1 00:00:05,840 --> 00:00:08,559 Sean Aylmer: Welcome to the Fear and Greed business Interview. I'm sean ailmer. 2 00:00:08,720 --> 00:00:12,560 Sean Aylmer: Private equity is a growing part of the global investment landscape, 3 00:00:12,640 --> 00:00:16,079 Sean Aylmer: offering access to companies not listed on public markets, but 4 00:00:16,400 --> 00:00:19,320 Sean Aylmer: selecting the right partners is a key challenge for investors. 5 00:00:19,360 --> 00:00:22,080 Sean Aylmer: Remember the information and this episode is general in nature 6 00:00:22,120 --> 00:00:25,759 Sean Aylmer: and doesn't take into account your own circumstances. Obsidian Capital 7 00:00:25,840 --> 00:00:29,320 Sean Aylmer: is an Italian investment firm that focuses on private markets, 8 00:00:29,360 --> 00:00:32,440 Sean Aylmer: working with a range of fund managers across different geographies 9 00:00:32,479 --> 00:00:37,440 Sean Aylmer: and sectors including technology, healthcare and business services. Daniele Mellana 10 00:00:37,600 --> 00:00:40,640 Sean Aylmer: is a partner at Obsidian Capital, which is working with 11 00:00:40,720 --> 00:00:43,760 Sean Aylmer: Sale Capital. A great supporter of this podcast, he joins 12 00:00:43,800 --> 00:00:46,840 Sean Aylmer: me now from Italy. Daniella, Welcome to Fear and Greed. 13 00:00:47,360 --> 00:00:49,160 Daniele Mellana: Hello there, thanks for having me here. 14 00:00:49,640 --> 00:00:53,240 Sean Aylmer: Now, can you give us a quick overview of Obsidian Capital, 15 00:00:53,280 --> 00:00:56,560 Sean Aylmer: what you do, where you invest, how you position yourself 16 00:00:56,600 --> 00:00:58,200 Sean Aylmer: in the private equity landscape. 17 00:00:58,440 --> 00:01:01,800 Daniele Mellana: Of course, so, Obsidian Capital was the funded seven years 18 00:01:01,800 --> 00:01:05,800 Daniele Mellana: ago and it's a regulated alternative asset management company focusing 19 00:01:05,880 --> 00:01:11,839 Daniele Mellana: only on international private markets. The private equity selection capabilities 20 00:01:12,240 --> 00:01:15,640 Daniele Mellana: come from the two funders experience in a private holding company, 21 00:01:15,680 --> 00:01:19,040 Daniele Mellana: down here in Italy where for twenty years they invested 22 00:01:19,240 --> 00:01:23,200 Daniele Mellana: in private technicy funds. But in twenty seventeen they decided 23 00:01:23,240 --> 00:01:26,880 Daniele Mellana: to bring these expertise to the market by launching the 24 00:01:26,920 --> 00:01:31,480 Daniele Mellana: asset management business started raising money from family offices, high 25 00:01:31,520 --> 00:01:36,479 Daniele Mellana: netural individuals and institutional clients. And as you mentioned, we 26 00:01:36,560 --> 00:01:40,640 Daniele Mellana: operate in a business that is about not listed company 27 00:01:41,560 --> 00:01:46,000 Daniele Mellana: companies where access to information is limited and Bloomberg Termina 28 00:01:46,040 --> 00:01:49,720 Daniele Mellana: basically doesn't exist. So there are some databases, but the 29 00:01:49,840 --> 00:01:52,960 Daniele Mellana: information is far off from being complete, so you need 30 00:01:53,080 --> 00:01:56,920 Daniele Mellana: really to rely on your own research. And it's still 31 00:01:56,960 --> 00:02:00,520 Daniele Mellana: a business, it's still a people business. You need to 32 00:02:00,560 --> 00:02:03,600 Daniele Mellana: have good relations with all of the managers you invest with, 33 00:02:03,680 --> 00:02:06,240 Daniele Mellana: and this need to be built over time. 34 00:02:06,880 --> 00:02:11,280 Sean Aylmer: And so do you invest with managers, pay managers or 35 00:02:11,360 --> 00:02:14,040 Sean Aylmer: do you do the investing yourselves? 