Capital Decanted

How does a legacy private capital partnership who has thrived solely in the institutional draw down LP ecosystem, assemble the apparatus to begin distributing those strategies to the individual investor? When client acquisition and conversations, investor sophistication, product design, culture, operational support etc. are all fundamentally different...where do they start in this overhaul? What challenges and pitfalls have they experienced along the way? What battle scars and advice can they share with others that are considering the same or in the early stages themselves. Join us as we draw a blueprint in a very applied and practical manner.

Introduction: (0:48)

Halftime: (54:00)

Guests: (59:39)

Guests:

Shane Clifford, Managing Director–Partner and Head of Global Wealth, Carlyle

Doug Krupa, Managing Director, Global Client Solutions, KKR

Episode Sources

AI dominates headlines and investment conferences these days…often to excess.  Sensational stories like “Here’s the robot that will steal your job” and charges of “Disrupt, transform or die” fill our feeds and raise fearmongering narratives that channel Issac Asimov’s I-Robot or James Cameron’s Skynet--of course from the Terminator series.  Quant shops, hedge funds, and algorithmic trading firms have embedded AI in their models for over a decade.  But have we hit a tipping point where applications of these accelerated computing capabilities are ready to invade the more traditional asset management business?  What are those use cases and which are most promising?  And how should we think about peaceful future co-existence of the human and the machine in managing portfolios.  Martin Escobari and Dave Morehead join us to unpack this provocative topic.

Introduction (0:48)

Halftime (42:35)

Guests (50:44)

Guests:

Martin Escobari, Co-President, Managing Director, Head of Global Growth Equity, General Atlantic
Dave Morehead, Chief Investment Officer, Marketable Investments, Baylor University

Episode Sources

Today’s asset management business has quickly transformed into a race to build out a stable of thoroughbreds--investment strategies across a spectrum of conventional public equity and debt as well as offerings across the continuum of private capital--equity, credit, secondaries, real estate, infrastructure etc. What makes recent history particularly unique are the crossover deals from traditional managers with alternative managers.  For several decades, traditional long only mutual fund shops and institutional firms stayed in their lane and idiosyncratic, complex private capital partnerships lived in a different world---there was a peaceful co-existence and mutual exclusivity. Those distinctions and parallel worlds have evaporated.  We explore why with two of the most revered leaders in the industry and compare and contrast their different approaches to meeting this challenge.

Introduction (0:47)

Halftime (47:03)

Guests (53:15)

Guests:

Jean Hynes, CEO, Wellington Management

Jenny Johnson, CEO, Franklin Templeton

Episode Sources

No investor claims to be short-term but in the face of the seductive siren call of the emotionally volatile markets, even the most disciplined of investors buckles at the knees.  The apparatus and systems in which we work---governance, investment policy, benchmarks, asset allocation frameworks, compensation systems along with the behavioral spiral that haunts us all in times of market trauma tend to perpetuate herd mentality.  With the help of some of the best minds on the subject, we work to define long term investing more precisely, explore the virtues of a multi-cycle horizon, and warn of the common pitfalls that so easily break our convictions. 

Introduction (0:48)

Halftime (50:00)

Guests (55:50)

Guests:

Episode Sources

Welcome back to season 2 of Capital Decanted… well, almost! John Bowman, CFA teases the episode and the “greatest asset in investing” – can you guess what it is? Find out on September 30!

Private Credit has risen from obscurity within the private equity financing world to a greater than $2T asset class in just over a decade.  In this episode, we examine the conditions (M&A, debankification, regulation, staying private longer) that accelerated post the GFC that created a torrent of issuance and demand for private credit across direct lending, asset backed credit, structured credit, and innovative special situations.  And more importantly, we debate whether we’ve come a little too far, too fast, and if some rationalization and refining is needed before this exciting space continues its upward trajectory.

Guests:

Katie Koch, CEO, TCW

Kipp DeVeer, Partner and Head of Credit, Ares Management

⁠Episode Sources

Private Markets Valuations…do these quarterly marks properly represent fair value or are they make believe…contrived from the fictional world of GP machinations?  Do these interim valuations, as one commentator put it, “not matter;” or as another proclaimed provocatively, are they simply a case of “volatility laundering.”  Is the gap or “lag” with public market equivalents relevant…are we anchoring to the right bogey…or arbitrarily comparing objective value to an emotionally manic patient, to paraphrase Warren Buffett?  In today’s episode, our inaugural episode of Capital Decanted, we are going to lean in to this divisive and complex topic with some help from Scott and Andrea.

Guests:

Scott Kupor, Managing Partner, A16z

Andrea Auerbach, Global Head of Private Capital, Cambridge Associates

⁠Episode Sources

After a four decade relative period of global stability, the world order has fractured and grown more unpredictable. The new multi-polar reality poses a major problem for leaders and investors as our traditional guardrails, narratives, and structures seem less useful. How should an investor integrate geopolitical trends into their investment thesis and what pitfalls and common mistakes should we watch out for?

Guests:

Anastasia Titarchuk, CIO, New York State Common Retirement Fund

Marko Papic, Partner, Clocktower Group

Since the arrival of Modern Portfolio Theory (MPT) in the early 1950’s by the legendary Harry Markowitz, the industry has been sturdily anchored to this philosophy and all of it’s artifacts when constructing portfolios. In recent years, however, an enterprising handful of large institutional asset owners have begun challenging the common wisdom of a strategic asset allocation approach given it tends to breed silo behavior, unhealthy competition for resources and attention, unrecognized duplication or disjointed risk exposure across the portfolio, and difficulty in managing the capital pool holistically around a view of the future. This is the story of how CAIA convened some of the most reputable and largest asset owners in the world to amplify the benefits of TPA and perhaps, the beginning of a new era.

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Permanent Capital or GP Stakes structures aim to take further advantage of long-dated patient capital in private markets. Furthermore, they allow the LP to participate in additional cash flow streams with the GP that are elusive in a traditional fund structure. In other words, it allows LPs to get exposure to a variety of alternative asset managers as minority owners in the GPs themselves. But does this provide a purer incentive alignment of investors and GPs or simply split allegiance and attention between multiple masters?  In this episode, with the help of the largest GP Stakes participant, Blue Owl, and a large LP in their fund, USAA, we examine the evolution of the approach, its idiosyncratic and multi-faceted return stream, and try to honestly assess some of the myths that haunt the space.

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