1 00:00:05,820 --> 00:00:08,640 Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer. 2 00:00:08,880 --> 00:00:11,550 Sean Aylmer: As an asset class, private equity has a reputation for 3 00:00:11,550 --> 00:00:14,849 Sean Aylmer: a couple of things. Delivering some impressive returns, and also 4 00:00:14,849 --> 00:00:17,040 Sean Aylmer: being the domain of the big end of town. But 5 00:00:17,070 --> 00:00:20,880 Sean Aylmer: Pacific Equity Partners, the largest and most active private markets 6 00:00:20,880 --> 00:00:24,180 Sean Aylmer: fund manager in Australia is making it more accessible with 7 00:00:24,180 --> 00:00:26,819 Sean Aylmer: the launch of a new strategy to give individuals access 8 00:00:26,820 --> 00:00:29,790 Sean Aylmer: to global private equity. It's a good opportunity for us 9 00:00:29,790 --> 00:00:31,379 Sean Aylmer: to get a one- on- one on the asset class 10 00:00:31,380 --> 00:00:35,580 Sean Aylmer: more broadly, the pros, the returns, and who it might 11 00:00:35,580 --> 00:00:38,970 Sean Aylmer: appeal to. Remember, this is general information only and you 12 00:00:38,970 --> 00:00:42,930 Sean Aylmer: should seek professional advice before making investment decisions. Cameron Blanks 13 00:00:42,960 --> 00:00:46,290 Sean Aylmer: is the managing director of Pacific Equity Partners, a great 14 00:00:46,290 --> 00:00:48,809 Sean Aylmer: supporter of this podcast. Cameron, welcome to Fear & Greed. 15 00:00:49,348 --> 00:00:50,670 Cameron Blanks: Thanks for inviting me on, Sean. 16 00:00:51,240 --> 00:00:55,530 Sean Aylmer: So, we've all heard about private equity and particularly Pacific 17 00:00:55,530 --> 00:00:57,540 Sean Aylmer: Equity Partners. You've been around for a long time, but 18 00:00:57,540 --> 00:01:01,290 Sean Aylmer: just for listeners there, explain who you are and how 19 00:01:01,290 --> 00:01:02,100 Sean Aylmer: you invest. 20 00:01:02,730 --> 00:01:06,059 Cameron Blanks: Yeah, so we've been in the private markets in Australia 21 00:01:06,059 --> 00:01:09,479 Cameron Blanks: and New Zealand for the last 26 years. We really 22 00:01:09,480 --> 00:01:13,738 Cameron Blanks: focus on a sector of the private equity landscape, which is 23 00:01:14,130 --> 00:01:18,090 Cameron Blanks: a late stage private equity. So these are established profitable 24 00:01:18,090 --> 00:01:23,490 Cameron Blanks: firms that often have a market leadership position that we're 25 00:01:23,520 --> 00:01:28,048 Cameron Blanks: looking to invest in, to help transform the profits and 26 00:01:28,049 --> 00:01:31,378 Cameron Blanks: the growth trajectories of those businesses. So that's the part 27 00:01:31,380 --> 00:01:34,440 Cameron Blanks: of the market that we focus on here in Australia 28 00:01:34,440 --> 00:01:37,199 Cameron Blanks: and New Zealand. And then we have been doing that 29 00:01:37,560 --> 00:01:42,450 Cameron Blanks: investing alongside funds like ourselves globally in that same part 30 00:01:42,509 --> 00:01:46,199 Cameron Blanks: of the private equity landscape. Now, the private equity markets 31 00:01:46,199 --> 00:01:50,190 Cameron Blanks: are very large these days. They're around about 12 and 32 00:01:50,190 --> 00:01:53,370 Cameron Blanks: a half trillion of assets under management globally. And there's 33 00:01:53,370 --> 00:01:56,580 Cameron Blanks: a lot of different segments of private equity. So, we 34 00:01:56,580 --> 00:02:01,319 Cameron Blanks: don't do any venture capital type investing. So no early 35 00:02:01,320 --> 00:02:05,999 Cameron Blanks: stage investments. It's all established big businesses that we invest 36 00:02:06,000 --> 00:02:10,500 Cameron Blanks: behind. So as a 101, it's really important to understand the investment 37 00:02:10,500 --> 00:02:15,870 Cameron Blanks: philosophy of the firms that you're investing behind and understanding 38 00:02:15,870 --> 00:02:19,138 Cameron Blanks: the different parts of the private markets before you do invest. 