Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
Speaker 2: This week on the podcast, yet another extra special guest,
Speaker 2: Is There any Other Kind? Sanana Sinha is the global
Speaker 2: head of Private Capital Advisory Group for Raymond James. The
Speaker 2: Raymond James platform manages one point six trillion dollars in
Speaker 2: total assets and advises on a whole lot more. Sanana
Speaker 2: had stood up her own private capital group, Siebel Capital,
Speaker 2: which was acquired by Raymond James, and she's been there
Speaker 2: for the past three and a half years. She works
Speaker 2: as an advisor for a number of LPs and gps
Speaker 2: and pretty much everybody in between. If you're at all
Speaker 2: interested in the growth in private equity, in private capital
Speaker 2: and how this sector of the investment world is changing
Speaker 2: and where it might go, I think you'll find this
Speaker 2: to be a fascinating conversation. Sanana has a unique perch
Speaker 2: in the world of not only venture and an angel investing,
Speaker 2: but most especially private equity and private capital. I found
Speaker 2: this conversation to be fascinating, and I think you will also.
Speaker 2: With no further ado, my conversation with Raymond James Sanana Sinha.
Speaker 2: Sanana Sinha, Welcome to Bloomberg.
Speaker 3: Thank you very much for having me very well.
Speaker 2: Thank you so much for coming. So I was delving
Speaker 2: through your background, and I had a first ask BS
Speaker 2: in Management science and a master's in engineering and in
Speaker 2: chemical engineering from Stanford where you were a Mayfield Fellow,
Speaker 2: and then an NBA from Harvard. What was the original
Speaker 2: career plan.
Speaker 3: Well, the original career plan very much was to go
Speaker 3: into the biotech industry, which is what I did after
Speaker 3: I graduated from Stanford. Hence the masters and chemical engineering,
Speaker 3: which was an unusual masterress to get after doing the
Speaker 3: undergraduate in industrial engineering which was then relabeled as Management
Speaker 3: Sciences and Engineering at Stanford, but it allowed me to
Speaker 3: go into the healthcare vertical. Straight out of Stanford, I
Speaker 3: worked for two small and medium sized businesses owned by
Speaker 3: the same investor group and cut my teeth on those
Speaker 3: and then realized as a result of that experience, firsually
Speaker 3: was phenomenal experience. I was working directly with the CEO
Speaker 3: and president of both companies, but I realized that the
Speaker 3: biotech vertical was not my playing field for the long term.
Speaker 3: Hence the NBA at Harvard to find another career path,
Speaker 3: and that led me into asset management.
Speaker 2: So the really interesting thing I for reasons between Stanford
Speaker 2: and the fact that you're here via San Francisco. I
Speaker 2: just assumed you were living out there, but you're not.
Speaker 2: You're London based. Tell me how did you end up
Speaker 2: picking Stanford? How did you end up in California?
Speaker 3: You know, I grew up all over the world. They
Speaker 3: call people like me third culture kids. They were born
Speaker 3: in one place. So born in India, grew up in
Speaker 3: many other places and then land up in another place altogether.
Speaker 2: Well, when you say many other places, what I often
Speaker 2: hear is, you know, India to London, to Boston, New York, California.
Speaker 2: You seem to have traveled a little where else. Tell
Speaker 2: me where you grew up.
Speaker 3: So, my dad was a diplomat for the World Bank.
Speaker 3: I grew up in Nigeria, in Legos, in Harari, Zimbabwe,
Speaker 3: and then in Hanoi, Vietnam. I applied to universities from
Speaker 3: colleges in the US and also in the UK. From Hanoi,
Speaker 3: there were no places to take the SAT in Vietnam
Speaker 3: back then, so we flew to Bangkok. My dad flew
Speaker 3: me to BANKOK to take my SAT ones, and then
Speaker 3: we flew back a few weeks later to take the
Speaker 3: SAT twos, and I flew back again to do interviews,
Speaker 3: and I was blessed enough to get into a number
Speaker 3: of great US IVY leagues, but ended up choosing Stanford
Speaker 3: because even then Berry I knew I was an entrepreneur
Speaker 3: at heart. I wanted to build businesses, scale businesses, and
Speaker 3: help other people scale their businesses. And Stanford had that
Speaker 3: rag magic between entrepreneurship and technology and the nexus of
Speaker 3: starting to grow things, which is what I wanted to
Speaker 3: learn most.
Speaker 2: We always pay attention to regions where there is a
Speaker 2: pool of capital, a world class educational institution, and a
Speaker 2: private sector that can combine all three. There's no doubt
Speaker 2: Silicon Valley and Stanford is one of the leading places.
Speaker 2: So if that's what you wanted to do, you certainly picked. Well,
Speaker 2: how did you end up back in London as where
Speaker 2: you wanted to live?
Speaker 3: Yes, So I had the most incredible experience at Stanford.
Speaker 3: Ended up working in the Bay Area straight after that,
Speaker 3: still very close ties to Stanford, was still teaching a
Speaker 3: class there over even after graduation and working with a
Speaker 3: bunch of professors out there at the time. When it
Speaker 3: came to picking where I wanted to do my MBA again,
Speaker 3: I had the choice between the Stanford of the East
Speaker 3: as I call Harvard Business School, but also to go
Speaker 3: back to Stanford, and I knew that if I didn't leave,
Speaker 3: then I may never leave the Barrier. It's such a
Speaker 3: special place and such a special bastion, an ecosystem of
Speaker 3: entrepreneurship and technology and growth and ideas. Made the decision
Speaker 3: to leave just to try something new at that point,
Speaker 3: went to Harvard for my MBA, and then had made
Speaker 3: the choice at that point to switch out of biotech
Speaker 3: and interviewed with a whole bunch of firms and ended
Speaker 3: up getting into the hedge fund world, doing capital raising
Speaker 3: for two large hedge funds, and one of them, Brevan Howard,
Speaker 3: would was headquartered in London. So moved over to London
Speaker 3: back in two thousand and nine, and the rest is history.
Speaker 3: Have been a resident of London. My family would argue
Speaker 3: with you Berry and argue with anybody who asked them
Speaker 3: that I live on a plane, because I managed a
Speaker 3: global business over seven offices, six of which happened to
Speaker 3: be in the US. So I'm Stateside a lot and
Speaker 3: also traveled the rest of Europe, but home very much
Speaker 3: is London to so.
Speaker 2: I want to rewind a little bit. I don't want
Speaker 2: to skip that middle experience. So you were at a
Speaker 2: couple of hedge funds. You were Bridgewater, which is headquartered
Speaker 2: in Greenwich, Connecticut, and you were at Brevin Howard, which
Speaker 2: was which is still headquartered in London. In either of
Speaker 2: those cases, you weren't working as an investor, right you
Speaker 2: were a research and analyst capital raiser. How did those
Speaker 2: experiences at Bridgewater and Brevien Howard affect how you look
Speaker 2: at the world of investing? Clearly two superstar funds that
Speaker 2: have put together a really impressive long term track record.
Speaker 3: Absolutely when it comes to any asset management business, very
Speaker 3: two things important. Make smart investment decisions and have investors
Speaker 3: to back you to do them right. And so I
Speaker 3: knew I had to master in one of those those streams,
Speaker 3: and the stream I picked was I do the capital
Speaker 3: raising too. That enables the asset management industry engine to turn.
Speaker 3: And both Bridgewater and Brevin Howard were incredible training grounds
Speaker 3: to teach you just how to do that, but secondly,
Speaker 3: how to cover investors systematically, and how to think about
Speaker 3: the world in a holistic way and what levers drive
Speaker 3: what others. Both for macro hedge funds as you know,
Speaker 3: and understanding how macro markets work, how they interplay with
Speaker 3: each other is incredibly important. I use that day to
Speaker 3: day when I speak to my private equity clients today.
Speaker 3: I use it all the time when it comes to
Speaker 3: understanding how markets are going to affect different types of investors.
Speaker 3: How does the oil price impact my sovereign wealth fund investors,
Speaker 3: How does what's happening with rates impact endowments and pension plans.
Speaker 3: All of it is incredibly interlinked. And it's that interlinkage
Speaker 3: that macro thinking really teaches.
Speaker 2: You, huh, really intriguing. So it's kind of interesting that
Speaker 2: you're in private equity. You spend time in the world
Speaker 2: of hedge funds, but you also made a number of
Speaker 2: venture investments going back to the early twenty tens. Tell
Speaker 2: us a little bit about how you sort of got
Speaker 2: involved in seed and angel investing, very early stage venture investing.
