The Democratization of Private Markets with moderator: Moira Forbes, President and Publisher, ForbesWomen and EVP, Forbes and panelists: Anne Valentine Andrews, Global Head of Private Markets, Manulife Investment Management, Suyi Kim, Global Head of Private Equity, CPP Investments and Bruce Lee, Founder & CEO, Keebeck Wealth Management.
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LifestyleTranscript
00:00For the next conversation, the democratization of private markets,
00:04please welcome moderator Moira Forbes,
00:07President and Publisher, Forbes Women, and EVP, Forbes,
00:11and panelists Anne Valentine Andrews,
00:14Global Head of Private Markets,
00:16Manulife Investments Management,
00:18Sooyi Kim, Global Head of Private Equity,
00:22CPP Investments, and Bruce Lee,
00:25Founder and CEO, Keebeck Wealth Management.
00:29I feel like my brain has gotten bigger
00:31in just a matter of a few short hours,
00:34and it's going to continue to do so with my panels.
00:37My panel right now, I'm so excited because this morning,
00:41we've been talking about the transformative forces
00:44reshaping the landscape across the industry.
00:47And what I love is while there's definitely headwinds
00:50and some dark clouds and concerns,
00:52there's lots of opportunity as well.
00:55And today we're going to talk about
00:57the democratization of private markets.
01:00What are the forces at hand?
01:02Where are we in this process?
01:03And what does it mean for the different stakeholders
01:06really as we're in the nascent stages of this?
01:08And I love this conversation because we have leaders
01:11across a number of different areas of the ecosystem.
01:14So thank you so much for joining us today.
01:17Anne, I'm going to start with you.
01:18I'll reach over a little bit.
01:20Manulife Investment Manager,
01:22you're a leading global asset manager.
01:25You have a really diverse private markets platform.
01:28You're focused on investments through a sustainability lens,
01:31positive impact and the like,
01:33but you have also extraordinary exposure and depth
01:36in a number of different areas.
01:38To level set this conversation,
01:40I would love to have you share your perspectives
01:43on how the private market has evolved
01:46before we go into maybe some of the trends
01:48as to where the specific areas of investment opportunity are.
01:52But what are these mega trends?
01:53And from your vantage point,
01:55how do you see where we are today?
01:57Yeah, great.
01:58And thank you.
01:59And it's great to be here.
01:59I think the last time I was in this room,
02:01I was at an Australian-American ball.
02:04So it's great to be here and to see everyone.
02:06Thank you to Forbes for hosting.
02:08So I've been around for a while now.
02:10And the beauty of that is that you do see
02:13how much things have changed.
02:15And so the big thematics in the world of privates
02:19are a huge diversification.
02:22Things have really broadened out.
02:25You mentioned infrastructure,
02:28where the leaders in natural capital.
02:31But if I went back in time 10 years,
02:33most people were just talking about private equity.
02:35That was really the big game that was in town.
02:37Everything was private equity funds.
02:41And even the big private equity firms
02:43weren't very diversified.
02:45And so you fast forward to today
02:48and you think about all of the opportunities
02:51in the private markets.
02:53I always like to quote the statistic
02:55that there are way less companies in the public markets.
02:58So 30 years ago, there were 8,000 US public companies.
03:01Today, there's only 4,000.
03:03So if you wanna get access to where alpha is being driven,
03:06you wanna get access to the megatrends
03:08that we're gonna talk about,
03:09you have to participate in the private markets, right?
03:12It's essential to get access to these private markets.
03:15So the other big trend we're seeing is the democratization,
03:17which is obviously the panel discussion.
03:20Beforehand, it was just institutional investors
03:23who would be able to invest.
03:25I could invest because I worked in private markets.
03:28But if you were the average person on the street,
03:29you couldn't get access to all of these sorts of deals.
03:32So that's another huge trend.
03:34So expansion of asset classes, democratization.
03:38And you mentioned more of the megatrends.
03:41I think this is, you're gonna hear a lot about this today
03:44if you haven't already, decarbonization of the world, right?
03:48We need to urgently decarbonize everything.
03:50And it's not just the energy world.
03:52And energy is actually easy to decarbonize, right?
03:54Because you put up renewables and that solves that.
03:58But what about decarbonizing buildings,
04:01decarbonizing agriculture, decarbonizing meat?
04:04Cows are the worst thing on earth for the environment.
04:07So all of these different decarbonization trends,
04:11and then you add on AI, you add on digitalization,
04:16you add on how we're living, we work,
04:18we do everything on our phones, we shop on our phones.
