2020 Review: On track despite pandemic curveball

February 24, 2021

The year 2020 will go down in history as a year of contrasts, also for CapMan. Although the Covid-19 pandemic threw an unexpected curveball, we succeeded in growing our assets under management as well as our management fees, launching new products, and creating value in our investments.

Last January, our plans were clear. We intended to continue on our strong growth path, increase the profitability of recurring income, actively make new investments, and build sustainable value in our portfolio, with the intention to also realise carried interest from funds. However, the year turned out to be very different than expected. Suddenly, work equalled remote work without physical meetings, and international fundraising took place in a world where planes remained on the ground. At the same time, our organisation leaped on digitalisation as our teams transitioned to hybrid forms of remote work. During the year, 15 new CapManians started their employment from their home offices and have since become integrated in the CapMan family.

We succeeded in our goals

Considering the circumstances, we succeeded well in the goals we set at the beginning of the year. Last year, we raised over €800 million in new capital to our eight funds and mandates, and our assets under management reached a new record at €4 billion. The profitability of our management fees and fees from services improved, and we made over ten new investments into our funds. Our total share return was clearly positive in 2020.

Strong year in fundraising

The successful fundraising indicates that our concept works. The Nordic Real Estate III fund will, at significantly exceeding €500 million, become the largest fund in CapMan’s history to date. The fund continues the success of the preceding Nordic Real Estate funds and has both internationalised and diversified our investor base. Our Real Estate team is the largest one in the Nordics.

In addition, our Growth team took major steps during the year. In the summer, CapMan Growth established its second growth fund, which raised close to €100 million. The fund exceeded its original target size as well as the size of the previous Growth fund. The fund attracted a lot of interest among investors, which reflects the Growth team’s successful strategy. The team has already made two investments in line with the strategy into Finnish growth companies, whose development we are excited to follow in the coming years.

Growth from new teams

The assets under management of CapMan Infra increased to almost €400 million with the completion of the first fund’s fundraising and the investments made by new investors in individual assets. In three years, CapMan Infra has grown from a one-person venture to a team of ten with operations in Finland and Sweden. The team completed three new investments last year and the fund has invested 70% of its target size.

We also made new initiatives during 2020 by launching CapMan Special Situations, an investment area that pursues event-driven investment situations by providing flexible capital solutions and strong operational capability to deliver step-change improvements in performance. Currently, there is no other local private equity investor in Finland specialising in similar situations.

New power in the service business

Services have been an integral part of our business for several years already. At the end of 2020, we had two new service organisations focusing on investors’ needs: CapMan Wealth Services and JAY Solutions. CapMan Wealth Services offers comprehensive wealth advisory services covering both listed and unlisted markets. JAY Solutions, which has grown from JAM Advisor’s analytics and reporting business, offers technology-driven reporting, analytics and back-office services across the financial services industry. At the same time CaPS has continued its growth and internationalisation. The procurement service concept was launched in the Baltics in collaboration with BaltCap. We expect rapid growth in our service business in the coming years as the restructurings and investments of 2020 start to pay off.

The exceptional year affected valuations

The value creation work has been challenging in many portfolio assets in these exceptional circumstances. Due to the COVID-19 pandemic at the beginning of the year, the fair values of our investments decreased significantly. However, valuation levels have recovered since the beginning of the year, and after three consecutive upward quarters, changes in the fair values of our own investments were positive for the full year.

Last year provided an abundance of new insights. We have learned that sometimes plans need to be altered rapidly, but if the business is on a sound foundation and the goals are clear, even challenging circumstances are not obstructing success. The year ahead will reinforce this approach as we continue to apply the lessons learned during the pandemic and the new opportunities it creates. In 2021, with the recovery of a good acquisition market, we will focus especially on strong value creation in our current investments as well as on exits and new investments. Fundraising in key investment areas continues and our goal is to bring new products to the market. Succeeding in these goals should correlate with strong returns to shareholders.

Joakim Frimodig
CEO

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