39 00:02:19,469 --> 00:02:21,690 Sean Aylmer: Okay. So I might ask you just to dig a 40 00:02:21,690 --> 00:02:26,730 Sean Aylmer: little deeper into your investment philosophy. What exactly are you 41 00:02:26,730 --> 00:02:29,610 Sean Aylmer: looking at? I get that you're not doing VC, your 42 00:02:30,600 --> 00:02:33,929 Sean Aylmer: more mature companies. What attracts you to a company? 43 00:02:34,320 --> 00:02:37,319 Cameron Blanks: Yeah. So Sean, for us, we start with the market 44 00:02:37,320 --> 00:02:41,819 Cameron Blanks: structure and the market itself. Is the market growing for 45 00:02:41,820 --> 00:02:44,669 Cameron Blanks: a business that we're investing in? So given that we 46 00:02:44,669 --> 00:02:47,549 Cameron Blanks: are looking for market leaders, these do tend to be 47 00:02:48,090 --> 00:02:50,700 Cameron Blanks: larger businesses that have been around for a long time. 48 00:02:51,059 --> 00:02:53,730 Cameron Blanks: And often we are looking for these types of market 49 00:02:53,730 --> 00:02:57,660 Cameron Blanks: leaders that are underperforming their full potential, if you like. 50 00:02:58,109 --> 00:03:02,370 Cameron Blanks: And our philosophy is coming in with a great leadership 51 00:03:02,370 --> 00:03:05,610 Cameron Blanks: team with a very clear plan to do two or 52 00:03:05,610 --> 00:03:08,190 Cameron Blanks: three things differently than have been done in the past 53 00:03:08,550 --> 00:03:10,950 Cameron Blanks: with a aim to double the profits of the business. 54 00:03:11,490 --> 00:03:16,320 Cameron Blanks: We typically find these opportunities are often divisions of multinational 55 00:03:16,320 --> 00:03:20,400 Cameron Blanks: companies or very large Australian companies, unloved division if you 56 00:03:20,400 --> 00:03:23,639 Cameron Blanks: like. Or public companies that have really lost their way 57 00:03:23,669 --> 00:03:26,399 Cameron Blanks: in the public markets. That tends to be the type of 58 00:03:26,820 --> 00:03:30,960 Cameron Blanks: companies that we're investing behind. There's obviously other private equity 59 00:03:30,960 --> 00:03:35,369 Cameron Blanks: firms and occasionally we do also invest into private companies. 60 00:03:35,369 --> 00:03:40,230 Cameron Blanks: But generally it's public companies and subsidiaries of larger companies 61 00:03:40,230 --> 00:03:41,010 Cameron Blanks: that we're targeting. 62 00:03:41,550 --> 00:03:44,070 Sean Aylmer: So, give us a couple of examples over the last 63 00:03:44,070 --> 00:03:47,460 Sean Aylmer: decade or so that PEP have gotten into. 64 00:03:47,880 --> 00:03:51,870 Cameron Blanks: Yeah. So look, the easiest one to explain is Peter's 65 00:03:51,870 --> 00:03:55,380 Cameron Blanks: Ice Cream. So this was a company that everybody's familiar 66 00:03:55,380 --> 00:03:58,680 Cameron Blanks: with the makers of drumsticks and connoisseur and the like. 67 00:03:58,680 --> 00:04:04,229 Cameron Blanks: It's a duopoly market structure with streets and Peter's was 68 00:04:04,230 --> 00:04:09,900 Cameron Blanks: owned before we acquired it by Nestlé. It's $100 billion food conglomerate 69 00:04:09,960 --> 00:04:12,810 Cameron Blanks: out of Switzerland. That's a pretty well- known name to 70 00:04:12,840 --> 00:04:17,910 Cameron Blanks: most people. Essentially it's a chocolate and coffee company, is 71 00:04:17,910 --> 00:04:21,299 Cameron Blanks: Nestlé. And this was the only ice cream division that 72 00:04:21,300 --> 00:04:25,289 Cameron Blanks: they had around the world. Very good business, good strong 73 00:04:25,710 --> 00:04:29,699 Cameron Blanks: market leadership position in its categories. But