every step. Flexstone diversifies across the best GPs, geographies, and sectors, and those GPs further diversify within their portfolios, providing a double layer of diversified, high-quality opportunities. “With private equity as a typically small portion of an institutional portfolio,” adds Celine, “it has to work well to deliver great results. Our job is to reach a good level of performance while managing risk.”
Private equity offers a world of opportunities that are difficult to access in public markets, but like any specialised field, it takes diligence, knowledge, and careful execution to reap the rewards. For institutional investors, a specialist asset manager can take on much of the heavy lifting to improve results.
By combining careful portfolio construction, asset selection, hands-on monitoring, and a tailored approach to both investment and data management, Flexstone helps its clients unlock the full potential of this asset class.
Written in April 2025
1 Source: KKR, An Alternative Perspective, September 2024.
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