36 00:02:14,600 --> 00:02:18,560 Daniele Mellana: Now, what we do We construct a private equity fundle 37 00:02:18,600 --> 00:02:21,919 Daniele Mellana: fund portfolios. Right, so it means that we are manager 38 00:02:22,040 --> 00:02:26,640 Daniele Mellana: selectors and portfolio constructors so to say. 39 00:02:26,720 --> 00:02:29,839 Sean Aylmer: Right, so how do you pick those managers? Yeah? 40 00:02:29,880 --> 00:02:34,560 Daniele Mellana: We we of course follow some criteria I might mention some. 41 00:02:34,880 --> 00:02:39,840 Daniele Mellana: So first we are middle market investor and this means 42 00:02:39,840 --> 00:02:43,440 Daniele Mellana: that we want to be invested with middle market managers. 43 00:02:43,440 --> 00:02:45,960 Daniele Mellana: This is a pretty broad definition. It changes from geography 44 00:02:46,040 --> 00:02:50,520 Daniele Mellana: to geography, but usually is companies with revenues in the 45 00:02:50,600 --> 00:02:54,799 Daniele Mellana: range between fifty and one billion US dollars. And we think, 46 00:02:55,120 --> 00:02:58,079 Daniele Mellana: we really think this is the sweet spot for investing 47 00:02:58,120 --> 00:03:02,280 Daniele Mellana: in private equity because our companies usually with high grow potential, 48 00:03:03,080 --> 00:03:08,959 Daniele Mellana: more motivate than main management, and where opportunities in value 49 00:03:08,960 --> 00:03:14,760 Daniele Mellana: creation are much higher thanks especially to improvement in efficiencies, 50 00:03:15,040 --> 00:03:18,560 Daniele Mellana: and usually the hand on approach is much more visible 51 00:03:19,040 --> 00:03:20,760 Daniele Mellana: than in larger deals. 52 00:03:21,280 --> 00:03:25,520 Sean Aylmer: Okay. And so when that comes bringing back to our angiographies, 53 00:03:25,600 --> 00:03:30,000 Sean Aylmer: are the region Asia, Australia, New Zealand? Are there many 54 00:03:30,040 --> 00:03:33,600 Sean Aylmer: opportunities in our regions fifty to one hundred billion US? 55 00:03:33,720 --> 00:03:36,920 Sean Aylmer: It's still a sizeable amount of money? Are there many 56 00:03:36,960 --> 00:03:38,360 Sean Aylmer: opportunities in this region? 57 00:03:38,680 --> 00:03:41,240 Daniele Mellana: Of course, there are many many opportunities. Also you need 58 00:03:41,320 --> 00:03:45,560 Daniele Mellana: to factor in the Today the APAC region is basically 59 00:03:45,680 --> 00:03:50,760 Daniele Mellana: the second market for private equity in terms of deals, 60 00:03:51,080 --> 00:03:55,880 Daniele Mellana: average ticket size and number of operators. I think today 61 00:03:56,360 --> 00:04:00,320 Daniele Mellana: is a pack regions of private equity ties. It is 62 00:04:00,320 --> 00:04:05,160 Daniele Mellana: basically as twice as Europa and half of the activity 63 00:04:05,160 --> 00:04:06,280 Daniele Mellana: in North America. 64 00:04:06,400 --> 00:04:10,760 Sean Aylmer: Okay, and hence Obsidian Capital's interest in the region because, 65 00:04:10,800 --> 00:04:13,680 Sean Aylmer: to be honest on our show, we haven't done many 66 00:04:13,680 --> 00:04:18,520 Sean Aylmer: interviews with Italian fund managers to be perfectly honest, Daniella. 67 00:04:18,640 --> 00:04:20,920 Sean Aylmer: And so it is interesting that you're in this region. 68 00:04:22,600 --> 00:04:29,000 Sean Aylmer: What role does sector or geography expertise in sector expertise 69 00:04:29,000 --> 00:04:32,120 Sean Aylmer: in geography play when you're looking for a manager. So 70 00:04:32,360 --> 00:04:35,480 Sean Aylmer: I'm sort of still exploring this idea that you're investing 71 00:04:35,520 --> 00:04:38,760 Sean Aylmer: in this region. How much is it that you need 72 00:04:38,800 --> 00:04:41,039 Sean Aylmer: people on the ground here who know what they're doing. 