04:22So just these huge megatrends are gonna continue
04:25to provide just private market opportunities, right?
04:29Because it's very hard if you're a listed company
04:31to invest in these early stage decarbonization measures.
04:36So I would say much more versatility,
04:38much more broad access, less public companies,
04:41and then also investing against these huge megatrends
04:46and that's what's happened.
04:48So things are changing fast.
04:50I mean, 10 years ago, we weren't talking
04:51about decarbonization at a conference like this.
04:54If someone said that, people would say,
04:56ooh, they're green, greeny people, right?
04:58That's just 10 years.
04:59So imagine where we're gonna be in another 10 years.
05:02And I would imagine that pace of change
05:03is gonna only accelerate.
05:06Suyi, Canada Pension Plan is one of the world's
05:10largest pension plans, over $600 billion Canadian dollars
05:14in assets under management.
05:16Huge scale, huge insight into this space.
05:19We were talking earlier about the private equity landscape
05:22and Anne mentioned just the sheer volume
05:25of private companies right now, lack of activity,
05:29a lot of dry powder and the like.
05:31How are you seeing this from your vantage point?
05:34How are you looking at private equity
05:37and where are the opportunities that may emerge
05:39for you all on the institutional side
05:42as the retail sector starts to open up?
05:45Okay, thanks, Moira.
05:47I'm really honored to be here.
05:48Thanks for inviting me for this session.
05:51I would agree with everything that Anne said.
05:53Lots of big trends that private investors
05:56can take advantage of.
05:57As Moira said, we have one of the largest
06:02private equity pool in the world.
06:05I manage currently about 110 billion US dollars
06:08of investments on the ground
06:11and that actually represents more than 4,000
06:14underlying portfolio companies.
06:16So I get to see big trends on what is happening
06:18in private equity markets as well.
06:21I would say that what I have seen in the last 10 years
06:24or plus is that this market has grown tremendously.
06:28So if you look at one segment of the private equity
06:30investments, buyout, which is one of the most active
06:33and high performing segment,
06:35it used to be a trillion dollars market.
06:37Now it's more than three trillion dollars.
06:40So that's one big trend that's growing really fast.
06:42But we all know that after the fast rate adjustment
06:45that we saw in 2022 and 23,
06:48private equity market is going through some adjustments.
06:51I would say that that is more like multiple adjustments
06:54that you need to see.
06:55It is natural because LBO model is run by
06:58your terminal value and multiple of EBITDA
07:01or multiple revenue that you're willing to pay for this.
07:04So we have seen for the last two years some adjustments.
07:07I am seeing now the activities picking up
07:09after some of those adjustments and lots of values
07:12of the private equity companies growing into the dollar sign
07:16with the fast growth that we're seeing
07:18for the underlying portfolio companies.
07:21One other trend, which is a topic of today's discussion,
07:23democratization of private markets.
07:25Yes, the retail investors coming into the private
07:29investments as well as private equity market
07:31is another big trend.
07:33When you step back and look at it, that's really natural.
07:36There are two big trends that you're seeing
07:38that enables those.
07:39One, I would say that lack of DPI.
07:42DPI is the cash distribution coming back.
07:46So one of the stats that I saw is that
07:49if you have invested $1 20 years ago in buyout,
07:54you would have received in DPI of cash back
07:57less than a dollar after 20 years.
08:00You'd be investing constantly, which generated good returns,
08:02but you haven't actually seen your cash money coming back.
08:06Venture and growth is even worse.
08:08You have gotten maybe, if you put $1,
08:10you have gotten 70 cents back as a cash back.
08:13So institutional investors need the DPI,
08:15money coming back to be able to reinvest.
08:18So where do you get the capital?
08:20It's natural that you look at the retail markets.
08:22So that's one big enabler.
08:24Second one is the technology.
08:26In the past, if you have a small ticket site
08:27to get into any private equity funds,
08:29you had to be $10 million at a minimum.
08:33Otherwise, you wouldn't take it.
08:34Otherwise, your fund will have too many investors.
08:37It will be too much burden,
08:38administrative burden for you to deal with.
08:40But with the technology that we have now,
08:43it is possible to have wider net and many more investors.
08:48I think that is making this possible.
08:51What does that mean for the institutional investors?
08:54We need to think about what our strategy is.
08:57With more supply of capital,
08:59it is natural that the return can get pressured,
09:02valuation could go up.
