📝 Retail and the City: "Is everything we need to know in Sacramento?"
Written by Susan Long McAndrews, Former Partner, Pantheon
So much is happening at the intersection of private markets and private wealth — at such a dizzying pace — that it can be hard to cut through the noise.
There are so many different pieces to the private markets puzzle: a sea of investment strategies, complex asset allocation frameworks, new product innovation, endless amounts of educational materials, technology improvements, and operational challenges.
Alt Goes Mainstream aims to help put together the pieces of the puzzle and connect the dots for GPs and LPs alike that are navigating this rapidly evolving ecosystem.
Who better to help private markets and private wealth decode the biggest themes and challenges than industry experts who have helped to shape what private markets is today.
The latest Op-Ed on Alt Goes Mainstream features private markets pioneer Susan Long McAndrews.
She recently closed a meaningful chapter of her career as a Partner at Pantheon, which has over $71B in discretionary AUM.
Susan led Pantheon’s global business development team and overall capital formation and investor relations strategy. She was a member of Pantheon’s Executive Committee, International Investment Committee, and was the CEO of Pantheon Securities, LLC, a FINRA-registered broker-dealer. In her role with Pantheon, she worked with many of the GPs that have defined private markets.
Building Pantheon’s private wealth solutions and distribution efforts, Susan found a passion for bringing an institutional mindset to the wealth channel. She launched one of the first private equity evergreen funds at Pantheon, where she was the co-portfolio manager of the AMG Pantheon Fund. The fund, P-PEXX, was one of the earliest private equity 40 Act-registered funds designed for accredited investors and has since grown to $5.58B AUM.
She was at Pantheon for almost 23 years and also worked at Russell Investments and in the US Department of Defense in the Office of the Secretary of Defense, Asian & Pacific Security Affairs.
Please enjoy this Op-Ed by Susan, who brings a wealth of experience that combines thoughtful, strategic perspectives with practical, actionable advice to bear in private markets, private wealth, and how to best implement private markets in both institutional LP and wealth management LP portfolios to the AGM community.
Susan is an independent private markets specialist with no shortage of opinions. Passionate about the private ownership model and better investment outcomes for individuals. Buckeye born, UNC and Stanford educated, Fighting Irish by marriage. You can find her on LinkedIn here.
Susan Long McAndrews, Former Partner, Pantheon, Former CEO, Pantheon Securities, LLC
"Is everything we need to know in Sacramento?"
While private equity and private wealth were busy colliding in Beverly Hills and Berlin, a sleeper story was percolating inside the walls of state government.
Last month, CalPERS presented its Annual Program Review for Private Equity.
The update, presented by CalPERS Head of Private Equity and interim Head of Private Debt Anton Orlich, delivered good news for state taxpayers, but it also served-up lessons and warnings for the wealth channel.
Investing in private companies should be available to everyone but are today’s financial advisors looking to institutions for what to do … and more importantly what not to do?
Is everything we need to know in Sacramento?
The lessons from CalPERS are obvious in many ways, but they are challenging to implement even for experienced private markets investors.
Let’s dive into a few of the key takeaways.
Are you procyclical — too much at the top, too little at the bottom?
Of course you are. The nature of the private equity deal environment and its capital formation cadence is procyclical. When markets are open and capital is flowing, you will be investing more at the top, whether you intend to or not. Investors need to be hyper-disciplined to moderate (but can never eliminate) the procyclical risk. Creating a programmatic (not opportunistic!) approach to private equity is mandatory. Evergreens are a useful new tool for dollar cost averaging, although the asset manager is still subject to the core dynamic of deployment at the wrong time.
Do you really understand and know how to use the secondary market?
Probably not. Does your client have aging NAV that would be better put to work in new companies in more recent vintage years? Does your evergreen manger have assets it should sell? Absolutely. All investors have legacy NAV if they have a relatively mature program. The wealth channel needs new tech-enabled tools to execute, but selling and rebalancing is as important as the buy.
Are you tapping the best private companies in the mid-market?
Maybe. If you’re carefully selecting a direct fund portfolio and co-investments, you can stay on course. However, most investors stick with managers who are generating good performance, who will (I guarantee) drift upmarket due to growth ambitions. As the evergreen sector explodes, watch the shift. Large cap private companies can perform well, but know what your manager is doing and how to grade their efforts.
Can you successfully tap Venture and Growth?
BIG maybe. New company creation and the availability of follow-on capital for young companies are even more subject to the whims of market cycles. Best implementation requires a high bar for manager selection and a keen eye for talent. Implementing high quality venture and growth across a large client base is difficult, and while VC FoFs and secondaries are a scalable solution only relative to the overall access constraints.
Lessons for wealth platforms and advisors?
As CalPERS has shown, even the most sophisticated investors need to course correct. If you or your firm have been allocating to privates for over a decade, you already own the rebalancing and stage drift challenges. While portfolio management data and tools are improving, the “buy” of an individual fund remains the focus of time, energy and incentives. For new entrants or those looking to reset existing programs, model portfolios are a fabulous new development for investors. Their availability, access and professional approach is worth a look and more competition will only yield better options and results over time.
The CalPERS Private Equity Program 2024 Annual Review can be found here.
Alt Goes Mainstream’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Alt Goes Mainstream’s work may feature entities in which Broadhaven Ventures or the author has invested in.