73 00:04:41,680 --> 00:04:44,640 Daniele Mellana: Yes, of course that's really key to have people on 74 00:04:44,680 --> 00:04:47,640 Daniele Mellana: the ground. So of course, as you mentioned, we are 75 00:04:47,760 --> 00:04:51,919 Daniele Mellana: an Italian manager and fund selectors, and that means that 76 00:04:52,160 --> 00:04:55,200 Daniele Mellana: we travel a lot. But we want to be invested 77 00:04:55,279 --> 00:04:58,720 Daniele Mellana: with managers that are deep roots in the places where 78 00:04:58,839 --> 00:05:03,000 Daniele Mellana: where they invest, and so basically we really rely on 79 00:05:03,080 --> 00:05:06,760 Daniele Mellana: our own research. That means that we really travel like crazy, 80 00:05:07,040 --> 00:05:11,480 Daniele Mellana: so to say, and we really want to meet the managers. 81 00:05:11,600 --> 00:05:14,200 Daniele Mellana: So as part of our dutiligions, of course, we want 82 00:05:14,240 --> 00:05:17,479 Daniele Mellana: to meet the people we give money to locally. We 83 00:05:17,560 --> 00:05:21,520 Daniele Mellana: want to visit the headquarters, discuss their strategy, their truck record, 84 00:05:22,200 --> 00:05:27,360 Daniele Mellana: their people background, and so we really have a pretty discipline, 85 00:05:27,440 --> 00:05:29,159 Daniele Mellana: the due diligence process in place. 86 00:05:29,560 --> 00:05:31,920 Sean Aylmer: Stay with me, Daniele, and we'll be back in a minute. 87 00:05:38,520 --> 00:05:43,360 Sean Aylmer: My guest this morning is Danielle Mellana from Obsidian Capital. Okay, 88 00:05:43,400 --> 00:05:46,200 Sean Aylmer: so they're the source of managers you're looking for. Before 89 00:05:46,200 --> 00:05:48,040 Sean Aylmer: the break, we discussed that what are the sorts of 90 00:05:48,200 --> 00:05:51,800 Sean Aylmer: investments that you're seeing here? And I've got a pack 91 00:05:51,880 --> 00:05:54,720 Sean Aylmer: here in front of me, and you talk about a supercycle, 92 00:05:54,760 --> 00:05:59,200 Sean Aylmer: particularly around technology and investment trends. What other sources of 93 00:05:59,200 --> 00:06:04,560 Sean Aylmer: the areas that you saying opportunities in the private market 94 00:06:04,680 --> 00:06:06,400 Sean Aylmer: as opposed to public markets. 95 00:06:07,240 --> 00:06:12,120 Daniele Mellana: Yeah, of course, I mean the unlisted markets are less 96 00:06:12,440 --> 00:06:16,160 Daniele Mellana: drugged by what's called the betech fact, right, they are 97 00:06:16,320 --> 00:06:20,960 Daniele Mellana: much more decorrelated. And if you consider the life cycle 98 00:06:21,040 --> 00:06:24,159 Daniele Mellana: of one private tech with fund is usually ten years. 99 00:06:24,320 --> 00:06:26,599 Daniele Mellana: So of course we need to start with a kind 100 00:06:26,600 --> 00:06:30,440 Daniele Mellana: of top down approach and see what the trends are. 101 00:06:30,720 --> 00:06:34,920 Daniele Mellana: This is why, for instance, in all of our vintages 102 00:06:35,279 --> 00:06:39,200 Daniele Mellana: investing in international private equity, we want to be exposed 103 00:06:39,240 --> 00:06:43,159 Daniele Mellana: to Asia and the ATPARC region because we really really 104 00:06:43,160 --> 00:06:47,120 Daniele Mellana: see these secular growth trend even though of course there 105 00:06:47,120 --> 00:06:50,720 Daniele Mellana: can be piccups like it's happened with China. So now 106 00:06:50,720 --> 00:06:56,000 Daniele Mellana: we are now launching our new app strategy and probably 107 00:06:56,320 --> 00:06:58,560 Daniele Mellana: China would be ruled out at the beginning, but of 108 00:06:58,600 --> 00:07:01,680 Daniele Mellana: course then we have four years to invest and then 109 00:07:02,000 --> 00:07:05,440 Daniele Mellana: we can maybe reconsider it, and we want to focus 110 00:07:05,480 --> 00:07:08,520 Daniele Mellana: more on some of our geographies in Asia at the moment, 111 00:07:09,040 --> 00:07:13,080 Daniele Mellana: India and Japan first. But also in terms of sectors, 112 00:07:13,360 --> 00:07:17,280 Daniele Mellana: we are pretty sector agnostic, so we but but of 113 00:07:17,280 --> 00:07:20,480 Daniele Mellana: course we want to be invested again in secular trends. 