Speaker 3: You know, we all have to decide what our gifts
Speaker 3: are to offer in the world. What of the gifts
Speaker 3: I have to offer is how do you help businesses growth,
Speaker 3: hack and get to the next level of scale. I
Speaker 3: did that with two businesses early on in the early
Speaker 3: twenty tens, as you say, I bought a business called
Speaker 3: Barkres fitness boutique in the UK doing something new for
Speaker 3: women by women. Grew that over a course of six
Speaker 3: or seven years, very successful business, and sold that to
Speaker 3: a private equity back Strategic. Did that again with a
Speaker 3: business called Mindful Chef, a healthy recipe box business that
Speaker 3: grew like gangbusters, especially over the COVID years, and sold
Speaker 3: that to n Eslay as well. And now I'm chairperson
Speaker 3: of the board of a publicly listed company called SFC Energy.
Speaker 3: They do clean energy fuel cells and being able to
Speaker 3: steer entrepreneurs and enable them to realize their vision and
Speaker 3: think tactically as well as strategically as to how to
Speaker 3: get there to help them do that, That's very much
Speaker 3: something that helps me come alive every single day.
Speaker 2: So let's expand on that. Most people, I would imagine
Speaker 2: think of angel investing very different than private equity investing.
Speaker 2: One is you're betting on a team, You're betting on
Speaker 2: a founder and some innovative new idea where there may
Speaker 2: not even be a market for that sort of thing.
Speaker 2: Yet as opposed to taking existing company and management team
Speaker 2: and product and saying here's how to level up, here's
Speaker 2: how to make this more productive, efficient and really reach
Speaker 2: your potential. What's the overlap or what skills you bring
Speaker 2: from one to the other.
Speaker 3: Well, I think the most important skill I bring is
Speaker 3: the fact that I've started my own business, grown it
Speaker 3: from scratch, and sold it to a fortune three hundred.
Speaker 3: So I've seen all legs of this journey.
Speaker 2: So not just an investor, but an operator.
Speaker 3: An operator, and a grower of her own business. So
Speaker 3: that's the first thing. The second thing is you are
Speaker 3: absolutely right buried. The muscle it takes to grow from
Speaker 3: zero to ten a revenue or zero to ten of
Speaker 3: ibadah is very different from the journey that takes ten
Speaker 3: from ten to one hundred and one hundred to a billion.
Speaker 3: These are different muscles, and these are different levers in
Speaker 3: the business but also levers in mindset. I've done zero
Speaker 3: to ten quite a few times. So in my angel
Speaker 3: investing businesses, it was very much that hey, how do
Speaker 3: we get from zero to ten of ibadah? That takes
Speaker 3: a certain amount of nimbleness, hunger, agility, scrappiness, and I
Speaker 3: love that. Having done that myself, I know what that
Speaker 3: feels like. I can relate to the entrepreneurs. I can
Speaker 3: help them duck and weave through whatever's coming at them.
Speaker 2: I'm sensing the word pivot coming.
Speaker 3: I'm not going to use it because you used it already,
Speaker 3: but you've got to be able to figure out what
Speaker 3: I call the incomings. If life is throwing a lot
Speaker 3: at you, the market throws a lot at you, and
Speaker 3: what are you going to ignore and deflect? And what
Speaker 3: are you going to say? Okay, that's the signal from
Speaker 3: this noise. That's where I double click. That takes a
Speaker 3: pattern recognition that I have. Now that said, over the
Speaker 3: last few years, once I've sold my business to Raymond James,
Speaker 3: I'm doing that second leg of the journey. How do
Speaker 3: you something that's established, growing, proven, and really scale it.
Speaker 3: And that's the same thing I'm doing with the public
Speaker 3: board seat at SFC, helping that management team and that
Speaker 3: board take an existing business of his business is doing,
Speaker 3: you know, close to one hundred and fifteen million dollars
Speaker 3: of revenue, you know, very profitable, growing organically thirty percent
Speaker 3: year and year. How do you take that and scale
Speaker 3: that to the next level? How do you make that
Speaker 3: a billion dollar business? So now I'm trying my hand
Speaker 3: at that second leg of the journey, but that first
Speaker 3: leg of zero to ten that I've done a few
Speaker 3: times over, and I think I've got real value to
Speaker 3: add to entrepreneurs there.
Speaker 2: So let me roll even further back. You launch Seable
Speaker 2: Capital in twenty eleven. What made you decide I'm going
Speaker 2: to throw out a whole new company that's focused on
Speaker 2: was it venture or private equity?
Speaker 3: At the beginning, it was focused both on private equity
Speaker 3: and hedge funds, But within a year and a half
Speaker 3: I retired all our hedge fund business because I could
Speaker 3: see the capital inflows going into the private markets opportunity.
Speaker 3: That was the right call to make. As you think
Speaker 3: about the last decade, the influence into private equity have
Speaker 3: been phenomenal, and we've been a great beneficiary of that,
Speaker 3: of that flaw and that movement. But in the early days,
Speaker 3: what enabled me to start, or what gave me the
Speaker 3: conviction to start, was really the belief that build it
Speaker 3: and they will come, and if they don't come, at
Speaker 3: least you're enjoying the journey for yourself. I knew I
Speaker 3: loved capital raising. I knew I could do that effectively,
Speaker 3: and I could do that for a handful of clients.
Speaker 3: And my goal very much was, let me give this
Speaker 3: a shot, and if it doesn't work, I'll go out
Speaker 3: and get the job again. I was in my early thirties.
Speaker 3: I didn't have a mortgage, I didn't have kids, I
Speaker 3: had very few liabilities. It was a risk, it was
Speaker 3: a calculated one, and I'm very glad I took it
Speaker 3: because it worked out beautifully. But it's not for the
Speaker 3: feint of heart, that's for sure. Being an entrepreneur isn't anyway.
Speaker 3: But being an entrepreneur in an industry like financial services,
Speaker 3: where there's these old and very incumbent eight hundred pound
Speaker 3: gorillas are all around you is certainly.
Speaker 2: Not, to say the very least. You went to Stanford.
Speaker 2: You were an adjunct professor, visiting guest professor.
Speaker 3: I was a guest lecturer with engineering.
Speaker 2: Yes, but you're also on the advisory board for the
Speaker 2: Stanford Institute of Economic Policy and Research. Tell us a
Speaker 2: little bit about what you do there and how that
Speaker 2: ties into your day job.
Speaker 3: As you know, I love macro and I love thinking
Speaker 3: about how policy and macro movements around markets around the
Speaker 3: world really impact what's happening in the ground reality for
Speaker 3: businesses that are run all over the world. The SEEPER,
Speaker 3: as it's called, the Stanford Institute for Economic Policy and Research,
Speaker 3: is an incredible congregation of leading economists, Nobel laureates, policy
Speaker 3: advisors from all walks of life across Stanford around the
Speaker 3: world who joined the Institute to look at the big
Speaker 3: problems facing the world today and think about how do
Speaker 3: you solve them, how do you come at them. It
Speaker 3: could be from looking at how social security reform, or
Speaker 3: look at homelessness in California, or thinking about the age
Speaker 3: issue in Japan. They could look at any number of
Speaker 3: issues globally and parse it using the world's leading experts
Speaker 3: and actually research how to come out at the other
Speaker 3: side of it. Some of the most powerful research that
Speaker 3: I've encountered at sipor being on that board, I'll give
Speaker 3: you one that really astounded me. One of the researchers there,
Speaker 3: Nick Bloom, has done some of the most definitive research
Speaker 3: on flexible working and how it impacts productivity, retention, and
Speaker 3: how it's very much here to stay or should be
Speaker 3: very much flies in the face of how some Wall
Speaker 3: Street banks think about the return to work. Fascinating empirical
Speaker 3: evidence there that he's collected. Another piece of research there
Speaker 3: that I'll quickly mention is work on labor force participation
Speaker 3: by women dipping in the summer months as kids come
Speaker 3: out to school. Interesting on how.
Speaker 2: It's very seasonal, very seasonal.
Speaker 3: What do we do about that that costs the US
Speaker 3: United States GDP growth in the summer months. Fascinating the
Speaker 3: interlinkages between women, our education policy, labor force productivity, and
Speaker 3: again ultimately the growth of the economy.
Speaker 2: So early in the twenty tens, you were doing some
Speaker 2: angel investing. Tell us what you were looking for, either
Speaker 2: in sectors or technologies. What attracted you to the angel space.
