Successful investing in the Financial Services sector requires private equity investors to offer more than just funding. Selecting businesses where the investor can clearly add value is key.

An exclusive domain
Considering the sums invested in the sector and the significance it holds in most developed economies, financial services has not historically received the focus from the private equity industry that it deserves. The reasons for this include the view that financing requirements are complex, business models are difficult to understand and investors need to understand the impact of the regulatory environment. These factors have meant that the sector has only received ongoing  interest from a few specialist firms.

Investment clarity
At 3i we have invested many years to truly understand the sector. We know how to develop creative financing structures and we have clear views about where value creation opportunities lie. We are also able to draw on knowledge, experience and contacts in mature markets and deploy these in faster growing economies. Investing in financial services is core to 3i and it will continue to be an exciting global sector for us.

Backing specialist operators
In many countries, the financial services industry is dominated by large banks and insurance companies. However in most markets, there are substantial opportunities for agile, specialist operators to thrive and create significant value by utilising their skills within specific sub-sectors. Across the US, Europe and Asia, we partner with these niche operators to challenge the dominance of the large financial institutions.

We invest across most areas of financial services but focus on four sub-sectors:

Consumer Finance
We are attracted to business models with effective and focused distribution channels and businesses that maximise knowledge of their end customers in order to drive superior returns. Accessing capital markets across the credit cycle is also important to these businesses.

Insurance
We are interested in underwriters who combine effective distribution with a strong track record of writing profitable, upper quartile business across the cycle. We also see an opportunity for specialist brokers with strong distribution.

Asset and Wealth Management
An increasingly wealthy and ageing population across Europe and Asia means there is significant demand for specialist investment managers. We are interested in companies with effective distribution and strong track records measured against their relevant benchmarks.

Outsourcing and Offshoring
There is a well-established trend for large financial institutions to outsource some of their administrative processes either onshore or offshore. We see this trend continuing and creating value for established outsourcing companies. Where offshoring is a feature, we use our network and knowledge in Asia to  provide advantage to this business activity.

We typically invest in the following situations:

• Venture Capital; for both early and late stage businesses, typically investing up to €50m;
• Growth Capital; for minority investments in established, privately-owned businesses, typically investing €10m–€250m;
• Buyouts; where we provide funding and strategic support to management teams of large private or public companies, typically investing in companies with an Enterprise Value of up to €1bn.
• Quoted Private Equity (QPE); seeks to acquire significant and influential shareholding positions in European public-listed companies that are valued at up to €2bn.