was really lost 74 00:04:29,699 --> 00:04:33,060 Cameron Blanks: within the Nestlé system. So, there's a great example of 75 00:04:33,060 --> 00:04:35,880 Cameron Blanks: a corporate carve out where we're able to come in, 76 00:04:36,210 --> 00:04:39,540 Cameron Blanks: separate it from the parent, give it its own management 77 00:04:39,540 --> 00:04:43,500 Cameron Blanks: team, its own focus, its own capital structure, and really 78 00:04:43,500 --> 00:04:46,529 Cameron Blanks: drive that business in a way where we more than 79 00:04:46,529 --> 00:04:49,560 Cameron Blanks: doubled the profits over a two or three year period 80 00:04:49,920 --> 00:04:54,060 Cameron Blanks: and then sold the business to a global consolidator of ice 81 00:04:54,060 --> 00:04:56,760 Cameron Blanks: cream companies around the world. So that's a great example 82 00:04:57,089 --> 00:05:00,779 Cameron Blanks: of the type of investments we make and one that's very 83 00:05:00,779 --> 00:05:02,279 Cameron Blanks: relatable, given it's ice cream. 84 00:05:03,059 --> 00:05:05,039 Sean Aylmer: Stay with me Cameron. We'll be back in a minute. 85 00:05:12,149 --> 00:05:16,319 Sean Aylmer: My guest today is Cameron Blanks, managing director of Pacific Equity Partners. 86 00:05:17,520 --> 00:05:19,740 Sean Aylmer: Okay, for many people when they think about investing, they 87 00:05:19,740 --> 00:05:22,318 Sean Aylmer: think equities which trade on the ISX and they think 88 00:05:22,320 --> 00:05:27,029 Sean Aylmer: about bonds. We're talking about private markets here, which increasingly 89 00:05:27,029 --> 00:05:30,990 Sean Aylmer: are opening up to more and more investors. Before we 90 00:05:30,990 --> 00:05:34,050 Sean Aylmer: talk about how that's happening and what you are doing, 91 00:05:34,320 --> 00:05:36,809 Sean Aylmer: what is it about, in this case, private equity as 92 00:05:36,809 --> 00:05:39,750 Sean Aylmer: an asset class? What are the benefits of that to 93 00:05:39,750 --> 00:05:44,099 Sean Aylmer: an investor who is looking not necessarily at a one 94 00:05:44,100 --> 00:05:46,289 Sean Aylmer: or two year time horizon, but a three, five, 10 95 00:05:46,290 --> 00:05:49,289 Sean Aylmer: year time horizon? Why get interested in private equity? 96 00:05:49,740 --> 00:05:53,669 Cameron Blanks: Well, firstly, the private markets have outperformed the public markets 97 00:05:53,670 --> 00:05:58,859 Cameron Blanks: by a considerable margin for a very long of time. Why 98 00:05:58,859 --> 00:06:01,799 Cameron Blanks: is that? It's because we believe it's because of a 99 00:06:01,800 --> 00:06:05,789 Cameron Blanks: superior governance model. In the private equity environment it's a 100 00:06:05,790 --> 00:06:10,650 Cameron Blanks: real partnership between the management teams of those companies and 101 00:06:10,950 --> 00:06:14,880 Cameron Blanks: the shareholders or the private equity firm. There's no large boards. 102 00:06:14,940 --> 00:06:19,650 Cameron Blanks: It's typically a real partnership with management. So you've got 103 00:06:19,650 --> 00:06:24,719 Cameron Blanks: that connectivity between shareholder and management in a much closer 104 00:06:24,720 --> 00:06:29,460 Cameron Blanks: targeted manner that is able to go ahead and execute 105 00:06:29,460 --> 00:06:33,599 Cameron Blanks: a strategy rather than thinking about quarterly and six monthly 106 00:06:33,599 --> 00:06:38,430 Cameron Blanks: reporting in a public markets environment. So that's what we 107 00:06:38,430 --> 00:06:43,409 Cameron Blanks: put the superior performance of private markets down when compared 108 00:06:43,410 --> 00:06:46,349 Cameron Blanks: to the public markets. That focus and ability to go 109 00:06:46,349 --> 00:06:49,320 Cameron Blanks: and execute a strategy in a private environment. 