Podcast: Fund Shack

Douglas Hansen-Luke, Future Planet Capital

September 20, 2023
Ross Butler

Fund Shack

Douglas Hansen-Luke, Future Planet Capital

00:00 / 00:39:27

In this Fund Shack private equity podcast, Ross Butler of Linear B Group speaks with Douglas Hansen-Luke, founder of Future Planet Capital.

Douglas explains how the firm runs a portfolio of mandates for purpose-oriented institutional investors across the world. He defines Impact, and explains how to measure it, as well as how to assess and manage the risks of unintended consequences (negative impact).

Future Planet Capital also has exceptional links to the world’s leading universities and Douglas gives the inside scoop on the ins and outs of harnessing the very best ideas for commercialisation. Most famously, the firm backed the Oxford Vaccitech T-cell Covid vaccine directly from the university to lab, and saw it list on the Nasdaq stock market in 2021.

Other investments include Roslin Technologies, a fake meat business from the university that brought you Dolly the Sheep, Tokamak Energy, a fusion business feeding into a future low carbon energy grid and Tropic Biosciences, a cutting edge gene editing company.

Douglas has also been on the frontline of efforts to allow UK pension funds to invest in private equity and venture capital, and he explains why the latest ‘Mansion House reforms’ make sense for pensioners and for Britain.

???? If you are interested in impact investing, you may also want to check out Travers Smith’s Alternative & Sustainability Insights Briefing. Check out the latest edition, looking at the rewards and risks around collaboration between companies in order to achieve sustainability goals: https://www.traverssmith.com/knowledge/alternative-and-sustainability-insights/

Jonathan Blake, Herbert Smith Freehills

May 16, 2023
Ross Butler

Fund Shack

Jonathan Blake, Herbert Smith Freehills

00:00 / 00:32:18

Jonathan Blake is head of international funds strategy at Herbert Smith Freehills.

In the 1980s, Jonathan was responsible for devising the very first limited partnerships for venture capital and private equity in the UK and Europe, and was responsible for convincing the British government that these closed-ended funds were a legitimate structure and valuable business for the economy.

He is also responsible for four decades of carried interest being taxed as capital gains.

This podcast with Linear B Group‘s Ross Butler is the untold story of the birth of European private equity by the lawyer who was at the table and holding the pen when it all began.

In this Fund Shack private equity podcast, Jonathan recounts his journey, which began in the early ’80s when he joined a startup firm called SJ Berwin.

His career took a turn when he was tasked with understanding and structuring a venture capital fund. At the time, limited partnerships were relatively unknown in this context, but Jonathan, with the guidance of influential colleagues, successfully navigated the complexities to create a tax-efficient structure for venture capital investment.

The conversation touches on the evolution of private equity and venture capital, highlighting how limited partnerships, initially an untested concept, became the standard structure in Europe.

The podcast sheds light on the challenges faced in persuading tax authorities and shaping regulations to accommodate this new industry.

Jonathan’s contributions played a crucial role in laying the foundation for what is now a thriving private capital market.

Today, Jonathan continues his work at Herbert Smith Free Hills, advocating for private capital and helping the firm adapt to the evolving landscape of unquoted companies and private markets, emphasizing the benefits of this approach over traditional publicly listed companies.

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Trevor Hope, Gresham House

March 24, 2023
Ross Butler

Fund Shack

Trevor Hope, Gresham House

00:00 / 00:31:33

Trevor Hope is Chief Investment Officer of Gresham House Ventures, the growth capital arm of one of the UK’s oldest companies.

In recent years, the firm has been growing rapidly, consolidating the market for Venture Capital Trusts, tax-break vehicles for individual investors to access growth business in the UK.

In this podcast with Ross Butler of Linear B Group, Trevor discusses:

the firm’s approach to value creation with the use of internal talent operating partners who support the building out of managerial capacity in portfolio companies;
how they identify investment themes and source deals;
the threats and opportunities of AI;
the value of IP vs the operational ability to take market share;
and the firm’s plans to expand its VCT offering and complement it with limited partnership funds.

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Macfarlanes: politics, funds & private markets

March 3, 2023
Ross Butler

Fund Shack

Macfarlanes: politics, funds & private markets

00:00 / 01:00:17

The so-called perma-crisis of political and economic volatility witnessed in the UK, and beyond, has made the business of raising and investing long-term funds is even more uncertain than usual.