Speaker 3: What attracted me to that angel space was that I
Speaker 3: was building my business and had skills in learnings I
Speaker 3: wanted to share. But more importantly, when I looked for
Speaker 3: businesses and entrepreneurs to back, it came down to two
Speaker 3: very important criteria. The first is people, people people. I
Speaker 3: learned that during my Mayfield Fellows Program journey at Stanford
Speaker 3: where that was drilled into us. It starts with the people.
Speaker 3: It ends with the people. And secondly, the companies and
Speaker 3: the products they were building had to do good and
Speaker 3: do well right that they had to have a positive
Speaker 3: impact on the community that they operated in. So if
Speaker 3: you think about the recipe food business that was all
Speaker 3: about healthy eating, the fitness business was all about an
Speaker 3: exercise program that's efficiently designed for women's bodies. You think
Speaker 3: about the clean energy business that I am now a
Speaker 3: chair on the board of that is all about clean
Speaker 3: energy fuel sell alternatives to diesel generators and to polluting
Speaker 3: generator types. So that's kind of the thematic that I
Speaker 3: lean into the most really interesting.
Speaker 2: So you very easily could have either set this up
Speaker 2: as a VC fund or affiliated yourself with a venture group.
Speaker 2: What are the advantages to being an individual making single
Speaker 2: decision investments into a startup?
Speaker 3: I think the biggest advantage is that there's full alignment
Speaker 3: because you're not operating with OPM other people's money. It
Speaker 3: is your money, it's your skin in the game. The
Speaker 3: alignment of interest is one thing that you learn in
Speaker 3: private equity and all private markets investing that it's all
Speaker 3: about alignment of interest. You can't exit these things unless
Speaker 3: you grow value and you're in sync with the founders
Speaker 3: and with the management teams because they're private businesses. So
Speaker 3: you've got to figure out if you have that match
Speaker 3: an alignment of both economic interest but also vision and
Speaker 3: execution forte into the next three to five year journey.
Speaker 3: That's the minimum amount of amount of time you'll be
Speaker 3: together for. So that's why I think doing it as
Speaker 3: an individual always gave me much more reward and also
Speaker 3: quite frankly, economic success than doing it as a fund investor.
Speaker 3: The other thing I'd add is that I found very
Speaker 3: early on that professionally speaking, in terms of my day job, Berry,
Speaker 3: what was I really good at. I was really good
Speaker 3: at the capital markets function. I was really good at
Speaker 3: the capital raising, liquidity organization started side of the business,
Speaker 3: and that's what Sibil Capital did. So I knew that
Speaker 3: was going to be my day to day jam and
Speaker 3: on the board of some of these companies I would
Speaker 3: be able to go and add the value of how
Speaker 3: to grow their business.
Speaker 2: So let's talk a little bit about your day job.
Speaker 2: You set up Seeble Capital in London, right, that's where
Speaker 2: you found it. So before we get into the advisory
Speaker 2: services you provide, I'm a big angli phile. I love London,
Speaker 2: but there's such a difference between how they operate the
Speaker 2: economy and especially the financial sector. Let's talk a little
Speaker 2: bit about that. What's it like being Is it even
Speaker 2: by coastal your ny you know you're nylon producer, Jilan.
Speaker 2: That's right. How different is the UK finance from the US?
Speaker 2: And start the startup mentality? It seems that failure is
Speaker 2: not a dirty word in the US. I don't get
Speaker 2: that same vibe from Europe. Tell us a little bit
Speaker 2: about the differences.
Speaker 3: You're absolutely right, operating in the UK and in Europe
Speaker 3: at large and the US are fundamentally different. Having been
Speaker 3: at Stanford worked in the Bay Area, I then went
Speaker 3: to Harvard and worked in the Boston ecosystem. Came out
Speaker 3: of New York. London was a bit of an adjustment,
Speaker 3: I will tell you that because the startup ecosystem, especially
Speaker 3: in the early twenty tens, there was nowhere near what
Speaker 3: it was in San Francisco and the area.
Speaker 2: And I mean that's a well established mature, if you
Speaker 2: could say, mature startup cragian, but it is in the
Speaker 2: same with Boston and New York one.
Speaker 3: Hundred percent and so starting SABIL Capital in London ended
Speaker 3: up being both a blessing and a curse. Why was
Speaker 3: it blessing? It was a blessing because there was not
Speaker 3: that many startups there period. There was not that many
Speaker 3: new entrepreneurs starting financial services companies, and so it made
Speaker 3: us very unique and able to differentiate ourselves in the
Speaker 3: UK and European market very quickly. There were not that
Speaker 3: many new entrants, and we use that to our advantage
Speaker 3: and often still do. Although the market has definitely come
Speaker 3: a long way, there are still divergences and how uneasey
Speaker 3: of doing business. But it became very clear to me
Speaker 3: Bery very quickly on we would have to diversify our
Speaker 3: business to be US focused, and so we opened our
Speaker 3: first office in New York few years after we started,
Speaker 3: and we've been heavily focused on the US private equity
Speaker 3: clients and US institutional investors. Have done so from day one,
Speaker 3: knowing that actually the US market is much deeper and
Speaker 3: much larger than UK or Europe could ever be. But
Speaker 3: also the speed of doing business varies quite dramatically.
Speaker 2: So we've talked about the startup and angel world, let's
Speaker 2: talk about the advisory work you do for private equity,
Speaker 2: both in London and the US. I keep coming back
Speaker 2: to there seems to be such a difference between how
Speaker 2: companies operate there and how companies operate here. Every now
Speaker 2: and then a European company comes to the US and succeeds,
Speaker 2: but more often than not they have a hard time adjusting.
Speaker 2: And I imagine the same as true vice versa when
Speaker 2: a US company goes to the UK, at least outside
Speaker 2: of finance. Finance seems to have found a foothold in
Speaker 2: Europe from the US. Why the big cultural difference is
Speaker 2: what is it about the psychology there and here that
Speaker 2: creates such a different business and investing environment.
Speaker 3: I think that it depends on what type of investing
Speaker 3: you do. At its heart, private equity is about builo
Speaker 3: sell high right. It's a long only strategy in the
Speaker 3: private markets. So you got to buy a business and
Speaker 3: you've got to know that you have to add value
Speaker 3: and make it larger, better, stronger, and then sell it on.
Speaker 3: So number of the clients we have are pure play
Speaker 3: regional focused. So we have a German private Egrey client,
Speaker 3: we have a Benelux private Aqua client, we have a
Speaker 3: NORDICX private equity client. We've got UK clients and they
Speaker 3: are experts in understanding what needs to happen to grow
Speaker 3: their businesses and their companies that they're buying and selling
Speaker 3: in their target market. They know the customer base, they
Speaker 3: know how to impact the value drivers i e. On
Speaker 3: the talent acquisition side, on the add on Bolton strategy side.
Speaker 3: They know how to do that in their regional markets
Speaker 3: incredibly well.
Speaker 2: And I just want to interrupt and say, is it
Speaker 2: that different from Germany to the Netherlands, to Sweden to
Speaker 2: the UK? Like completely Like in the United States, New
Speaker 2: York is in Florida, Florida's in Texas. Texas is in California.
Speaker 2: But you could hop from one place to another, and
Speaker 2: it's not so different that you can adjust to the
Speaker 2: regional We more or less speak kind of the same
Speaker 2: language throughout the country. Maybe there are some dialects and differences,
Speaker 2: but you know the general gestalt of California, New York, Texas. Yeah,
Speaker 2: the politics may be different, but the business seems to
Speaker 2: be the same. That's not true when you're a visit.
Speaker 3: It depends on the size of businesses you're buying. Right,
Speaker 3: If you're buying businesses that are up to say ten
Speaker 3: or twenty million dollars or euros of EBIDAB, then it
Speaker 3: really matters that you're a regional champion, right that you
Speaker 3: understand how a German business can scale in that end
Speaker 3: of the market versus how a Nordic business will scale.
Speaker 3: So they're having regional footholds and expertise really matters. But
Speaker 3: when you're doing larger businesses and we have clients that
Speaker 3: are pan regional, that are your P and PAN European
Speaker 3: buyout players, or there are global buyout players that do
Speaker 3: global deals US and Europe, but they do them for
Speaker 3: larger businesses, and larger businesses often tend to have global
Speaker 3: customers because by definition, you've got to make sure you've
Speaker 3: diversified your revenue out So it depends on what scale
Speaker 3: of business you're doing. But even if you are the
Speaker 3: largest private equity funds out there, they will have local
Speaker 3: offices if they know they need to operate in the
Speaker 3: Italian market, they'll have presence in Milan, or they'll have
Speaker 3: Italian experts in house that know how to operate and
Speaker 3: buy businesses in Milan, or they'll have sector experts if
Speaker 3: because a software business in Italy is going to be
Speaker 3: very similar to software business in Texas. It might the
Speaker 3: operating environment might change, but the characteristics of business and
Speaker 3: how you drive value in that business will often be
Speaker 3: very similar. So you've got to make sure you're either
Speaker 3: a sector or a regional expert, and that often depends
Speaker 3: on the size of business you buy.
