Investing in private assets – the “giant of the real economy”

Xavier Bonna, Managing Partner at Lombard Odier

“Private assets are an essential pillar of modern wealth management. They provide resilience, unique valuation, and contribute actively to the transformation of the global economy. They are the giant of the real economy.”

That was the message from Xavier Bonna, Lombard Odier Managing Partner, as he opened our inaugural Private Assets Investor Day at Geneva’s prestigious Conservatoire de Musique. Entitled Private Assets: Unlocking Opportunity, the day brought together an invited audience of clients and guests, and a panel of leading CEOs, fund managers and investment experts, to explore the role private assets can play in portfolios and to provide insights into the future of this growing asset class.

Throughout the day a number of key themes emerged, chief among them the importance of diversification as a way to build portfolio resilience. In a world of rapid change, Xavier Bonna explained, “Private assets offer a long-term approach, away from the volatility and noise of public financial markets.”

By giving privileged access to long-term growth stories – such as artificial intelligence (AI) innovations, the clean energy transition, and the growth of digital infrastructure – private assets can help investors build wealth not around short-term, often volatile trends, but around the fundamental systems changes taking place across our economy and wider society. Delegates heard, however, that private assets are not a simple panacea. In a vast universe of investment potential, a rigorous approach to selection is essential.

Private assets offer a long-term approach, away from the volatility and noise of public financial markets

Investing in the real economy

Thierry Célestin, Lombard Odier’s Private Bank Head of Private Assets, began by sharing the current market context. “86% of the economy is private assets,” he said. “We believe that diversification and access to the real economy is very important.”

Adding private equity to portfolios has, historically, improved portfolio performance, he explained, with long-term returns rising as portfolio allocation to private assets is increased as a diversification to bonds and listed equities. However, he continued, “over the last few years, private industry has struggled to match the performance of the stock market.”

86% of the economy is private assets

This paradigm is now shifting, as more and more large companies, especially in the technology sector, are “staying private for much longer. We continue to see capital flows coming to the private market. We believe there is still a lot of room to grow.”

From left to right: Nicolas Chatillon, Nadine Mottu, Thierry Célestin, Gonzague Bernard, Guillaume Chapuis

Gonzague Bernard, Senior Investment Manager, Lombard Odier Investment Managers (LOIM), picked up on this point, noting that in the venture and growth capital segment, IPO (Initial Public Offering) expectations are improving after three years of stagnation. “Recovery phases have historically delivered strong returns,” he said.

Read also: Preparing portfolios for the coming decade

Debt and real assets

This focus on ‘turnaround’ emerged as another key theme of the day, as Indeesh Tangeraas, Investment Director, Global Real Assets at LOIM, turned attention to real estate and infrastructure. “Private real estate fundraising has been declining,” she said, “but transactional activity has already turned around. Against a backdrop of supply shortages, due to past high construction and financing costs, and evidence of demand reviving for some sectors, there is a strong outlook for real estate this year, albeit a narrowing window.”

There is a strong outlook for real estate this year, albeit a narrowing window

Similarly, she noted, “Private infrastructure fundraising stalled for the first time in over a decade, but it remains a growing asset class due to strong secular tailwinds and has demonstrated resilience across investment cycles.”

“The different sectors have evolved over time,” she explained. “Energy continues to be dominate, with strong growth in renewables, driven by the rise in digital demand, climate transition goals and, increasingly, energy security. We’re seeing a lot of countries moving to onshore their energy production in light of global conflicts. Digital infrastructure has been steadily increasing its market share driven by demand for the physical infrastructure required to fulfil the rise of technology especially AI and cloud applications.”

Lucas Pech, Investment Director, Private Debt, Lombard Odier Investment Managers, noted that this growth story is similar in the private debt sector. “Private debt pricing is at historically high levels,” he said, explaining that large deals – those over EUR 1 billion – accounted for 18% of European direct lending deals in 2024, rising from just 6% in 2023. “Large deals have grown significantly, but are now facing more pressure on structure, leverage and pricing than smaller deals,” he concluded.

Artificial intelligence driving growth

Throughout the day, artificial intelligence emerged as a key driver of growth. Gonzague Bernard explained: “AI is driving investment activity. It’s a really good opportunity that is crossing different sectors – from health to insurance companies. It’s changing the way we work.”

From left to right: Gonzague Bernard, Ángel Agudo, Carlotta Riganti

For Fergal Mullen, Co-founder and Partner of Highland Europe, a growth-stage venture capital firm investing in fast-growing technology and software companies in Europe, the growth of AI is creating significant new opportunities. However, he explained, the sector is complex, and there are reasons for both investors and founders to be cautious. “The reality is that founders need partnerships. They need people they can trust,” he said. “Everybody has euros, dollars, Swiss francs – but finding a partner who has the knowledge to help you expand your business is really hard.”