110 00:06:50,190 --> 00:06:52,500 Sean Aylmer: It's always been a big end of town product, private 111 00:06:52,500 --> 00:06:55,469 Sean Aylmer: equity. But you basically, you've got a new offering out 112 00:06:55,560 --> 00:06:59,910 Sean Aylmer: bringing it to more wholesale investors. What is the product 113 00:06:59,910 --> 00:07:03,299 Sean Aylmer: and who are you targeting? Who are the investors that can 114 00:07:03,300 --> 00:07:07,019 Sean Aylmer: suddenly get involved in PEP, whereas previously they may not 115 00:07:07,020 --> 00:07:07,740 Sean Aylmer: have been able to? 116 00:07:08,580 --> 00:07:11,039 Cameron Blanks: Yeah, so probably before we go into our product, maybe 117 00:07:11,039 --> 00:07:15,030 Cameron Blanks: to explain why it's been such a difficult sector for 118 00:07:15,090 --> 00:07:19,020 Cameron Blanks: individual investors to access. If you think about the origins 119 00:07:19,020 --> 00:07:22,770 Cameron Blanks: of private equity, it was really an institutional product that 120 00:07:22,770 --> 00:07:27,929 Cameron Blanks: was designed for large institutions to provide backing to private 121 00:07:27,929 --> 00:07:33,090 Cameron Blanks: equity firms to seek out opportunities and execute those over 122 00:07:33,090 --> 00:07:36,960 Cameron Blanks: a 10- year period. So in the private equity world, 123 00:07:37,410 --> 00:07:40,170 Cameron Blanks: you end up with these call structures if you like. 124 00:07:40,559 --> 00:07:44,280 Cameron Blanks: They're called where institutional investors are committing money to a 125 00:07:44,280 --> 00:07:47,310 Cameron Blanks: private equity firm and that private equity firm draws down 126 00:07:47,549 --> 00:07:50,280 Cameron Blanks: on that money over a four or five year period 127 00:07:50,880 --> 00:07:54,510 Cameron Blanks: as it finds deals or companies to buy. And then 128 00:07:54,510 --> 00:07:57,480 Cameron Blanks: returning that money over another four or five year period, 129 00:07:57,840 --> 00:08:00,929 Cameron Blanks: there's no liquidity during that time and the minimums are 130 00:08:00,929 --> 00:08:04,290 Cameron Blanks: very high. So it's never really been a very accessible 131 00:08:04,770 --> 00:08:08,160 Cameron Blanks: product to individual investors. So, the way that we've actually 132 00:08:08,160 --> 00:08:12,750 Cameron Blanks: solved that problem is through the PEP Gateway program. And 133 00:08:12,750 --> 00:08:16,290 Cameron Blanks: what this program does is its put an all- star 134 00:08:16,320 --> 00:08:20,639 Cameron Blanks: set of great private equity products into an Australian management 135 00:08:20,700 --> 00:08:24,149 Cameron Blanks: investment trust, where investors can come in and out the 136 00:08:24,180 --> 00:08:28,320 Cameron Blanks: fund on a monthly basis. And we do that by 137 00:08:29,010 --> 00:08:32,099 Cameron Blanks: establishing a clear unit price at the end of each 138 00:08:32,099 --> 00:08:35,790 Cameron Blanks: month to enable investors to come in and out. We're 139 00:08:35,790 --> 00:08:41,130 Cameron Blanks: then using our networks to invest in the best opportunities 140 00:08:41,219 --> 00:08:46,620 Cameron Blanks: on a global basis, next to managers, like ourselves in 141 00:08:46,620 --> 00:08:50,790 Cameron Blanks: the Australian market, but sitting in North America and Europe 142 00:08:50,880 --> 00:08:55,050 Cameron Blanks: that we know through being in private equity industry for 143 00:08:55,830 --> 00:08:59,010 Cameron Blanks: 26 years. We know the principles of those firms and we're 144 00:08:59,010 --> 00:09:03,360 Cameron Blanks: investing alongside of them into their star trophy assets. 