Speaker 2: So you've lived in Africa, You've lived in India, you've
Speaker 2: lived in Vietnam, been to Thailand and all over Asia.
Speaker 2: Have you thought of expanding to some of these other
Speaker 2: continents or is it just US and Europe.
Speaker 3: We do cover Asian and Middle Eastern investors in my
Speaker 3: business prolifically and have done from almost the first day
Speaker 3: of inception. You cannot ignore the rest of the world.
Speaker 3: As you know, the sovereign wealth funds and the institutions
Speaker 3: in the Middle East are big movers in the market today,
Speaker 3: and that's today. I started covering Middle Eastern institutions when
Speaker 3: I first opened the doors of the business now fourteen
Speaker 3: years ago. And fourteen years ago people were like, I
Speaker 3: don't know if I need to go over there. It's
Speaker 3: a huge investment of time and air my airfare and
Speaker 3: so forth. Well, now everyone's saying I wish I'd built
Speaker 3: those relationships long ago, because relationships die hard in those
Speaker 3: markets Asia and Middle East, and those relationships I've had
Speaker 3: and my team has had for a long time.
Speaker 2: Huh. So let's talk a little bit about valuation in
Speaker 2: the public markets. Hard to say, fourth quarter twenty twenty four,
Speaker 2: US markets aren't at the very least fully priced, if
Speaker 2: not richly priced. When we look at the UK, when
Speaker 2: we look at Europe much much less expensive, we see
Speaker 2: a lot of companies trading at book value, not the
Speaker 2: same growth level that we see in the US. Does
Speaker 2: that valuation difference in the public markets extend to private
Speaker 2: markets as well?
Speaker 3: So, firstly, let's comment on the public market side, that
Speaker 3: is characterized very much. That valuation gap is characterized by
Speaker 3: the depth of the markets. The US capital markets vibrant,
Speaker 3: incredibly dynamic, incredible fragmentation of investors, deep rich market where
Speaker 3: you can do business on the capital market size presseemously.
Speaker 2: And I would add, plus all these giant mega tech
Speaker 2: companies that certainly have rich valuations in skew, whether it's
Speaker 2: a Nazaq one hundred or the S and P five hundred. Yes,
Speaker 2: you know, there's a handful of them. Overseas, Taiwan Semiconductor, asmathroography,
Speaker 2: you can name SAP, you can name like a handful,
Speaker 2: but most of the big ones are here, which certainly
Speaker 2: the valuation on the public side, what do you see
Speaker 2: on the private side.
Speaker 3: On the private side, we see a similar valuation gap
Speaker 3: that and I'll just finish the public market side. The
Speaker 3: UK and the European capital markets just don't have the
Speaker 3: same depth, which is why you see the valuation, missed pricing.
Speaker 2: So you think it's more than just the tech companies.
Speaker 3: It's the structure, it's structural, there's not that many participants.
Speaker 3: It's also legal and regulatory. Right in the UK, there
Speaker 3: was a move away from holding UK assets by the
Speaker 3: UK pension plans that suck the liquidity out of the
Speaker 3: UK markets, hence the valuation gap. So there's also regulatory
Speaker 3: angles that are at play there on the private markets,
Speaker 3: though I've got to agree with you entirely, there is
Speaker 3: evaluation arbitrage even in the private markets that the European
Speaker 3: buyout specialists are able to buy companies at better value
Speaker 3: in Europe and scale them into global businesses and sell
Speaker 3: them at global valuations or US market valuation. It comes
Speaker 3: down to selling time. So some of the biggest best
Speaker 3: private equity household names that you know, whether it's a
Speaker 3: Blackstone or an Apax or a Clayton, Dubley and Rice
Speaker 3: have headquarters both sides of the pond because there's so
Speaker 3: much value to be harvested by buying smartly in Europe
Speaker 3: and an advantage quite honestly evaluation arbitrage that you can
Speaker 3: play all day long, and many of them do so
Speaker 3: very successfully.
Speaker 2: So you're advising a lot of players in the private
Speaker 2: equity market. Is it general partners gps the funds that
Speaker 2: are essentially running Are they LPs and investors or do
Speaker 2: you advise across the whole space.
Speaker 3: We sit in between the gps and their LPs when
Speaker 3: it comes to and we will raise everything from a
Speaker 3: small for us would be a two hundred and fifteen
Speaker 3: million dollar fund and our largest client to raise twenty
Speaker 3: seven billion in their flask fund, okay, and everybody in between.
Speaker 3: In the last year alone, we raised north of four
Speaker 3: billion of new capital commitments for our clients and are
Speaker 3: very prolific at ensuring that private equity general partners raise
Speaker 3: the capital they need to go off and buy businesses
Speaker 3: and build the ecosystems around each of their businesses. So
Speaker 3: we sit right in between general partners and limited partners.
Speaker 3: Got a team of over sixty people or seven offices,
Speaker 3: raising capital for our clients but also intermediating in the
Speaker 3: liquidity side of the equation in private markets. As you know,
Speaker 3: in the public markets, the second resistance market is much
Speaker 3: larger than the primarysurance market. In private markets today it's flipped.
Speaker 2: But that means explain what you mean by that, Why
Speaker 2: is that? How is that flipped?
Speaker 3: Well, in private markets today there is a one point
Speaker 3: six trillion dollars new capital raising engine that hums along annually.
Speaker 3: That's how much capital is raised across private market funds
Speaker 3: in a twelve month rolling cycle.
Speaker 2: And to just put a little flesh on that, go
Speaker 2: back to before you launched Sebral, private equity was a
Speaker 2: trillion dollars now ten twelve trillion, and it's projected to
Speaker 2: go up to twenty something trillion. Absolutely, so this has
Speaker 2: certainly been ramping up rapidly, and your timing was quite
Speaker 2: for two to say you get twenty eleven.
Speaker 3: Yes, very lucky to have launched then, but you're absolutely right.
Speaker 3: But the secondaries market in private markets is only one
Speaker 3: hundred and forty hundred and fifty billion dollars in size,
Speaker 3: but growing rapidly. That market, when we first did our
Speaker 3: first secondaries transactions as a firm in twenty twelve, was
Speaker 3: only twenty billion, a drop in the bucket. Today it's
Speaker 3: one hundred and fifty billion, still small compared to the
Speaker 3: size of the primary private equity market. But these investors
Speaker 3: want liquidity too, Berry, you could help something eight years,
Speaker 3: nine years, ten years, you want out? Who do you
Speaker 3: go to? You've got to call a market maker like
Speaker 3: ourselves who can make an advice on that position in
Speaker 3: the secondaries private equity market to get you liquidity. Can
Speaker 3: I get you a one fun fact?
Speaker 2: Sure?
Speaker 3: The average age of a private equity fund sixteen point
Speaker 3: two year.
Speaker 2: Wow, that's crazy.
Speaker 3: It says ten on the tin. It's ten with two
Speaker 3: one year extensions, so up to twelve. But the average
Speaker 3: vehicle is around for average is around for sixteen point
Speaker 3: two years. Hence the need for the secondary's market to
Speaker 3: provide liquidity for investors who want out.
Speaker 2: So, just for the lay listener, I want to do
Speaker 2: a little definitional work here. So for when we talk
Speaker 2: about a ten year fund, you're putting money into a
Speaker 2: private equity fund. Over the course of that decade, they're
Speaker 2: making various investments. There's no guarantee in year eleven that
Speaker 2: all of those investments have found an exit, so there'll
Speaker 2: be a series of extensions, and even after those extensions,
Speaker 2: all right, the fund is arguably inactive, but we're trying
Speaker 2: to find an exit for this. A secondary market is
Speaker 2: one way that can take place. It gets people who
Speaker 2: are in that liquid and hopefully at a discount. For
Speaker 2: the buyers who come in and say we'll take this
Speaker 2: at X price, We'll give them liquidly, and then it's
Speaker 2: year one for us, not year twelve. So there are
Speaker 2: different timelines. Is that fair explained?