114 00:07:20,600 --> 00:07:25,360 Daniele Mellana: Then business service technology represent a pretty large part of 115 00:07:25,400 --> 00:07:30,640 Daniele Mellana: our portfolio, whereas we tend to exclude some others like 116 00:07:30,840 --> 00:07:34,640 Daniele Mellana: you know, real estates, metals and mining. So we represent 117 00:07:34,720 --> 00:07:38,080 Daniele Mellana: a kind of good diversification factor for our Australian investor. 118 00:07:38,400 --> 00:07:41,840 Daniele Mellana: As you know, a large part of the portfolio is 119 00:07:41,880 --> 00:07:45,720 Daniele Mellana: exactly in this segment. And also of course we apply 120 00:07:45,880 --> 00:07:49,760 Daniele Mellana: some ESG filters and then there are some other sectors 121 00:07:49,800 --> 00:07:53,240 Daniele Mellana: like oil and gas and energy and tobacco and alcohol 122 00:07:53,280 --> 00:07:54,880 Daniele Mellana: that are excluded for the portfolios. 123 00:07:55,440 --> 00:07:58,880 Sean Aylmer: Okay, properly in metals and mining, why is it that 124 00:07:58,960 --> 00:08:04,720 Sean Aylmer: you favored towards those sorts of sectors at the moment. 125 00:08:05,080 --> 00:08:08,360 Daniele Mellana: Now that there is no prejudice in it, is the 126 00:08:08,400 --> 00:08:11,920 Daniele Mellana: fact that it's usually in the metals and mining sector. 127 00:08:12,360 --> 00:08:15,640 Daniele Mellana: A lot of big deals are happening and those are 128 00:08:15,800 --> 00:08:19,520 Daniele Mellana: not to be included in the middle market range that 129 00:08:19,600 --> 00:08:20,720 Daniele Mellana: we mentioned before. 130 00:08:21,320 --> 00:08:22,000 Sean Aylmer: Okay, but of. 131 00:08:21,960 --> 00:08:24,520 Daniele Mellana: Course there is a kind of in the grade to 132 00:08:24,600 --> 00:08:28,480 Daniele Mellana: play those sectors because we do also have some Australian 133 00:08:28,520 --> 00:08:32,000 Daniele Mellana: managers in portfolio in our previous vintages. And of course 134 00:08:32,040 --> 00:08:35,559 Daniele Mellana: maybe you want to be investing with managers that are 135 00:08:36,600 --> 00:08:41,520 Daniele Mellana: focusing on sectors like business service to metals and mining sector. 136 00:08:41,760 --> 00:08:45,200 Daniele Mellana: So it's kind of way to indirectly play this theme 137 00:08:45,200 --> 00:08:45,880 Daniele Mellana: in portfolio. 138 00:08:46,400 --> 00:08:49,839 Sean Aylmer: And what about the technology you mentioned as an area 139 00:08:49,840 --> 00:08:52,400 Sean Aylmer: that you're interested in looking at? But technology is a 140 00:08:53,000 --> 00:08:56,800 Sean Aylmer: small word covering a lot of areas. Is it more 141 00:08:56,840 --> 00:09:00,880 Sean Aylmer: around II and virtual reality slash augmented reality? Are they 142 00:09:00,960 --> 00:09:03,920 Sean Aylmer: the sours areas that you're seeing opportunities at the moment? 143 00:09:05,160 --> 00:09:08,520 Daniele Mellana: Yeah, of course AI is a big, big theme. I 144 00:09:08,559 --> 00:09:12,400 Daniele Mellana: mean it's on every everyone's mouth at the moment, and 145 00:09:12,440 --> 00:09:15,200 Daniele Mellana: of course we don't want to miss out, so of 146 00:09:15,240 --> 00:09:18,280 Daniele Mellana: course we invest in that segment with manager. But we've 147 00:09:18,280 --> 00:09:22,720 Daniele Mellana: all been managers that are kind of investing in companies 148 00:09:23,040 --> 00:09:28,079 Daniele Mellana: servicing the AI. So because now the largest investors are 149 00:09:28,080 --> 00:09:31,760 Daniele Mellana: made by the usual suspects that we can find on 150 00:09:31,800 --> 00:09:34,760 Daniele Mellana: the list and markets, but of course also indirectly, we 151 00:09:34,840 --> 00:09:39,520 Daniele Mellana: want to directly and directly play data theme via business 152 00:09:39,559 --> 00:09:45,840 Daniele Mellana: services or for instance data centers and and all of 153 00:09:45,880 --> 00:09:49,520 Daniele Mellana: what can be called the complementary business to the AI. 154 00:09:50,240 --> 00:09:55,520 Sean Aylmer: Okay, finally, before we leave, what are the trends you're 155 00:09:55,559 --> 00:09:58,120 Sean Aylmer: seeing in the private equity sector at the moment? 