09:04Having said all those, I do have very firm,
09:06this is last point,
09:07very firm view that private equity has inherent advantage
09:12in a sense that it has the governance arbitrage.
09:15What do I mean by that?
09:17It's private equity has a very strong and motivated owners.
09:21They're really motivated to make two and a half
09:23to three times money in five to six years.
09:26And then they will find a way to make that work.
09:29But appreciate those thoughts of understanding
09:32from that vantage point, the retail investor.
09:35Bruce, you work with very high net worth families.
09:39And this is obviously a conversation, as you know,
09:42that's at the forefront of many of the individuals
09:45in this space.
09:46What's unique about high net worth individuals and families
09:49is they may have that multi-generational approach
09:51that allows them to maybe have a time horizon
09:53that's a little bit different
09:55from the retail investor and the like.
09:58When you're having these conversations
10:00and when you're looking at the opportunities
10:02for the high net worth individuals,
10:04where are they leaning into most?
10:07And what are the risks and the types of dynamics
10:10of this opportunity that they may not fully understand
10:14or appreciate yet?
10:16Well, first of all, that's a terrific question
10:17that really is difficult to just explain in a sentence.
10:22However, that being said,
10:25when you talk about generational wealth being transferred,
10:27so let's just go top down,
10:29and you think in terms of some $100 trillion
10:32that's gonna be transferred over the course
10:33of the next few years,
10:35that tailwind is so dramatic
10:38that you have to kind of take a look at the attributes
10:40of what that all means.
10:42And so when you have a patriarch of a family,
10:45they've built their wealth from 30, 40, 50 years ago,
10:48they're gonna have a completely different view
10:50on what they view as private markets.
10:53They might go into the standard buckets
10:54of leveraged buyout, structured credit,
10:56whatever those case may be.
10:58But then when you're talking about the second generation
11:00that is about to inherit these dollars,
11:03and then so if you think about this bottom-up statistic
11:06that in fact more millionaires
11:09are gonna be inheriting money
11:11than actually millionaires creating opportunities,
11:14that creates for very crowded spaces.
11:17So the dynamic that intertwines with both those parties
11:20and candidly, the younger generation,
11:22a little more aspirational, a little more risk-taker,
11:25but possibly as the old man would say, so to speak,
11:28hey, we gotta have outcomes that drive results,
11:32KPIs, whatever the case may be.
11:34Whereas if you take a look at the genuine disruption,
11:37the younger generation says, ah, I have an idea,
11:39and they're gonna go for it.
11:40So it's between those two dynamics
11:42where you have to create the discipline
11:44in order to create those outcomes,
11:47but you need to also have the idea.
11:49And that to me is where that dynamic tension exists.
11:52And so that's why you're seeing
11:54not only democratization of private equity,
11:57I personally think that although I believe these verticals
12:00from everything that we've been speaking about here
12:02in the panel are gonna continue to grow,
12:05it's the attribute of who's also gonna be an investor,
12:07which then is kind of what I think
12:09is the most undervalued space is women.
12:11And women are gonna basically take over that particular,
12:15well, okay, I'm here with.
12:16We are right now, Bruce.
12:18I have two daughters as well,
12:19so I'm literally surrounded by all women.
12:22But I find that there are different types of investors.
12:26And so as opposed to just talking about
12:28the democratization of private equity,
12:30it's the style in which that disruption is going to occur.
12:34Then you put on top of it AI, digitization,
12:40and these technology platforms.
12:41What I've been noticing, and I've said this before,
12:45back in the 80s and 90s when I was first an investor,
12:49you would just drop money into a large bucket
12:50and you'd drill deeply.
12:52Today, I view it as financial fracking.
12:54You have to go over a wider base, a longer path,
12:58shorter, more capillary type outcomes,
13:01not to suggest that if you're up the vertebra of investments
13:04that you're not gonna buy these larger funds
13:06because it's necessary in any important diet.
13:08But then when you start taking a look at the demographic
13:11and the disruption of that,
13:12you're talking about a market that could potentially
13:16possess a $10 trillion to $20 trillion market opportunity
13:20over the next 10 years, 20 years.
13:22That's gonna be predominantly, in my opinion,
13:24controlled by women.
13:25And a market opportunity where still wealth exists right now
13:28but isn't necessarily, there's a huge investment gap
13:31as it relates to women's participation
13:33in these opportunities. Gigantic.
13:35And you bring up a good point
13:37in terms of these larger macro forces,
13:39including who's investing and what their priority is.
