FMO posts first net loss in 3 decades as PE portfolio valuation dives

REUTERS/Jason Lee

Dutch development bank FMO posted a net loss of €205 million ($242 million) in 2020, its first loss since 1991, largely driven by a decrease of the fair value of its private equity portfolio, its annual report showed.

The decrease is seen across sectors and geographies and is the result of a global decline in emerging market equity valuations due to the COVID-19 pandemic, FMO said.

Linda Broekhuizen, CEO of FMO, said the firm prepared for a worst-case scenario as early as March 2020, at the start of the first lockdown. She noted that customers were more resilient than FMO had expected during the year.

“Still, reflecting on the uncertainty that current times have brought, the value of our private equity portfolio decreased. Consequently, we ended the year with a negative result of €205 million for the year 2020. This is the first time in almost three decades that we report a loss,” Broekhuizen said in the report.

Aside from the pandemic, FMO said its PE portfolio was exposed to changes in currency rates as a large part of it is denominated in US dollars.

“With stock markets plummeting at the beginning of the pandemic, the euro-dollar valuation has changed significantly, affecting our private equity portfolio on the currency side,” FMO said.

Travel restrictions and lockdowns, as well as internal capacity constraints due to KYC remediation later in 2020, also prevented FMO from carrying out its due diligence process and exploring new viable business opportunities in a conventional way.

As a result, several deals were put on hold or took longer to materialize than normal. Deals that were closed in 2020 were mainly investments in existing customers with whom FMO has a well-established relationship, and in customers that had already advanced through FMO’s due diligence and KYC process, it added.

Despite these negative factors, the firm’s net interest income grew due to lower interest rates during 2020, resulting in lower interest expenses. It also claimed that its capital ratio remains well above the combined ratio of the SREP minimum requirement set by the Dutch Central Bank.

In 2020, FMO’s private equity investments in emerging markets reached €211 million, down from $352 million that it invested in 2019.

Despite a weaker 2020, FMO managed to record various milestones during the year. These include the launch of FMO Ventures Program, which seeks to support pioneering technology-enabled business models.

The program has made six investments in 2020, including four new or follow-on investments in Asia.

FMO is the Dutch entrepreneurial development bank that invests in over 85 countries, supporting jobs and income generation. It is focused on supporting sustainable private sector growth in developing countries and emerging markets by investing in ambitious projects and entrepreneurs.

The bank has an investment portfolio of $10.4 billion, with a 28 per cent exposure to Asia. It covers sectors such as financial institutions, energy, and agribusiness with average ticket size for investment at 15 million euros ($16.7 million) across equity and debt.

FMO has its head office in The Hague, the Netherlands, with local offices in Johannesburg, South Africa, and Nairobi, Kenya. It also has a representative office registered in Singapore.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.