156 00:09:58,200 --> 00:10:00,360 Daniele Mellana: So we have heard a lot about it, and it 157 00:10:00,440 --> 00:10:04,240 Daniele Mellana: ebbs and flows at times, but it just seems in 158 00:10:04,240 --> 00:10:09,480 Daniele Mellana: Australia at the moment, investors are looking for non publicly 159 00:10:09,559 --> 00:10:13,200 Daniele Mellana: listed assets more and more, and part of that's because 160 00:10:13,200 --> 00:10:16,200 Daniele Mellana: Australia has this massive amount of superannuation or retirement savings 161 00:10:16,320 --> 00:10:19,440 Daniele Mellana: which we are trying to place, and it just seems 162 00:10:19,480 --> 00:10:24,120 Daniele Mellana: that non listed assets are very popular at the moment. 163 00:10:24,200 --> 00:10:27,280 Sean Aylmer: You think that'll continue, of course, I mean the portion 164 00:10:27,360 --> 00:10:32,640 Sean Aylmer: of private equity investments in the in portfolio is growing 165 00:10:32,800 --> 00:10:34,760 Sean Aylmer: massively year after year. 166 00:10:34,920 --> 00:10:37,600 Daniele Mellana: I mean, of course, if you take a US endowment, 167 00:10:37,679 --> 00:10:40,800 Daniele Mellana: already sixty percent of the portfolio is invested in such 168 00:10:40,800 --> 00:10:43,480 Daniele Mellana: a sets. But for instance, if I talk about my 169 00:10:43,559 --> 00:10:48,520 Daniele Mellana: own country, that's less than probably six percent, including real 170 00:10:48,640 --> 00:10:53,520 Daniele Mellana: estate but this trend is really changing. As said, we 171 00:10:53,640 --> 00:10:58,360 Daniele Mellana: are sect or agnostic, but of course we are seeing 172 00:10:58,400 --> 00:11:00,880 Daniele Mellana: some clear trends. But you can also get it from 173 00:11:01,080 --> 00:11:06,560 Daniele Mellana: from newspaper headlines that the globalization is not over but 174 00:11:06,920 --> 00:11:09,800 Daniele Mellana: is decreasing. And so what you want to do, of course, 175 00:11:09,800 --> 00:11:12,760 Daniele Mellana: you want to be invested in local businesses that are 176 00:11:12,800 --> 00:11:16,240 Daniele Mellana: not really exposed to what's happening at the moment. So 177 00:11:16,600 --> 00:11:20,760 Daniele Mellana: we we create this fundel at the very beginning with 178 00:11:20,960 --> 00:11:24,520 Daniele Mellana: our un array of opportunities, and then of course little 179 00:11:24,559 --> 00:11:29,280 Daniele Mellana: by little we filter out and we remain with the managers, 180 00:11:29,320 --> 00:11:33,160 Daniele Mellana: strategies and sectors we want to be having in portfolio 181 00:11:33,200 --> 00:11:34,679 Daniele Mellana: for the next ten years. 182 00:11:34,720 --> 00:11:37,360 Sean Aylmer: Fantastic Daniele, thank you very much for talking to Fear 183 00:11:37,400 --> 00:11:37,880 Sean Aylmer: and Greed. 184 00:11:37,960 --> 00:11:38,800 Daniele Mellana: Thank you very much. 185 00:11:39,040 --> 00:11:42,760 Sean Aylmer: That was Daniele Mellana, partner at Obsidian Capital, which is 186 00:11:42,800 --> 00:11:45,800 Sean Aylmer: working with side Or Capitals, great supporter of this podcast. 187 00:11:46,000 --> 00:11:48,840 Sean Aylmer: Remember information this podcast is general in nature and you 188 00:11:48,840 --> 00:11:51,280 Sean Aylmer: should get professional advice and make sure a product is 189 00:11:51,360 --> 00:11:53,920 Sean Aylmer: right for you before proceeding. This is the Fear and 190 00:11:53,960 --> 00:11:56,480 Sean Aylmer: Grade Business Interview. Join us every morning for the full 191 00:11:56,520 --> 00:11:59,400 Sean Aylmer: episode of Fear and Grade. The daily business news the people, 192 00:11:59,760 --> 00:12:08,800 Sean Aylmer: make your own decisions I'm Sean Aylmer. Enjoy your day.