13:43Anne, you talked about the importance of sustainability
13:47and this focus in terms of really the positive outcomes
13:51for the world in terms of the core pillars
13:53that you all are invested behind and the like.
13:57Can you talk about where you see those opportunities exist?
14:02You talked about timber, infrastructure, real estate.
14:06There's sometimes some misperceptions
14:08as to where opportunities exist within those sectors
14:12and where you see the greatest growth and dynamism
14:15the market may not appreciate right now.
14:18Yeah, I know.
14:19And again, at Man Your Life,
14:20we have a very broad platform, over 100 billion,
14:23across all of those sectors,
14:26credit, PE, real estate infrastructure, and timber and ag.
14:30We are the biggest leader.
14:31We are the number one leader of natural capital,
14:33which is taking care of our mother nature, so to speak.
14:38So trees are the original carbon sequestration tools.
14:43So it's important to think about that.
14:44And I don't think enough gets talked about
14:44in relation to that.
14:45But taking a big step back,
14:48I think the world has become much more complicated
14:52given the rate increases,
14:54given the DPI stats you talked about, right?
14:56It used to be, back in the day,
14:58private equity was very clear.
14:59It was much higher returning.
15:01Infrastructure, real estate, lower returning,
15:03and credit was down here.
15:05Now with the megatrends, decarbonization,
15:08digitalization, demographic, all of the things we're seeing
15:12and also just this change of interest rates,
15:15things are becoming a little bit more harder to discern.
15:18So I like to think,
15:20and given private markets is growing so much,
15:23I like to think that we're becoming more attuned
15:25to sort of thematic investments, right?
15:27Because as private investors,
15:29we can't trade in and out of a deal very quickly, right?
15:32We have to put money in the ground today
15:35and then someone's gonna buy that in 10, 15, 20 years.
15:38So I wish I had a crystal ball
15:41that's gonna project everything, but I don't.
15:44And frankly, I'm always interested
15:48that everyone thinks very, very close term, right?
15:52Like, oh, rates have gone down, rates have gone up.
15:53But the best thing is to be very diversified
15:56and get access to a lot of different asset classes
15:58because I don't care who you are,
16:00no one exactly knows what's gonna happen in the future
16:03apart from investing against these very large trends.
16:06Bruce, you just mentioned one,
16:08women are gonna become more in charge of capital,
16:11but also we know that the world needs to decarbonize.
16:14We know the world's growing in Asia
16:17and emerging markets more than it's growing here.
16:20We know people are getting older.
16:21We know people are living less well when they're old.
16:24I mean, all of these big trends,
16:25that's how I think about putting money against it.
16:27So we talk about decarbonization,
16:30investing into renewables, investing into storage.
16:34We invested into a company that builds battery storage
16:38in urban areas here in New York.
16:40Why?
16:41Because the wind doesn't blow and the sun doesn't shine
16:44always when you want it, right?
16:46And the grid is unstable at best.
16:49So we then need to have storage
16:51so that we can all turn our power on on days like today
16:54and not worry about brownouts.
16:55So all of these really important trends that are out there
16:59that we all know about, as a private markets investor,
17:02we're putting money behind.
17:03Same with natural capital, right?
17:06We wanna invest into sustainable forestry.
17:09We wanna invest into sustainable agriculture
17:12to be able to make sure our children and their children
17:15are gonna be able to live in this world
17:18and make money at the same time.
17:19I think that's the important point, right?
17:20None of this is charitable.
17:22So to me, that's the important thing,
17:25like putting money where we can make a big difference,
17:28but where we can also create value for our investors.
17:32And that is the big trend, right?
17:34These thematics that we're now investing against.
17:37And that's not green, that's just good business.
17:40And we believe that sustainability is good business.
17:45And those thematics,
17:46I think what I appreciate what you all do
17:48is that you create the products
17:49and the opportunities for access
17:52for retail investors and the like
17:55to be able to start to have entry points
17:57in these areas that are really important.
17:59So it's these themes that we're investing against.
18:02It's whose money is being invested on both sides,
18:05both in terms of wealth creation for women,
18:07but also in terms of women at the helm
18:10of these really significant institutions
18:13deploying capital such as yours, Suyi.
18:16We were talking earlier,
18:17when you look at your purview,
18:21you're not moving a ship, you're moving a freight car.
18:23I can't even describe just the size
18:26of the type of institution and opportunities
18:29that you're shifting and the scale that you have.
18:33I would imagine that there's a lot of opportunities
18:36to sort of make big bets, but as an aggregate,
18:39it may not move the ship necessarily.