Speaker 3: It? Very, very beautifully. The only new ones I'd add
Speaker 3: to that is that that liquidity can be asked for
Speaker 3: by both the limited partner so i e. The investor
Speaker 3: and the fund itself. And we get asked by pension plans,
Speaker 3: endowmas foundations, family offices saying hey, we've held this portfolio
Speaker 3: now for eight years, nine years, it's getting along in
Speaker 3: the tooth. Or actually my predecessor made these investments. I'm
Speaker 3: the new CIO. Can you sell this stuff for me,
Speaker 3: I don't like it anymore, or I've actually realized the
Speaker 3: gains I thought I would realize much sooner than I expected.
Speaker 3: Can you sell this on for me? All reasons to
Speaker 3: seek liquidity on the limited partner site, and we do
Speaker 3: that all day every day. Actually, I've done one hundred
Speaker 3: and sixty three transactions in that space alone in the
Speaker 3: last decade. And we also organize a liquidity when the
Speaker 3: general partner asks us. Sometimes a general partner will say, actually,
Speaker 3: can can you help organize liquidity for a company that
Speaker 3: needs to be sold out of the fund because the
Speaker 3: fund is reaching its end of life. The fund needs
Speaker 3: to sell some companies, but I general partner want to
Speaker 3: hold on to it longer, so pull it out of
Speaker 3: the fund and put it in its own fund. And
Speaker 3: that is called the continuation vehicle space. And that's something
Speaker 3: we do all day every day. As well.
Speaker 2: We've been experiencing something here in the US that I
Speaker 2: find kind of fascinating, and I'm giving you a perch.
Speaker 2: I'm really curious as to what you see in the
Speaker 2: UK and Europe or the rest of the world. Over
Speaker 2: the past decade, there has been, for lack of a
Speaker 2: better word, a democratization of private equity and private debt.
Speaker 2: You used to need twenty or ten million dollars to
Speaker 2: participate in this. I think you can get into a
Speaker 2: number of places for a quarter million, one hundred thousand
Speaker 2: dollars less, very less. So this has you know, when
Speaker 2: I look around at Blackstone and Carlisle and so many
Speaker 2: of the big pe firms in the US, they have
Speaker 2: set up parallel funds where you know, there's really practically
Speaker 2: no minimum. Is this trend something that's us focused? Are
Speaker 2: you seeing this in the UK and Europe? Tell us
Speaker 2: a little bit about private equity for everybody.
Speaker 3: Absolutely, the entrance of private wealth into private markets, but
Speaker 3: private equity in particular has been the single biggest innovation
Speaker 3: and movement of capital from LP investors into private markets
Speaker 3: in the last five years. It's been happening. It's started
Speaker 3: off over the last decade, but it's really over the
Speaker 3: last three to five years we've seen an acceleration. And
Speaker 3: here's the most important fact that as ultra high networth
Speaker 3: and high net worth individuals build out their portfolios, they're
Speaker 3: putting equities, they're putting bonds, and they're putting alternatives, and
Speaker 3: alternatives being led by private markets. The average investor in
Speaker 3: private wealth is under allocated to private equity by three
Speaker 3: to five x three to five hundred percent. That is
Speaker 3: a huge number. And so the growth of private wealth
Speaker 3: as an investor in private markets has absolutely exploded over
Speaker 3: the last two years and will continue to do so
Speaker 3: in over the next decade or so. And it's a
Speaker 3: global phenomena. Of course, the US led the way, and
Speaker 3: certainly the forty Act regulation of allowing semi liquid evergreen
Speaker 3: products and individuals to invest on those was a huge
Speaker 3: game change when it came to private wealth's interest in alternatives.
Speaker 3: We're seeing the same thing in Europe. We're seeing the
Speaker 3: same thing in Asia that individuals who have a certain
Speaker 3: net worth are saying, I want a bit of private
Speaker 3: equity in my portfolio, how do I go out to
Speaker 3: get it? And more and more sponsors are saying, well,
Speaker 3: I'm going to create solutions for you to access my
Speaker 3: funds and product and my alpha through accessible channels.
Speaker 2: So in the US, when this really began to get
Speaker 2: popular in the twenty tens, one of the big drivers
Speaker 2: was zero interest rates, this ZIP policy where when bonds
Speaker 2: are yielding you know, two two and a half percent
Speaker 2: that side of the portfolio really wasn't producing anything, and
Speaker 2: people started looking around, Hey, where can I get better
Speaker 2: yield private debt? Private equity stepped into that and really
Speaker 2: filled that gap, especially for institutional investors. So I look
Speaker 2: around the world and we had, you know, rates that
Speaker 2: were zero for a decade. How significant was that as
Speaker 2: a driver? And then what does it mean now that
Speaker 2: rates are you know, appreciably higher than they were in
Speaker 2: the twenty tens.
Speaker 3: There's no doubt that rates being low helped investors seek
Speaker 3: yield and seek alpha in different markets, including in private markets.
Speaker 3: But also it helped private equity do deals right, leverage,
Speaker 3: biot requise leverage, and when rates were so low, they
Speaker 3: leverage when it was cheap and easily accessible, and they
Speaker 3: used it for that decade of boom that we had
Speaker 3: until rates started going up. Now that roads have gone up,
Speaker 3: but they are coming back down, we can always discuss
Speaker 3: what neutral looks like. What we have is now investors
Speaker 3: seeking where do I invest that I can still find
Speaker 3: value in given how expensive the public markets are? Right
Speaker 3: you think about the forward pe of the public markets today,
Speaker 3: where do I still get relative value? Where I can
Speaker 3: buy at sensible multiples and sell at higher ones private markets.
Speaker 3: So it's a diversification strategy. And secondly, it's an incredibly
Speaker 3: important way for investors to say that as I think
Speaker 3: about a balanced portfolio, I want to seek investments in
Speaker 3: folks who really know how to add value to businesses
Speaker 3: over a period of time, So they'll do that only
Speaker 3: in general partners who have a track record, and that
Speaker 3: track record is often anywhere between fifteen to twenty two
Speaker 3: to twenty three percent net IRRs, and that track record
Speaker 3: really matters. So you have to be able to return
Speaker 3: money over the neutral rate, otherwise are not going to
Speaker 3: be viable. Even the best private credit funds will return
Speaker 3: high single digits or low teens type of returns, which
Speaker 3: is very much a good diversifier and an addition to
Speaker 3: private wealth portfolios.
Speaker 2: And one of the things I noticed whenever I see
Speaker 2: a private debt or a private credit it used to
Speaker 2: be liboard. Now at SOFRA, it's not a fixed rate,
Speaker 2: it's a variable rate plus some markup beyond that. So
Speaker 2: kind of raises the question low interest rates first sent
Speaker 2: people exploring this aspect of private markets and private credit
Speaker 2: and debt. Do higher rates really have a negative impact,
Speaker 2: or you're still getting whatever the SOFA rate is plus
Speaker 2: five six seven percent.
Speaker 3: Yes, for sure you're going to get a if you're
Speaker 3: comparing to SOFA, you're definitely going to get a return
Speaker 3: normalization which did happen when rates were in twenty two
Speaker 3: to twenty three, less deals got done because at higher
Speaker 3: rates private equity funds had a difficult time brawing. You know,
Speaker 3: the debt markets were shut, so deal value values came down.
Speaker 3: If you look at the M and A volumes that
Speaker 3: at most of the major investment banks, including at raymag Jes,
Speaker 3: volumes came down. Now they're on their way back up.
Speaker 3: But your point is a salient one. How does it
Speaker 3: impact returns? You have to be able to show if
Speaker 3: you're doing private equity buyouts, you've got to be able
Speaker 3: to show that you can do fifteen points over for
Speaker 3: so far.
Speaker 2: Right, fifteen that's a big number, ten.
Speaker 3: To fifteen points. If you are a mid market private
Speaker 3: equity house, you are returning twenty percent net IRRs. That's
Speaker 3: kind of what you have to show fund on fund
Speaker 3: and that's interesting. That's why you're added to a portfolio
Speaker 3: if you're a private debt strategy. Obviously, not private debt
Speaker 3: will be more like low teens type of numbers. Somewhere
Speaker 3: they're ten to thirteen percent net range. But even that
Speaker 3: is value add when you think about a debt strategy
Speaker 3: that you know, because even in public market debts, you're
Speaker 3: not able to find that type of yield. So as
Speaker 3: rates come down, as money gets pushed out of t bills,
Speaker 3: gets pushed out of money market accounts and starts to
Speaker 3: seek yields again, private markets become interesting to a lot
Speaker 3: of players.
Speaker 2: Huh, really interesting. You mentioned the transaction numbers slid down
Speaker 2: and then came back up again. Does that impact the
Speaker 2: secondaries you've done? You guys have done over two hundred
Speaker 2: secondaries and fundraising transactions. That's a pretty big number for
Speaker 2: a relatively short period of time. How have you seen
Speaker 2: the volumes on secondaries affected by swinging interest rates?