The reality is that founders need partnerships. They need people they can trust. Everybody has euros, dollars, Swiss francs – but finding a partner who has the knowledge to help you expand your business is really hard

Here, delegates were introduced to Clarity AI, a fast-growing privately-owned technology firm deploying AI to help investors and businesses better understand the social and environmental impact of their decision-making process.

Outlining the considerable advantages that AI can offer, Ángel Agudo, Chief Product Officer and Board Director at Clarity, noted that Clarity AI’s automated data collection achieves a speed increase of 40% and a better than 99% accuracy rate when analysing a firm’s social and environmental impact. With its power to analyse large datasets, he explained, Clarity AI is now able to analyse more than 70,000 companies and more than 5,000 metrics, and is already working with some of the world’s biggest names in finance and insurance.

Read also: AI Summit in Paris: Macron and Europe step up the pace in response to the US and China

Sustainability and ‘transition alpha’¹

By working at the intersection of AI and sustainability, Clarity AI is evidence of a wider opportunity, delegates heard, as investments flourish in new technologies and also in adapting traditional businesses to more sustainable business models.

Guillaume Chapuis, Senior Investment Manager, Plastic Circularity Fund, LOIM, explained: “For us, sustainability has two dimensions. The first is the alignment dimension – companies that accelerate the transition, cause no harm, and meet social and governance safeguards. The second is the financial dimension – companies leading the transition will perform better financially as they will be able to capture shifting and emerging profit pools from the transition.”

From left to right: Nadine Mottu, Thierry Célestin, Gonzague Bernard, Indeesh Tangeraas, Lucas Pech

In the plastics industry, he noted, private assets investment opportunities are emerging across the full value chain. Aiming to achieve both a positive real-world impact and an attractive exit for investors, he explained that LOIM employs three golden rules when analysing investment opportunities – new solutions must accelerate the sustainability transition, they must be cost competitive, and they must match or beat incumbents on performance.

Innovative French firm 900.care, which sells sustainable personal care and washing products, meets all three tests. Having raised EUR 21 million in a 2024 funding round led by LOIM, the firm has become a clear example of sustainability driving private investment opportunities.

One of the most common misconceptions is that you have to choose between building a positive impact business and building a financially successful business

Aymeric Grange, 900.care Co-founder and CEO, explained: “Our prices are very accessible, even lower than most big brands.” Noting that the firm has so far avoided 8 million plastic bottles, 3,000 tonnes of CO₂, and 1 million litres of water being transported, while achieving 10x sales growth (from EUR 1 million to EUR 10 million in just four years), he said, “I think one of the most common misconceptions is that you have to choose between building a positive impact business and building a financially successful business. We manage to do both. Last week we signed a national deal with Carrefour to be distributed in all their supermarkets. Our ultimate goal is to transform the industry and become the new norm of the personal care model.”

Read also: Personal care products with zero plastic waste? 900.care is building a revolution

Investing in private assets – quality first and long-term thinking

For delegates, the day served to highlight the breadth of opportunity provided by private assets. From AI to real estate, and debt to sustainability, panellists explained that private assets can offer vital portfolio diversification in an uncertain economic and geopolitical landscape.

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With more companies choosing to stay private for longer, private markets are also becoming a key place to access fast-growing sectors, and to find the innovators and disruptors transforming their industries. This was highlighted by Max Aniort, CEO of Le Collectionist, a European leader in luxury holiday property rentals, who explained that Le Collectionist’s position as a member of the ‘French Tech 120’, one of France’s most promising scale-ups, has been achieved, “through both organic and external growth, supported by a scalable operating model and a deep commitment to quality.”

Private assets are about rigorous due diligence and strategic long-term investment. Discipline is key. So, too, is having access to the best funds

Picking up on this “commitment to quality”, many panellists noted that investors in private assets must take a quality-first approach. While this applies to individual allocations, it is equally important when it comes to selecting fund managers, they said. Thierry Célestin, for example, noted, “The key characteristic of this market is the massive dispersion of performance between the best and the worst managers.”

At Lombard Odier, we believe that private assets can be a key portfolio differentiator. With their often-illiquid nature, however, they are only suitable for investors ready to take a long-term approach. As the day’s co-host Nadine Mottu, Partner and Co-Head Grandes Familles, Lombard Odier Group, noted, “Private assets are about rigorous due diligence and strategic long-term investment. Discipline is key. So, too, is having access to the best funds.”