18:41That being said, what are your perspectives
18:44as you're sitting in your chair right now
18:47that you think will have the strongest
18:49or likely have the strongest performance
18:51in the next 12 to 36 months
18:54that is shifting your perspective
18:56than maybe if we had this conversation five years ago?
19:00You can say that I'm biased,
19:01but I'm biased for private equity.
19:04Again, I have a huge faith in private equity asset class,
19:08and it provides, I would say just to settle down
19:10to two things.
19:11One is it provides a diversification
19:13and access to the part of the economy
19:16that you cannot access through the public markets.
19:19I talked about how many companies we have
19:21as an underlying portfolio companies.
19:22It's a huge part that unless you invest into private
19:25and private equity, you won't get that equity access.
19:28Second thing private equity provides
19:31is a long-term outperformance versus public markets.
19:35Despite the size that we have, $110 billion,
19:38we have for the last 10 years generated
19:40more than 16% net returns.
19:42That's net of all the operating costs,
19:44net of all the allocated costs, everything.
19:46So it, hands down, beat the public market returns.
19:49So this is an asset class we continue to firmly believe
19:52that will outperform.
19:55There are multiple strategies within private equity
19:58that I think at any given point that will do better
20:01than other type of strategies.
20:03Under me, there are all type of private equity strategies,
20:06whether it's a buyout,
20:07whether it's gross equity investments,
20:10whether it is Asia markets or the European markets
20:13or U.S. markets, whether it's a secondary,
20:15secondaries including LP secondaries
20:17or GP-led transactions, fund investments, all of that.
20:21I have all of those strategies.
20:22For example, for the last two years
20:24and including this year as well,
20:25the secondary business has been very active.
20:28And it provides very attractive risk-adjusted returns.
20:31And secondary business is a strategy
20:33that provides liquidity to the private equity industry.
20:36So given what I said earlier, that's natural.
20:39So I think that opportunity will continue to last.
20:42And I think the opportunity to buy very attractive businesses
20:45and then compound your returns
20:47for the private equity owners continue to be there.
20:50It's helpful to see where those openings
20:52and new windows are emerging.
20:54Bruce, as we wrap up, again,
20:57you work with family offices,
20:58high net worth individuals and the like.
21:02I would love to get your perspective
21:03on what this means for portfolio allocation of the future,
21:08the traditional ratios that family offices have approached
21:13and where you see them placing the biggest bets
21:17in terms of the types and breadth of opportunities
21:19that now exist in this space.
21:22I think the standard 60-40 model
21:24is something that's been so ground down
21:26over the last 30 to 40 years.
21:28You don't really even need an advisor for that.
21:30There's plenty of surrogates out there
21:32that you can pay literally no fees
21:34and accomplish those goals.
21:36So I think from the perspective
21:38of where advisors are going with their clients,
21:41as the panel has been speaking about,
21:43alternative investments are becoming
21:45a much, much greater discussion.
21:47But I think it's being camouflaged
21:49by talking about how these alternatives are equity-like
21:52or fixed income-like.
21:54And so there are some correlative aspects to it.
21:57And I think the most challenging thing,
21:59and I'll just kind of wrap this up for my theory,
22:01is the Federal Reserve was primarily subsidizing
22:05a lot of the risk for over the last 20 years.
22:07And today with an inverted yield curve,
22:10what we're seeing is a look and a view
22:13that makes most people feel uncomfortable.
22:15I think everybody is waiting for that next shoe to drop.
22:18I don't know when it's gonna happen
22:20and no one wants to be left holding the bag.
22:22So when you have an inverted yield curve,
22:24a Federal Reserve who really, really wants to lower rates
22:27but can't because the U.S. is so strong in its economy,
22:30the key isn't is alternatives the best place to be,
22:33which I agree with the panel it is, it's when.
22:37And so the discussion then revolves around
22:40what do we do to take less risk over a longer period of time
22:44and how do we monetize that risk
22:47for the next five to 10, 20 years?
22:49Because everybody knows if you invest pre-08,
22:53versus post-08, those outcomes are vastly different.
22:57And so I think that is where we are at this moment in time
23:00and I think that's where
23:01I think the conversations are revolving.
23:03So a new framework for approaching this.
23:05Well, thank you all for your insights
23:08and the optimism in terms of where the opportunities exist
23:11and what's ahead.
23:12Thank you.
23:13Thank you.
23:14Thank you.
23:15Thank you.
23:16Thank you.
23:16Thank you.