Speaker 3: So there was a dip in the secondaries of markets
Speaker 3: transacting volumes in twenty twenty three, in particular, as rates
Speaker 3: were high and investors didn't know what impact that had
Speaker 3: on valuation. If you remember first half of twenty twenty three,
Speaker 3: the world froze because you had fed raising interest rates
Speaker 3: and all other central banks you had Ukraine and Russia.
Speaker 3: You had Silicon Valley Bank and then you had Credit Swiss,
Speaker 3: so everybody was deer in headlines, going what on earth
Speaker 3: is going on? Volumes came down that year in secondaries
Speaker 3: market as well as an M and A. Now those
Speaker 3: volumes have gone up this year. Twenty twenty four will
Speaker 3: be another high water mark for the secondary's market in
Speaker 3: terms of transacted volumes. And that's because as the private
Speaker 3: markets grow, the need for liquidity and a liquidity solution
Speaker 3: over the period of that ten to fifteen year old
Speaker 3: becomes all the more pertinent for both limited partners and
Speaker 3: general partners. So now regardless of what the rates are doing,
Speaker 3: you have investors saying, you know what, every year or
Speaker 3: every two years, I'm going to sell in the secondaries
Speaker 3: market and move that cash into other more opportunistic situations,
Speaker 3: back into a program that will reield me a higher
Speaker 3: return because I've made what I needed to make out
Speaker 3: of this portfolio. That's become programmatic amongst many institutional investors.
Speaker 2: So I love the word opportunistic. When in the public markets,
Speaker 2: when we get those dislocations and people use the word freeze.
Speaker 2: In public markets, we use the word panic because they
Speaker 2: have the liquidity to engage in bad behavior. It definitely
Speaker 2: creates opportunities. When you see in the private markets people
Speaker 2: polling back and freezing, do you end up seeing the
Speaker 2: same sort of Hey, this is a substantial discount. I
Speaker 2: want to participate in this.
Speaker 3: You're absolutely right, Berry. It all comes down to the
Speaker 3: discount and other willing sellers sellers at the price. There's
Speaker 3: always a price. I'll give you one anecdote. One fund
Speaker 3: interest we sold traded at eight and a half cents
Speaker 3: on the dollar, eight and a half real There was
Speaker 3: a seller who said, get me any price I want out.
Speaker 3: I don't want to hold this anymore. Okay, this was
Speaker 3: I'm going back to twenty thirteen, twenty fourteen, But there
Speaker 3: was a buyer at eight and a half percent of
Speaker 3: anav of net ascid value. Great, you have all the
Speaker 3: cushion in the world, and you look like a genius
Speaker 3: when you do your markups the next quarter.
Speaker 2: Even in the worst of the financial crisis, bad mortgages
Speaker 2: pools of bad mortgages, right, they were selling for thirty
Speaker 2: five forty cents seemed like a huge deal. Ninety two
Speaker 2: and a half percent off ninety one and a half
Speaker 2: percent off. That's unbelievable.
Speaker 3: That was in an Asian manager in twenty thirteen. But
Speaker 3: I will say the average discount these days, the best
Speaker 3: private equity fund managers do not trade at discounts. They
Speaker 3: close it close to their net asset values. They trade
Speaker 3: close to par. But the average discount when it comes
Speaker 3: to the average buyout fund is somewhere in the four
Speaker 3: to eight percent range for the average private equity buyout fund.
Speaker 3: If you hold venture, especially if it's got a lot
Speaker 3: of fintech in it, these days, that's going at thirty
Speaker 3: to fifty percent discount because it's really hard to value
Speaker 3: that stuff. As you know, venture and growth is often
Speaker 3: valued that it's last rounds valuation. Well, if your last
Speaker 3: round was back in the boomyrrors and all you've done
Speaker 3: is try to tread water and maybe raise some debt,
Speaker 3: you don't have a valid print. So we are seeing
Speaker 3: a lot more spread a bit asport is very wide
Speaker 3: in the venture and growth world right now when it
Speaker 3: comes to buyouts, especially mid market large cap buyout at
Speaker 3: or close to par in the nineties.
Speaker 2: Huh. Really interesting. So you mentioned deal flow has ticked up.
Speaker 2: I'm assuming that'll continue into next year. What are some
Speaker 2: of the challenges and headwinds that are out there that
Speaker 2: could be something an investor in the space should be
Speaker 2: aware of.
Speaker 3: I think the one that's most salient, that we track
Speaker 3: most closely bury is the fact that because the math
Speaker 3: broke at the investor level in n twenty to early
Speaker 3: twenty three, we're still playing catch up on that. What
Speaker 3: does that even mean. It means that the exit activity
Speaker 3: the M and A volumes, the ability to sell companies
Speaker 3: and return cash to institutional investors really slowed down from
Speaker 3: summer twenty two onwards, as we had inflation, as we
Speaker 3: had Ukraine, as we had some of the macro.
Speaker 2: Challenges, plus a pretty public market at the same time.
Speaker 3: And a very ugly public market. So at that point,
Speaker 3: institutional investors stopped seeing very much cash back from their
Speaker 3: private equity portfolios. They were still having to pay into
Speaker 3: those capital calls that were being made by their private
Speaker 3: equity clients because the contribution still kept coming in saying
Speaker 3: I want to do a new deal, I want to
Speaker 3: do an add on. Here's some management fees and expenses
Speaker 3: you need to fund. But the cash back froze. Now
Speaker 3: we're starting to come out of that now, but that
Speaker 3: math is still nowhere near where it needs to be.
Speaker 2: I e.
Speaker 3: The private equity industry needs to return a lot more
Speaker 3: cash back to its investors. The capital markets need to
Speaker 3: open because some of the largest private equity funds you
Speaker 3: have out there need to list some of those businesses,
Speaker 3: and we haven't seen the IPO window open the US
Speaker 3: or Europe in the last year in a meaningful and
Speaker 3: sustainable way. We need all of that math to write
Speaker 3: in itself before institutional investors kind of come back to
Speaker 3: their normal levels of allocating to private equity. Where institutions
Speaker 3: have pulled back, private wealth has stepped in. We had
Speaker 3: that discussion, but the institutional investor has pulled back. The
Speaker 3: average pension plan, the average endownment, the average foundation, the
Speaker 3: average insurance company, if they used to do one hundred
Speaker 3: dollars per fund investment last time around, this go around,
Speaker 3: there are seventy five to eighty percent of that only,
Speaker 3: So for them to come back to the one hundred dollars,
Speaker 3: we need the private equity industry to sell companies and
Speaker 3: return cash back to them. It's getting better twenty f better.
Speaker 3: Amberinet volumes that twenty twenty three was, but is it
Speaker 3: back to what it was in twenty one. No, sir,
Speaker 3: we're not back there yet. You know.
Speaker 2: It kind of reminds me of what happened in the
Speaker 2: automobile market during the pandemic. When you're not making a
Speaker 2: lot of new cars, it means a few years later
Speaker 2: there are not a lot of used cars for sale.
Speaker 2: Sounds like it's the same situation where you have a
Speaker 2: twenty twenty two slow down twenty twenty five, where the
Speaker 2: exits am I oversimplifying that.
Speaker 3: I picked a really interesting and analogy, and I like
Speaker 3: it because that is what is happening. And now we're
Speaker 3: at the point where a lot of companies that were
Speaker 3: bought in the twenty twenty one era need to be sold.
Speaker 3: And some of our clients have been prolific at returning
Speaker 3: that capital back. In fact, I've done a great job
Speaker 3: in twenty twenty four of exiting those businesses and returning
Speaker 3: cash back to investors. Others not so much. Others need
Speaker 3: to pick up the speed on that. And as an industry,
Speaker 3: if you look at the entirety of the industry, let
Speaker 3: me give you some numbers. The average returns that investors
Speaker 3: get cash back that they used to distributions as a
Speaker 3: percentage of the total value held in private equities generally
Speaker 3: around twenty four percent. In twenty three, that number dip
Speaker 3: to only eleven percent. So far in twenty four we're
Speaker 3: back to about fourteen percent, but we're not back to
Speaker 3: twenty four.
Speaker 2: So when we're not talking about returns, we're talking about.
Speaker 3: Exit activity as a percentage of the net asset value.
Speaker 2: So fourteen percent exit as opposed to almost a quarter
Speaker 2: a big difference.