To help private markets practitioners navigate these choppy waters, we spoke with David Gauke, Damien Crossley and Shailen Patel from Macfarlanes.

David Gauke is one of the most senior former politicians to be working in private markets today. He was responsible for the UK’s tax system as Exchequer Secretary to the Treasury and then Financial Secretary to the Treasury, followed by Chief Secretary to the Treasury, Secretary of State for Work and Pensions, and Lord Chancellor. He is now head of public policy at Macfarlanes.

Damien Crossley is head of tax and reward at Macfarlanes, where he advises fund managers on fund formation, remuneration and investment structuring.

Shailen Patel is head of the firm’s corporate advisory, focusing on financial, strategic and regulatory matters for asset managers and private markets.

The trio are ideally placed to appraise the market context for private capital participants in 2023.

In this Fund Shack private equity podcast, we discuss the industry’s inclination towards retaining ownership of assets rather than opting for sales. This transformation is observed as a conceptual move, with ramifications extending from the listed market into the private sector.

The discussion looks at the dynamics of asset management consolidation, succession planning, and the considerations faced by founders of asset management businesses. The industry is undergoing substantial changes, mirroring historical shifts in the financial sector.

The conversation also touches on the evolving sources of capital in the fundraising landscape, including diversification beyond established financial centres. However, the stability of regulatory regimes, especially in the UK, remains paramount in attracting and retaining investment.

We touch on Environmental, Social, and Governance (ESG) factors, which must be adapted to local preferences and nuances, making fundraising strategies more complex.

Laura Dillon, Waterland Private Equity

January 25, 2023
Ross Butler

Fund Shack

Laura Dillon, Waterland Private Equity

00:00 / 00:39:24

Laura Dillon leads Waterland Private Equity‘s Dublin office, which she established in 2020. Laura has had a varied career both in private equity and business. She has worked at several private equity firms, including Apax Partners and Riverside, and set up a distribution business with her family that was sold to a corporate acquirer.

In this podcast, with Ross Butler of Linear B Group, she talks about her career to-date, the opportunities in the Irish private equity market, and her experience of working within Waterland’s international mid-market investment operation.

Her career has been marked by a series of transitions and success stories within the private equity sector.

The opportunity to lead Waterland’s Irish office came unexpectedly when the firm announced its plan to open an Irish branch. Laura initially dismissed the idea but reconsidered when approached by a headhunter who recognized her potential. Waterland’s reputation for being entrepreneurial and its track record of impressive returns were key factors that drew her to the firm. Laura’s unique connection to Dutch culture through her passion for sailing with a Dutch team also gave her valuable insights into Waterland’s transparent and egalitarian culture.

Upon returning to Ireland, Laura took on the challenge of building Waterland’s Irish office from scratch. Despite facing personal and external challenges, such as a skiing injury and the onset of COVID, she successfully managed to establish and grow the office. Waterland’s focus on partnering with business owners and entrepreneurs to accelerate company growth resonated with Laura’s vision. She also discusses how Waterland employs a buy-and-build strategy to support companies in fragmented markets, expanding internationally through acquisitions.

In terms of the Irish private equity landscape, Laura emphasized that the market has evolved over the years, with an increasing number of domestic and international firms showing interest in Irish companies.

Waterland’s unique position as an international private equity firm with an on-the-ground presence in Ireland allows it to collaborate closely with Irish businesses seeking to expand globally. Laura also highlighted Ireland’s favorable tax environment and its attractiveness to multinational companies as factors contributing to its appeal as a business hub.

She expressed optimism about Waterland’s growing pipeline and its potential to further enhance the Irish private equity ecosystem while maintaining collaborative relationships with other local firms.

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Paul Newsome, Unigestion

December 14, 2022
Ross Butler

Fund Shack

Paul Newsome, Unigestion

00:00 / 00:46:28

Paul Newsome is head of portfolio management at Unigestion, a Switzerland-based asset manager with a global private markets platform.

Paul has been at the firm for two decades, during which he has set up its private markets operation in North America, and has been instrumental in establishing its directs, co-investment and secondaries programmes.

In this discussion with Ross Butler of communications business Linear B Group, Paul reveals the international growth story behind Unigestion’s expansion across private markets investment, how the asset manager makes effective investment-decisions (with reference to their proprietary AI tool), his reading of the prevailing market volatility and what it means for investors and the asset class, and his outlook for further industry growth.