145 00:09:04,380 --> 00:09:07,920 Sean Aylmer: Okay, so if I'm an investor and I'm interested in the 146 00:09:08,370 --> 00:09:13,679 Sean Aylmer: PEP Gateway product and it's unit pricing's every month, I 147 00:09:13,679 --> 00:09:17,728 Sean Aylmer: know what it's worth. What investors are you trying... You're 148 00:09:17,730 --> 00:09:21,780 Sean Aylmer: not looking for traders, obviously. What investors are you looking 149 00:09:21,780 --> 00:09:23,189 Sean Aylmer: for, for this product? 150 00:09:23,850 --> 00:09:28,529 Cameron Blanks: Yeah, so look, it's available to wholesale investors. People can go to 151 00:09:28,710 --> 00:09:35,399 Cameron Blanks: our website and get some more details at pepgateway.com.au. And 152 00:09:35,400 --> 00:09:39,390 Cameron Blanks: really it's about investors who want to have access to 153 00:09:39,390 --> 00:09:43,500 Cameron Blanks: the best in private equity globally, in a format that 154 00:09:43,500 --> 00:09:48,300 Cameron Blanks: means that if their life circumstances change, it's a minimum 155 00:09:48,300 --> 00:09:52,679 Cameron Blanks: entry price of only $50, 000. And if their life circumstance 156 00:09:52,679 --> 00:09:56,610 Cameron Blanks: change over a period of time, they can withdraw that money 157 00:09:56,670 --> 00:10:00,208 Cameron Blanks: and take the real- life benefits during the period that they've been invested. 158 00:10:00,870 --> 00:10:04,319 Cameron Blanks: So it really is a great product for most wholesale 159 00:10:04,320 --> 00:10:09,270 Cameron Blanks: investors to really broaden their exposure outside of the traditional 160 00:10:09,270 --> 00:10:12,958 Cameron Blanks: property or shares or term deposits is a great way 161 00:10:12,960 --> 00:10:16,679 Cameron Blanks: to diversify access to the private markets. 162 00:10:18,630 --> 00:10:21,059 Sean Aylmer: Do you have many competitors in this space in Australia? 163 00:10:21,570 --> 00:10:23,940 Sean Aylmer: I don't know of many off the top of my head. 164 00:10:24,090 --> 00:10:27,929 Cameron Blanks: No. It's a reasonably unique offering, the way that we 165 00:10:27,929 --> 00:10:31,828 Cameron Blanks: do this. There are a few other products on the 166 00:10:31,830 --> 00:10:33,960 Cameron Blanks: market that have been around for a little while, but 167 00:10:33,960 --> 00:10:37,500 Cameron Blanks: they tend to be more fund- of- fund type products 168 00:10:37,500 --> 00:10:40,978 Cameron Blanks: where this is really targeted around all- star assets. And 169 00:10:40,980 --> 00:10:45,270 Cameron Blanks: again, most of those other products are actually managed in 170 00:10:45,270 --> 00:10:47,879 Cameron Blanks: New York or London. So we're really one of the 171 00:10:47,879 --> 00:10:51,990 Cameron Blanks: only local firms that have the scale history and expertise 172 00:10:51,990 --> 00:10:54,900 Cameron Blanks: to deliver this total product to Australian investors. 173 00:10:55,470 --> 00:10:57,000 Sean Aylmer: Well, good luck with it, Cameron, and thank you for 174 00:10:57,000 --> 00:10:58,139 Sean Aylmer: talking to Fear & Greed. 175 00:10:58,590 --> 00:10:59,730 Cameron Blanks: Thank you very much, Sean. 176 00:11:00,120 --> 00:11:03,179 Sean Aylmer: That was Cameron Blanks, managing Director of Pacific Equity Partners, 177 00:11:03,179 --> 00:11:05,789 Sean Aylmer: a great supporter of this podcast. This is the Fear & 178 00:11:05,789 --> 00:11:08,880 Sean Aylmer: Greed Business Interview. Remember, this is general information only and 179 00:11:08,880 --> 00:11:11,850 Sean Aylmer: you should always seek professional advice before making investment decisions. 180 00:11:12,179 --> 00:11:14,250 Sean Aylmer: Join us every morning for the full episode of Fear & 181 00:11:14,250 --> 00:11:16,619 Sean Aylmer: Greed, daily business news for people who make their own 182 00:11:16,620 --> 00:11:19,200 Sean Aylmer: decisions. I'm Sean Aylmer, enjoy your day.