Speaker 3: Yes, historical average of twenty four percent. The institutional investor
Speaker 3: does not like that math. They like to have their
Speaker 3: cash back come back to normal levels because that's the
Speaker 3: cash back that then recycle into new investment.
Speaker 2: They see other opportunities. So I asked you the negative question,
Speaker 2: what are the challenges? Let me flip it. What are
Speaker 2: the tailwinds? What are some of the positive things you
Speaker 2: see coming forward for the private markets.
Speaker 3: I think that as you see the increase in regulation
Speaker 3: around public market listings, more and more companies around the world, US,
Speaker 3: in Europe and beyond want to remain private because they
Speaker 3: see the benefits of being under private equity ownership, the
Speaker 3: value add the access to resources, the ability to have
Speaker 3: capital at hand, to grow faster is a very valuable playbook.
Speaker 3: So I expect that the private equity industry will continue
Speaker 3: to grow at the very rapid expansion rate that they've enjoyed.
Speaker 3: The other point I'll say is that this is a
Speaker 3: really interesting return driving environment for private equity. Valuations in
Speaker 3: the private markets remain very sensible, and there's a great
Speaker 3: arbitrage between US and Europe. The Europe divergence, as they're
Speaker 3: calling it these days, is real. So when it comes
Speaker 3: to saying, hey, I'm going to globalize my company's revenue chain,
Speaker 3: how do you do that? That's an interesting playbook, especially
Speaker 3: in the political environment we're in, and private equity is
Speaker 3: very well positioned to figure that out. The third thing
Speaker 3: we've already touched on, which is private wealth is a
Speaker 3: game change for private markets. Is a game change in
Speaker 3: terms of the capital inflows that's coming in, and we're
Speaker 3: still at the early innings of that. It would change
Speaker 3: private equity for good, and I think it's very exciting
Speaker 3: to see that gather pace and to be at the
Speaker 3: forefront of that at Raymond James, which is one of
Speaker 3: the largest wire platforms global private wealth platforms in the world.
Speaker 2: So let's talk a little bit about your time at
Speaker 2: Raymond James. First, you stand up your own firm see bowl,
Speaker 2: and now you're at a fortune five hundred bank and
Speaker 2: advisory firm. That's got to be a culture shock. Tell
Speaker 2: us a little bit about what that transition was like.
Speaker 3: On paper, it is a culture shock, but during diligence,
Speaker 3: Raymond James approached me within within offer to acquire the business,
Speaker 3: and we spend months getting to know each other to
Speaker 3: ensure that the culture fit would work. Because if that
Speaker 3: didn't work, the key ASCID you were buying, which is
Speaker 3: talent and financial services, was going to walk. And so
Speaker 3: my boss, now who is the person who acquired Sabiel Jimbo,
Speaker 3: and I spent a lot of time getting to know
Speaker 3: each other and ensuring that him and I could work
Speaker 3: together well and effectively, and that the cultural alignment and
Speaker 3: entrepreneurial DNA would stay intact when they acquired the firm.
Speaker 3: Now I've been part of Raymond James three and a
Speaker 3: half years. I can safely say that the honeymoon's over,
Speaker 3: but also say that the culture fit has been a
Speaker 3: real hit. Raymond James has a very affable community oriented
Speaker 3: a very low ego type of culture as in general,
Speaker 3: and I've found the same thing in the capital markets
Speaker 3: business and it's been actually one of my upside surprises
Speaker 3: of joining Raymond James on the culture side. You wouldn't
Speaker 3: know it if you looked at the paper announcement that
Speaker 3: a Fortune three hundred was buying a small boutique and you.
Speaker 2: Go from small boutique to a trillion dollar platform. How
Speaker 2: has that changed how you operate, not just globally, but
Speaker 2: the sort of companies you advise, the sort of funds
Speaker 2: that you're working with. What has been the upside for
Speaker 2: you being on this billion plus dollar platform.
Speaker 3: There'd be two things that point to The first is,
Speaker 3: almost overnight, the largest private equity funds in the world
Speaker 3: started hiring us, same team, same people, same services. All
Speaker 3: that change was the logo of the boutique got replaced
Speaker 3: with the logo of a Fortune three.
Speaker 2: Hundred plus Fortune three hundred is a giant. You know
Speaker 2: that there's thousands and thousands of banks and funds, only
Speaker 2: a couple hundred companies attain that haft size. And no,
Speaker 2: it's not just the boutique, it's everything around it. You
Speaker 2: can tap into a giant network of experts.
Speaker 3: And one of my clients said, listen, no one gets
Speaker 3: fired for hiring a fortune three hundred. Now you are
Speaker 3: part of one, and it changed our game overnight. Overnight
Speaker 3: we started assigning ten twenty thirty billion dollar funds and
Speaker 3: that was incredibly exciting. So do what we love to do,
Speaker 3: but to do it for some of the biggest players
Speaker 3: in the markets is very exciting. The second one is
Speaker 3: that we were able to figure out and a veil
Speaker 3: of and offer the synergy with our private wealth partners
Speaker 3: at Raymond James very quickly, and for that, I'll always
Speaker 3: be thankful to the leadership of the firm because they
Speaker 3: saw the opportunity and they made that happen, and that's
Speaker 3: been a huge value add to our clients.
Speaker 2: I can I can imagine, all right, So I only
Speaker 2: have you for a handful of minutes left Before I
Speaker 2: get to my favorite questions that I ask all my guests,
Speaker 2: I have a couple of curve balls I have to
Speaker 2: throw you, starting with you're a certified somalier from the
Speaker 2: Court of Master Somaliers. Tell us a little bit about
Speaker 2: your enthusiasm for wine and what led you into that.
Speaker 3: So I started teaching a wine class at Stanford for
Speaker 3: one yearit of credit. In my junior year, I was
Speaker 3: part of living in the French House there where I
Speaker 3: was member of the staff, and I had to teach
Speaker 3: a class that had something to do with France. I said,
Speaker 3: France and wine.
Speaker 2: That makes sense even though you were less than an
Speaker 2: hour from Napa Valley.
Speaker 3: And guess who my teachers were. I would get guest
Speaker 3: speakers and wine makers from Napa and Sonoma to come
Speaker 3: and my pitch to them was, hey, you get to teach,
Speaker 3: You get to talk to and teach wine to an
Speaker 3: impressionable young audience that can go on and become loyal customers.
Speaker 3: That they loved it. They would come down and do
Speaker 3: a talk on wine, and we do a small wine tas, maybe.
Speaker 2: Bring some a couple of bottles shirted.
Speaker 3: It was voted Stanford's most popular class. It would often
Speaker 3: shut down the Stanford systems during sign up day, and
Speaker 3: even after I graduated from Stanford, I kept teaching that
Speaker 3: wine class for close to three years. After graduation. When
Speaker 3: I went to Harvard for my MBA Harvard College, one
Speaker 3: of the houses their residential houses there, asked me to
Speaker 3: come teach a wine seminar for them. Which I did,
Speaker 3: which was again a roaring success. And then I moved
Speaker 3: to London. And when I moved to London, I said, well,
Speaker 3: I'm not teaching anything here. I guess I'm going to
Speaker 3: lose all this wine knowledge. Let me put it to
Speaker 3: the test. And I decided to take the Court of
Speaker 3: Masters Sommelier's test. It was a three day test. I
Speaker 3: don't think I've crammed that hard for anything in my life.
Speaker 3: It was I had a blind tasting of ten wines.
Speaker 3: It had a service test, had theory papers. It was
Speaker 3: incredibly intense, but lo and behold, I ended up passing,
Speaker 3: and here we are. It's a lifetime qualification. I still
Speaker 3: have it with pride and honor, although I don't use
Speaker 3: it as much anymore now being a mom of three.
Speaker 2: So I was going to ask your London base. It's
Speaker 2: a short train ride to France, to Germany to Italy.
Speaker 2: There are some great wines in that area. How often
Speaker 2: do you get to go to local wineries and sample
Speaker 2: the wares.
Speaker 3: I love tasting wine, and so I have joined a
Speaker 3: wine club in London, which I love. I used to
Speaker 3: take part in blind wine tasting competitions less so now
Speaker 3: so any opportunity I can to enjoy and experiment and
Speaker 3: try new wines. I do so, you absolutely right. Europe
Speaker 3: is a bastion of wine making, and so if I
Speaker 3: go to board meetings in Germany, or if I head
Speaker 3: off for a weekend in Spain, it's all about diving
Speaker 3: deep into the local wine. I recently went for dinner
Speaker 3: with about ten twelve friends to a lovely restaurant in
Speaker 3: near Barcelona and Spain, and there was a wine tasting
Speaker 3: core of repairing there for all Spanish wines, and we
Speaker 3: did that together and learn more about Spanish wines than
Speaker 3: we ever thought we would know. That's the kind of
Speaker 3: thing that I do now as a passionate hobby.