If you want a crash course in private markets asset management at the turn of 2023, you are in the right place.

The Fund Shack private equity podcast – overview

Paul discusses various aspects of private equity and investment decision-making. He begins by highlighting the importance of an AI-driven machine learning model that analyzes 40 variables to predict the performance of private equity deals. These variables encompass factors like Earnings Before Interest, ESG criteria, sector performance, and macroeconomic indicators. This tool has demonstrated impressive accuracy, helping guide investment decisions by providing probabilities for deals achieving better than 2x returns.

Paul also delves into the challenges facing the private equity market, including a drop in fundraising and increased concentration among larger managers. He notes that private market valuations have been less affected by recent economic uncertainties compared to public markets. Secondary markets are another focus of discussion, with Paul explaining their preference for more concentrated portfolios and participation in GP-led deals and LP stake acquisitions. He anticipates that secondary pricing may change as LPs become more motivated to sell, and valuations adjust accordingly.

The conversation touches on investment strategies, including the importance of vintage diversification and investing in fundamentally sound companies with robust cash flows and long-term growth potential. Paul briefly mentions UniCredit’s growth and scalability within the private equity industry, emphasizing that while growth is possible, there are limits to how much they can scale certain strategies.

Overall, Paul provides valuable insights into the private equity industry, the role of AI in investment decision-making, market challenges, and the strategies employed by his firm, UniCredit, to navigate the evolving landscape of private markets.

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David Larsen, Kroll

July 29, 2022
Ross Butler

Fund Shack

David Larsen, Kroll

00:00 / 00:52:50

David Larsen has been at the forefront of alternative assets valuation policy for several decades. He is managing director at Kroll, which was acquired by Duff & Phelps in 2018, and advises many of the largest alternatives institutions on private equity transactions and valuations policy. He has been vice-chair of IPEV – the International Private Equity and Valuations Board; and he is a member of the International Valuations Standards Council (IVSC).

In this podcast with Ross Butler of Linear B Group, David explains how managers should approach valuation in times of high volatility, providing a strong defence of why fair value is in the best interests of both managers, investors and the wider alternatives market, and insider’s view into the latest accounting standards changes and their implications for private equity valuations.

In this episode of the Fund Shack private equity podcast, we look at the core concept of fair value, which David Larsen defines as the amount one would receive in an orderly transaction. He emphasized the significance of market participant assumptions and elucidated the challenges of applying fair value to illiquid assets, a prevalent scenario in alternative investments. Throughout our conversation, the pivotal role of valuation professionals in accurately assessing fair value and the role of transparency in aiding investors to make well-informed decisions remained at the forefront.

We explore the role of fair value in the context of economic downturns, such as recessions or depressions. David Larsen illuminated the crucial aspect of transparency that fair value accounting brings to the table, helping to mitigate asset allocation imbalances. We also tackled the misconception that fair value was the root cause of the 2008 financial crisis, clarifying that fair value rules are designed for orderly transactions, not fire-sale pricing.

In the latter part of our engaging conversation, we delved into recent developments in fair value accounting, particularly a noteworthy change introduced by the Financial Accounting Standards Board (FASB). This change disregards contractual restrictions on equity securities when determining fair value, a decision that sparked skepticism from David Larsen. He laid out the unintended consequences and complexities this alteration introduces, especially for limited partners who report under US accounting principles.

Overall, this episode of the Fund Shack podcast offers a comprehensive exploration of fair value accounting’s profound implications for the private equity, venture capital and alternative investment landscape. It illuminates the challenges and intricacies involved in valuing assets transparently and accurately, providing valuable insights for professionals navigating this dynamic and critical field.

Michael Lindauer, Allianz Capital Partners

June 9, 2022
Ross Butler

Fund Shack

Michael Lindauer, Allianz Capital Partners

00:00 / 00:40:57

Michael Lindauer is co-CIO of Allianz Capital Partners. He joined the institution in 2003 and has been an influential decision-maker with regards to backing private equity managers, and a respected and informed LP. He is based in Europe and has responsibility for ACP’s global private equity investment programme.

He talks to Ross Butler of Linear B Group about Allianz’s investment business and market-view, approach to GP selection and terms, and much more. This is a must-watch conversation for any private equity manager who wishes to understand how an experienced and thoughtful institutional investor approaches fund investment opportunities.

