Why isn’t manager section like Nando’s, Henry the Hoover is coming for you and how to avoid a new boss. Pieces I’ve been reading this week.
Adam Grimsley
Working with family offices and pension schemes to access the opportunity set in private and alternative credit.
Thought I’d share a few pieces I found interesting over the last week or so.
I’d love to hear any other suggestions!
Citi - Rise of AI Robots
This Citi piece starts with the rather chilling tagline, “Physical AI is Coming for You”. This comprehensive piece, 83 pages, looking at physical AI such as cars, caring robots, humanoids and vacuums apparently the latter being 25mn robovacs by 2050. Well if Henry the Hoover wants to take his chance then bring it!
The piece sets out the use cases, developments, challenges and addressable market with examples of companies leading the charge to meet a $7trn TAM.
UBS - semi-annual Private Markets report
A semi annual report into private markets in a higher rate environment. There is even a quote from a German comedian, well I say comedian…
In general it seems that smart managers will do better…And I have seen a lot of interest in asset backed, shorter maturity niche sectors. I think they will do we well this year in fund raising.
Private Credit Meets Regulators: Who’s Lending, Who’s Watching?
Following on from the Financial Stability report, I mentioned last week, here is a piece from S&P about the perceived risks of a higher share of capital going to PC. It is certainly true that leverage has increased in the system which is a concern, if that leverage isn't particularly transparent, however this flexibility can be a valve to let off pressure on interest payments for fundamentally solid companies where markets are temporarily strained. PC was also “traditionally” protected by the lack of connectivity to other larger institutions, this is changing so naturally regulators are encumbered to assess this potential vulnerability.
Big Fish or Small Pond? The Perks of Picking Investment Management
Another thing I have been ruminating on what’s best big or small? Probably deserves a bigger piece.
Why can't life be simple? Why can't it be like Nando’s?? Half chicken, corn on the cob, pretend to think about mash potato before choosing chips. Simples.
“Preqin data shows that buyout funds under $250mn from the 2020 vintage year generated a median net IRR of 25.7%, outperforming $1bn-plus funds, which had an IRR of 14.6%.’
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But this comes with surprise,surprise more risk!
“The standard deviation of net IRR for buyout funds under $250mn is 29.8%, compared with only 10.4% for funds over $1bn. A dispersion this high makes the art of manager selection even more important.”
If we do think 2025 will bring more reward but more volatility this dynamic is likely to get only bigger…as is my Nando’s consumption.
DC consolidation
There has been a lot said about the Mansion House speech, of varying quality. Everyone is seems it duty bound to have an opinion. Bit I think this short piece is pretty sensible.
Additionally I certainly think consolidation will only help private markets allocations.
Apollo - Financing the Renaissance
Not sure Apollo are quite the Medici family but maybe they are just what the doctor ordered. Hands up if anyone gets the pun here..still private markets will certainly play a role in new and emerging industrial megatrends.
Private Equity - People make businesses not numbers (although they help)
I was at a PE value growth conference a few weeks ago and on of the most interesting topics was about adding value through people in charge of revenue growth, value creation, although the most common theme was to fire the CFO. Tough gig.
But here is a piece about how PE are going about getting the right people in the right roles.
Venture Debt - When you need money but not a new boss
Much to the relief of CFOs everywhere, see PE piece article, venture debt is growing, apparently on target for a record 25bn Euros this year probably because deal flow has been so muted and as previously was the realm of banks, government agencies which may not be quite so prevalent.
The traditional objection still remains of protection on the downside for an early stage, non profitable company is not always possible.