Hey there, I’m Michael, and welcome to AGM — your one-stop hub for all things private markets. I’m thrilled to introduce you to our weekly digest, the AGM Alts Weekly, where every Sunday, I delve into the latest happenings, trends, and insights reshaping private markets. With every edition, you’ll find a curated mix of news articles, thoughtful commentary, a market index of publicly traded alternative asset managers, job opportunities within private market firms, and some recent podcasts and thoughtful articles from Alt Goes Mainstream.
Consider this your go-to resource for staying informed and navigating the dynamic landscape of private markets — ensuring you and your firm are always ahead of the curve.
Let’s dive into an ongoing challenge within the industry. For ages, private equity funds have been burdened by outdated methods like spreadsheets and disjointed documents, making the tracking of complex investments tedious and prone to errors. It’s a wildfire drill each time a regulator or an investor knocks on your door. Enter DealsPlus. At DealsPlus, we revolutionize the way private equity funds operate by digitizing investment and ownership structures, effectively banishing data silos. Our technology streamlines core processes such as quarterly reporting, audits, compliance, and exits. Want to learn more about how we do it? Learn more about DealsPlus.
Hello from Washington, D.C., where I’m gearing up to fly to Phoenix for the iCapital’s Connect conference. I’m set to lead an enlightening discussion with Dan Parant from Vista Equity Partners and Juliet Zawedde on how AI is driving enterprise software investment and value creation. We’re even exploring if the ‘Rule of 40’ could transform into the ‘Rule of 60.’ If you’re at the conference, look out for me!
Having returned to D.C. Friday night, I couldn’t resist dropping by my beloved pizza spot, 2AMYS Neapolitan pizzeria. For those in the know, 2AMYS is a staple of the D.C. pizza scene. Their pizza consistently earns top restaurant rankings thanks to a sublime crust and an enchanting combo of tomato sauce and mozzarella di bufala. And there’s a reason their crust stands above the rest; the founders have perfected their craft by learning directly from Naples’ finest.
But here’s an observation from my visit. Despite its reputation, my recent pizza experience was off — the crust was a bit burnt, lacking its usual chewy softness. It made me ponder the balance between growing large to serve broader markets and staying small to preserve quality. This dilemma isn’t unique to the food industry; it’s akin to the alternative asset managers’ quest for expansion. Should they remain boutique or scale up and risk quality? Londoners might tell you how scaling affected local favorites Franco Manca and Pizza Express, both of which expanded with private equity backing. Napoli on the Road is facing a similar crossroads too.
Is scaling crucial for firms with grand ambitions? And if it is, can they grow while maintaining their artisan touch? This notion of maintaining quality amidst growth fueled multiple discussions this week.
In a recent conversation with Marc Zahr, Blue Owl’s Co-President at Future Proof Citywide, we explored how and where scaling makes sense, corroborated by their $1.1T investment needed for future data center capacity.
Marc’s journey is telling. Starting small from Oak Street Real Estate Capital, which began with just $17M, Marc embraced an underutilized strategy: the triple net lease, keeping the tenant liable for all expenses including property taxes and insurance. Marc and his partner, Jim Hennessey, took this model and catapulted it to a multi-billion dollar firm, eventually merging with Blue Owl in 2021 through a $950M acquisition, accessing new scales of fundraising and deal-making.
They illustrate how scaling helped Blue Owl engage with large companies like Amazon through appealing propositions like the triple net lease strategy, vital for controlling operations and aiding in future rent visibility which benefits corporate planning.
In contrast, take middle-market private equity strategies, showing performance advantages by remaining small, as highlighted by JPMorgan’s Tyler Jayroe, who found that sub-$3B buyout funds have outperformed their larger counterparts significantly.
Yet, larger buyout firms like BlackRock or GIP can execute monumental deals, like the Colossal Panama Canal transaction, due to their available capital and size, presenting a less competitive match for smaller investors.
Data from Hamilton Lane emphasizes that middle-market companies’ EV/EBITDA ratios are lower, providing pricing leverage that large firms might not have given their higher entry fees.
The conundrum arises: as funds expand and seek larger deals, where do exits lie? Perhaps IPO markets will regain favor as a completion mode or evergreen funds’ structures will hold large scaling assets.
But amidst the quest for growth, maintaining the authentic touch that contributes to early success remains critical. Client relationships matter, as Angela Miller-May, CIO of Chicago Teachers’ Pension Fund, once described how Oak Street’s small scale facilitated genuine client interactions fostering trust. Such relational foundations should guide the wealth channel’s expansion ensuring every investor feels valued.
Altogether, whether staying boutique or going big, ensuring the investment returns — the product’s quality — stays top-notch is paramount, resonating across small or large-scale platforms.
We’ve created an index to monitor the largest publicly traded alternative asset managers, offering a window into private markets’ investor perceptions through net inflows and allocations into alternative investments.
If you’re looking to explore more on this topic or leverage some insights and jobs in private markets, feel free to reach out, share this newsletter with others who share your interests, and subscribe below for more enriching private market stories.
Let’s stay connected, and feel free to send suggestions or recommend content for future editions or podcasts. Special shoutout to Michael Rutter and Nick Owens for their valuable newsletter contributions. Partner with Alt Goes Mainstream to explore further opportunities and delve into our archive of insightful podcasts and articles covering the evolving landscape of private markets.
