European Software Specialist Builds Billion-Euro Private Wealth Business

In Brief:

Private equity is experiencing a fundamental shift as specialized firms demonstrate that focused expertise can drive superior returns while building scalable wealth management businesses. Martina Sanow, Partner and Head of HG Wealth at the $85 billion software-focused private equity firm HG, reveals how a European specialist has built one of the continent's most successful evergreen fund strategies on the Alt Goes Mainstream podcast. Speaking from Berlin during Super Return, Sanow explains how HG's 25-year focus on mission-critical B2B software has enabled the firm to grow from $2 billion to $85 billion in assets while maintaining top-quartile performance. The firm's Fusion evergreen fund surpassed $1 billion in NAV within 12 months of launch, demonstrating that specialized strategies can capture significant wealth channel demand when properly structured and positioned.

Big Picture Drivers:

• Specialization Advantage: Focused expertise in mission-critical B2B software enables superior deal sourcing, value creation, and portfolio performance across market cycles

• European Opportunity: Europe's fragmented markets and high percentage of private software companies create compelling opportunities for local specialists with scale

• Wealth Capital Flows: Private wealth is growing faster than institutional capital, requiring firms to innovate distribution strategies to access this expanding market

• Structural Innovation: Evergreen structures allow immediate capital deployment and continuous compounding while providing institutional-quality access to wealth investors

Key Topics Covered:

• Mission-Critical Focus: How HG identifies and invests in software businesses that become embedded in customer operations and resist economic downturns

• European Market Dynamics: Why Europe's fragmented regulatory environment creates barriers that benefit established specialists with local presence

• Evergreen Fund Construction: How Fusion provides diversified exposure across HG's three buyout strategies plus co-investment opportunities with no performance fees

• Community Building: Leveraging portfolio company founders and CEOs as both investors and advocates for the wealth business

Key Insights:

• Specialization Drives Performance: HG's focus on mission-critical B2B software has delivered over 3x cost and 30% gross IRR consistently through global financial crisis and COVID, with 45 realization events across 55 portfolio companies in the past three years.

• European Private Market Structure: Less than 50% of Europe's top 40 software companies are publicly listed compared to 80% in the US, creating significant opportunities for private equity specialists to access quality assets.

• Evergreen Complexity: Managing evergreen funds requires sophisticated operational capabilities that many firms underestimate, particularly around liquidity management and balancing investor demand with deal flow availability.

• Network Effects: HG's portfolio of 55 companies represents over $180 billion in collective enterprise value, creating a self-reinforcing ecosystem where companies benefit from shared expertise and group purchasing power.

• Capital Deployment Advantage: Evergreen structures enable immediate capital deployment compared to traditional drawdown funds where committed capital may take years to be fully invested, allowing for continuous compounding from day one.

• Private Ownership Benefits: Being 100% partner-owned allows HG to prioritize returns over AUM growth, enabling the firm to cap subscriptions when necessary to maintain performance rather than chase asset gathering.

Memorable Quotes:

• "Software is not a sector anymore. Software is in everything we do" - Martina Sanow, explaining how software exposure has become essential across all industries

• "We have quarterly subscriptions on the fusion evergreen vehicle and so far we have for every quarter had to cap subscriptions in order to really match subscriptions coming in with deal flow" - Martina Sanow, describing the challenge of managing overwhelming investor demand

• "If you are only a public investor in software, you're missing out on 90% of that market" - Martina Sanow, highlighting the opportunity in private software companies

• "We are not driven by AUM. I've never had sort of a AUM target on my head when it comes to the wealth strategy" - Martina Sanow, explaining how private ownership enables performance-focused decisions

• "It's definitely you know what we talked about before it's been very much a startup within an existing platform" - Martina Sanow, describing the challenges of building a wealth business from scratch

The Wrap:

HG's success demonstrates that specialized expertise can be a competitive advantage in building wealth management businesses, particularly when firms can articulate clear value propositions around focused investment strategies. As private markets continue expanding into the wealth channel, firms with deep sector knowledge and strong operational capabilities may be better positioned than generalists to capture market share. The European market presents unique opportunities for local specialists who understand fragmented regulatory environments and can build the relationships necessary to source quality deal flow consistently.