Speaker 2: Huh. Really really interesting? All right, So all have you
Speaker 2: for a few more minutes. Let's jump to our favorite questions.
Speaker 2: Tell us what's keeping you entertained these days? What are
Speaker 2: you either watching or listening to? What are you streaming.
Speaker 3: Watching? I have to say I tend to watch in
Speaker 3: limited doses these days, given life and travel and children.
Speaker 3: But I love The Diplomat on Netflix. Fascinating again geopolitics.
Speaker 3: I'm absolutely interested in the new spy thriller that Paramount
Speaker 3: has out called The Agency. I've watched a couple of episodes.
Speaker 3: It's trending well so far. I love listening to a
Speaker 3: number of podcasts. My go to list will be Andrew
Speaker 3: Humeman Love. He's a Stanford professor wright the healthcare Yes,
Speaker 3: he loves that. He talks about health wellness protocols. Super fascinating.
Speaker 3: I try to dive into his stuff as much as
Speaker 3: I possibly can. They're long, though, so sometimes it takes
Speaker 3: a few iterations. I'll often listen to the news via podcasts,
Speaker 3: whether it's Bloomberg, CNBC. That's often part of my regular rota,
Speaker 3: and more than any of the others. I am a
Speaker 3: huge believer in preventative mental health. I meditate every day,
Speaker 3: go to an annual meditation course, so I'm often listening
Speaker 3: to talks around meditation, around mental health. How do you
Speaker 3: deepen your meditation practice. That's a huge part of my
Speaker 3: repository as well.
Speaker 2: And while we're on streaming entertainment, if you like the
Speaker 2: Diplomat and The Agency, let me suggest the Lioness oh
Speaker 2: on Parami about intelligence agencies and how they infiltrate terrorist groups.
Speaker 2: Really fascinating, very cool. I just finished the first season
Speaker 2: and I'm looking you need a break because it's like
Speaker 2: very tense and wow, we're about to start the second
Speaker 2: So tell us about your mentors who helped shape your career.
Speaker 3: I am lucky enough to have been picked up by
Speaker 3: a wonderful professor Stanford called Professor Tom Cosnick. Tom took
Speaker 3: me on at the tenor age of nineteen or twenty,
Speaker 3: and he took me under his wing, made me a
Speaker 3: research fellow. He's the one that enabled me to guest
Speaker 3: lecture at Stanford. I wrote case studies that are still
Speaker 3: used in the teaching curriculum there under him, and he's
Speaker 3: been a tremendous mentor and supporter very early on and forever.
Speaker 3: Thing to him for his coaching and mentorship over the years. Similarly,
Speaker 3: is a wonderful professor at Standford called Professor Tina Selig.
Speaker 3: She gave me one of the best piece of advice
Speaker 3: I think any young career professional, but certainly a woman,
Speaker 3: could have received. She said to me, you can have
Speaker 3: it all, just not at once. And that has stuck
Speaker 3: with me forever since. And it's been true in many
Speaker 3: walks of life, as I've had my children, as I've
Speaker 3: grown my businesses, as I do what I do on
Speaker 3: a daily basis. So those are the two that stand
Speaker 3: out both at Stanford. Both influential in the way they
Speaker 3: mentored me, but also what they imparted in me.
Speaker 2: Really interesting. Let's talk about books. What are some of
Speaker 2: your favorites and what are you reading right now?
Speaker 3: I love the book The Big Leap by Gray Hendrix.
Speaker 3: Everyone should pick it up. It's a quick read. It
Speaker 3: talks about upper limits, how we set upper limits unconsciously
Speaker 3: in our lives. He starts off with this great research
Speaker 3: about how most lottery winners after five years, most of
Speaker 3: them end up being broke, really unhappy.
Speaker 2: Broke, divorce, suicide. It's terrible.
Speaker 3: It's terrible. Why we've just been coming to all these riches.
Speaker 3: The mind has a reset point that brings you down
Speaker 3: into what you're used to feeling and the kind of
Speaker 3: mental space you're used to inhabiting. How do you break
Speaker 3: out of that and increase your upper limits so you
Speaker 3: can continue to scale in your life and in your career,
Speaker 3: in your personal life and so on. Fascinating quick read.
Speaker 3: Big Leap by Gay Hendrix Highly recommended. I'm reading a
Speaker 3: book right now. I'm only about thirty pages into it.
Speaker 3: Called the Mind Matters. Back to my thematic about mental
Speaker 3: and understanding how the mind works and mental health. Mind
Speaker 3: Matters is by a professor who talks about how the
Speaker 3: mind can often visualize things into reality. So you hear
Speaker 3: this phrase called manifestation a lot. This is a neuroscientist
Speaker 3: studying what that means in terms of how the brain
Speaker 3: fires to try to make things into reality for us.
Speaker 3: Fascinating thirty five pages or so. So far so early innings,
Speaker 3: but it's gone.
Speaker 2: Well, really interesting. And our final two questions, what sort
Speaker 2: of advice would you give to a recent college grad
Speaker 2: interested in a career in private markets or finance.
Speaker 3: My number one piece of advice to anybody entering finance
Speaker 3: is play the long game. Too many young people, I'm
Speaker 3: sure that you come across, Berry, that I come across,
Speaker 3: are all about the short term hits and the short
Speaker 3: term wins. If it doesn't work out, they move on
Speaker 3: and they try to make it work somewhere else, and
Speaker 3: they move on again. A rolling stone gathers no moss,
Speaker 3: and especially in finance, it's a world that ends up
Speaker 3: being one, maybe two degrees of separation. It's a world
Speaker 3: in which relationships still really, really matter, and you have
Speaker 3: to cultivate them. Thinking about a ten to twenty year
Speaker 3: career in mind, not what can this person do for
Speaker 3: me today, or this week, or this month or immediately.
Speaker 3: And that is I think one of the most profound
Speaker 3: pieces of advice I leaned into early in my career.
Speaker 3: Looking at every human being as a long term investment
Speaker 3: of time and energy, not looking for quick paybacks, same
Speaker 3: with investment investing in private equity, but certainly true when
Speaker 3: it comes to people.
Speaker 2: Really interesting and our final question, what do you know
Speaker 2: about the world of private equity today? You wish you
Speaker 2: knew twenty plus years ago when you were first starting out.
Speaker 3: What I know now that I wish I knew back
Speaker 3: then is that the market will change and adapt even
Speaker 3: faster and more furiously than you ever thought possible. Did
Speaker 3: we see the trillions of dollars in the private equity
Speaker 3: primary market?
Speaker 1: No?
Speaker 3: Did I see the secondary's market growing to one hundred
Speaker 3: and fifty billion on its way to a trillion dollars itself, No,
Speaker 3: So the growth will far outpace your wildest dreams, both
Speaker 3: in your own industry but also in the finance world
Speaker 3: around you. Think about twenty years ago, had you and
Speaker 3: I ever envisioned the mag seven and the trends we're
Speaker 3: seeing in technology and how markets would be at the
Speaker 3: levels they are today, not even in our wildest dreams.
Speaker 3: So as I think about the next twenty years, I
Speaker 3: keep that in.
Speaker 2: Mind really really interesting. Thank you, Sanana for being so
Speaker 2: generous with your time we have been speaking with. Sanna
Speaker 2: Sinhachi is the global head of the Private Capital Advisory
Speaker 2: Group for Raymond James. If you enjoy this conversation, well,
Speaker 2: be sure and check out any of the previous five
Speaker 2: hundred and forty we've done over the past ten and
Speaker 2: a half years. You can find those at iTunes, Spotify,
Speaker 2: Bloomberg YouTube, wherever you find your favorite podcasts. And be
Speaker 2: sure and check out my new podcast At the Money,
Speaker 2: short ten minute conversations with experts about topics affecting your money,
Speaker 2: earning it, spending it, and most importantly, investing it At
Speaker 2: the Money, in the Masters in Business, feed or wherever
Speaker 2: you find your favorite podcasts. I would be remiss if
Speaker 2: I did not thank the Cracked team who helps us
Speaker 2: put these conversations together each week. John Wasserman is my
Speaker 2: audio engineer. Anna Luke is my producer. Sean Russo is
Speaker 2: my researcher. Sage Bauman is the head of podcasts here
Speaker 2: at Bloomberg. I'm Barry Ritolts. You've been listening to Masters
Speaker 2: in Business on Bloomberg Radio.