EQT Partners puts UK 'on ice' till Brexit vote

MD of private equity fund says it is preparing for the worst

STOCKHOLM • EQT Partners, the biggest private equity fund in the Nordic region, says it is steering clear of Britain as the country prepares to hold a vote on its European Union membership.

"Our industry hates uncertainty and we haven't opened a fund there since the vote was announced," said Mr Thomas von Koch, EQT's managing partner, on Monday. "The United Kingdom is on ice for us."

Although most polls indicate that the UK will probably stay in the EU after the June 23 vote, EQT is preparing for the worst, Mr von Koch said.

The fund does not have equity investments in Britain but owns debt from British companies through its credit fund, he said.

The threat of a so-called Brexit is already prompting some companies to shelve initial public offerings that would have targeted London.

Both the International Monetary Fund and the Organisation for Economic Cooperation and Development have warned Britain against leaving the EU amid concern that an exit would cause financial shocks beyond the UK.

Mr von Koch said that should Britons vote to leave, it is worth noting that Ireland would suddenly become the last English-speaking country in the EU. Luxembourg would also stand to benefit, he added.

"I think the Irish and the Luxembourg people have the champagne cooling. They are clearly the winners," Mr von Koch said.

"I sincerely believe it would be a very stupid decision for the Brits, because it's going to hurt."

Investors face a world in which two once-unthinkable events may become reality, Mr von Koch said. One is Brexit, the other is Mr Donald Trump as US president.

"People are sitting on the bench, waiting to see if Brexit happens and Trump becomes president," he said. "It's an interesting world that causes lots of uncertainty."

The British government has issued its starkest warning yet about the dangers of leaving the EU, saying such a move risks causing a year-long recession, a decline in the pound and the loss of about half a million jobs.

The pound is already down about 5 per cent against the euro this year.

Leaving behind the "noise" of the Brexit vote and the possibility of a Trump presidency, the underlying strength of Europe is "underestimated", Mr von Koch said.

He cited France, Italy and Spain as countries that investors would do well to look at more closely.

EQT has raised about €29 billion (S$44.8 billion) in capital, spread over 18 funds, since it was founded in 1994.

EQT invests in equity, infrastructure and credit. It is expected to soon start a technology growth fund to broaden its appeal to investors.

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A version of this article appeared in the print edition of The Straits Times on May 25, 2016, with the headline 'EQT Partners puts UK 'on ice' till Brexit vote'. Print Edition | Subscribe