In this Fund Shack private equity podcast, Michael discusses various aspects of private equity, including its growth potential compared to public equity markets and the importance of maintaining good governance models. He mentions the potential for private equity to gain market share from public equity over time, given its strong governance. Michael also emphasizes the importance of evaluating managers based on their track record, portfolio, and cultural fit. He highlights the significance of understanding a manager’s decision-making process, team dynamics, and succession planning in the due diligence process.

Michael discusses the growth of private equity firms and how their operational processes have evolved with their size. He touches upon the competition in the industry, emphasizing that competition remains relative regardless of the firm’s size. Terms and fee structures in private equity funds are discussed, with Michael noting that while some changes have occurred at the margins, the basic model of 2-and-20 fees remains largely intact.

The conversation delves into the topic of holding periods in private equity investments and the challenges of extending them. Michael suggests that longer holds can be beneficial if they result in higher returns. He also touches on the evolving role of technology and healthcare in the private equity landscape, emphasizing the need for adaptability as market dynamics change.

Regarding his own organization’s ambitions, Michael discusses their growth plan, particularly in expanding their program to external clients. He notes that their ambition is to grow the second leg with external clients while maintaining a diversified client base, which includes pension funds, family offices, and insurance companies.

Michael concludes the podcast by stressing the importance of open communication between limited partners and general partners in private equity. He believes that maintaining transparency and building personal relationships is crucial to a successful partnership.

Jim Strang, private markets – the inside track

April 29, 2022
Ross Butler

Fund Shack

Jim Strang, private markets - the inside track

00:00 / 01:11:33

Jim Strang is chairman of HgCapital Trust, a senior adviser to CVC Capital Partners, independent director at the Business Growth Fund, a senior adviser at Bain & Company, an advisory director at Campbell Lutyens, a Fellow at the London Business School, and a senior adviser at Hamilton Lane.

Back by popular demand, this is Jim’s second time on Fund Shack. We talk about the state of private markets and how the industry grows from here.

Inside this Fund Shack private equity podcast…

David Ewing, ECI Partners

March 16, 2022
Ross Butler

Fund Shack

David Ewing, ECI Partners

00:00 / 00:43:19

David Ewing of ECI Partners talks to Ross Butler on the Fund Shack private equity podcast…

David joined ECI Partners, one of the UK’s oldest buyout funds, in 2001 and is now co-managing partner. He started out in software and has completed several landmark deals, including the UK’s first buyout of a native digital business and the UK’s first buyout of a native SaaS business.

We talk about software investment, the UK’s competitive edge, originating deals in the mid-market, expanding internationally, and the prospect for private equity returns.

David underscores the significance of adaptability and staying current in an industry characterized by constant change. David emphasizes the core mission of private equity, which is to identify and collaborate with innovative and passionate management teams to elevate good businesses into exceptional ones. He highlights the importance of being an appealing partner to decision-makers, frequently founders, and the role of experience and humility in nurturing successful partnerships.

David sheds light on ECI Partners’ approach to private equity, characterized by its adaptability and avoidance of a one-size-fits-all model. The firm tailors its strategies to each unique situation, recognizing that businesses come with their own architectures, platforms, and legacies. He mentions that a focus on product management, particularly in the United States, plays a crucial role in the success of portfolio companies. David discusses the challenges of managing succession in businesses acquired from founders and underscores how ECI Partners often supplements the management teams to drive business growth.

The conversation also touches upon ECI Partners’ diverse portfolio, which includes companies located in commuter belt towns and industrial areas across the UK and beyond. David explains the importance of expanding the international footprint of portfolio companies to tap into niche markets with sustainable growth drivers. He cites examples of portfolio companies successfully expanding to North America, emphasizing that international expansion often requires both organic growth strategies and strategic acquisitions.

David then provides insights into the challenges and pressures faced by co-managing partners in the private equity industry. He reflects on how the industry weathered the challenges posed by COVID, highlighting the resilience and adaptability of private equity. He emphasizes that private equity has become an increasingly attractive asset class for investors and a long-term solution for business owners and managers. Contrary to the belief that more capital inflow would lead to lower returns, he points out that historical data suggests otherwise, with private equity consistently delivering strong and stable returns.

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