In conversation with Daniel Sachs

PCP is based in Stockholm. Has that proven to be either an advantage or disadvantage?

When PCP was founded over 23 years ago, the primary focus was certainly on the Nordic market. Since then, our business has rapidly expanded across Europe with Germany now our largest market after Sweden. Whilst the quality of local talent is exceptionally high, we have always had an international team. In fact, with over 50 employees, we have 14 different nationalities. It is also worth mentioning that PCP work with ambassadors and partners across Europe. 

PCP has a particular niche targeting entrepreneurs and family-owned businesses. Is this a particular characteristic of the Nordic market? 

It’s certainly not unique to the Nordics, in fact Germany, PCP's second largest market, has an extremely large SME sector which underpins a large part of the wider German economy. There is also a lot of cultural similarity between the Nordic region, Germany and the Benelux.

The European private credit market has grown rapidly. Do you think this is likely to continue?

Yes, it has to. Not least because of the very large competitive and productivity gap which continues to exist between Europe and the US. European companies need to substantially increase their investment in entrepreneurship, digitisation, sustainability and energy security.

Funding these investments into European competitiveness requires primary capital, the initial funds invested in a company, so demand will remain high. In terms of supply, the greatest supply of private capital is secondary capital, or buy-out capital, funding transactions from a buyer to a seller – none of that capital goes into the business to fund its development (as opposed to primary capital). 

For example, private credit in Europe is 90% sponsored credit with a focus on funding buyouts¹. There is therefore a very real gap between the supply and demand for primary capital in the private credit market and this is a very real issue for Europe. Over 90% of what PCP does is use private credit to provide primary capital solutions across our strategies. PCP is by far the largest provider of non-sponsored private credit in Europe – this is a niche which remains nascent and therefore provides plenty of growth opportunities.

PCP's ethos is ‘investing with purpose’. The focus on ESG/impact/sustainability seems to be weaking, particularly in the US. Do you think this is transitory? 

From the start there has always been a dichotomy between those investors who claim they embrace integrating sustainability in their investing versus those who actually do. The pendulum does seem to be swinging, particularly in the US, against these values. However, I firmly believe that in order to build consistently profitable businesses you need to factor in the sustainability transition. ESG and sustainability do not come with a performance cost - quite the opposite, as they often help mitigate business risks and therefore enhance financial performance.

PCP is a credit provider. Why is ESG/sustainability important as there is no equity upside for PCP? 

A core focus for any lender is risk i.e. the avoidance of loss. The principal has to be repaid at the end of the loan, so clearly we have an interest in ensuring the borrower is successful. Added to this is the reputation of PCP – we want to be known in the market as a firm that backs and partners with successful businesses.

You don’t come from a financial family. What was the catalyst for you to enter the investment world?

Both my parents were academics and encouraged discussion of politics and social issues around the dinner table. But my great grandfather - Josef Sachs - founded NK, which is Sweden’s leading department store, in 1902, so the family did have a business background. I was always very curious about business, and over time I also realised that business was a great tool to make an impact in many different ways, for example allocating capital to parts of the economy important for social development. I have never believed there is any conflict between delivering financial performance and meeting these wider desirable goals - quite the opposite.

M&G has recently become majority shareholders in PCP. Why did you decide now was the time to become part of a larger group?

The main catalyst was a realisation that there was a very interesting opportunity to grow our business because of the large needs of primary capital for European competitiveness. In order to do that we felt we needed greater institutional capabilities, particularly in terms of capital formation and fundraising, as well as systems and operational support. Existing PCP management remain substantial minority shareholders, which is important.

In terms of your clients, do they tend to be one-time-only borrowers or do you maintain long-term relationships with them? 

The large majority of our deals are one-time transactions, but they are not short-term relationships. Most of our loans have a duration of five to seven years. We tend to provide capital for concrete growth initiatives in a company’s development, but over time typically they will transition towards using traditional bank financing or bond markets.

You travel all across Europe on business. Which is your favourite city?

Difficult to answer as in Europe different cities offer very different experiences, but I would probably opt for Milan. I enjoy Italian cuisine and culture but I also find it a really stimulating city, perhaps because it is so different from Stockholm. London would probably be my second choice.