The Exchanges

Q And then once you get back, you hop off your motorcycle and decide you're going to do something with your life?

A Exactly right. So I got back in the beginning of 1998 and I was very fortunate. I landed a job at a firm called Beacon Group, which was a great firm. It was half M&A advisory, half private equity, and it was a terrific initial professional experience for me. I had a lot to learn. And I had a great couple of years there. Ended up leaving Beacon to help my mom take her matchmaking business online during Internet One Point Oh. That was a great experience, but ultimately it wasn't a career for me, and I wanted to get back to private equity, so I went back to school, got an MBA, and I joined a private equity firm called Stone Point Capital.

AI assessment note: “Exactly right. So I got back in the beginning of 1998”

Q What was traveling in Africa like back then?

A For me, it was a unique experience in a lot of ways. It was independence. It was separation from a lot of the friends and family and support I had known. I was with two friends, and we spent the bulk of that trip, actually eight months, on motorcycles. Riding from Cape Town in South Africa to just north of Ethiopia. So we were, you know, really separated for parts of that trip from the kind of worlds that we had known, and it was an incredible experience. We camped outdoors, you know, night after night, and it was really all about people and the hospitable and, and fun and gracious people that we met along the way. And I, I took a lot away from that trip, including how far A dollar can go in different contexts, whether applied philanthropically or as investment capital. So I really learned a lot from that experience.

AI assessment note: “we spent the bulk of that trip, actually eight months, on motorcycles.”

Q So when you went to start Volery, what was the strategy you chose to pursue?

A Well, we started with a blank sheet of paper, and I should say the first thing I did was partner with my longtime friend, Danny Stein, who had collaborated with on investment thinking over time and had looked at deals with, but, you know, the stars never aligned to enable us to really Formerly partnered together, but they did in over the summer of 2017. And we, we formally launched that October. And again, we started with a lot to learn. We founded Volery to make private equity investments that generate positive social or environmental impact. And we quickly decided to focus on asset managers. Danny has run five businesses and ran a private equity platform. So he's a business builder. And obviously I had experience with With asset managers. And given our backgrounds, we thought the idea of investing in and helping institutionalize asset managers and helping make connections between Impact-oriented GPs and mainstream LPs could be a sort of force multiplier role that we might be able to help play in the space.

AI assessment note: “we thought the idea of investing in and helping institutionalize asset managers”

Q And as you've looked at that landscape, you mentioned looking for these bigger opportunities with thematic growth behind you. Where have you focused in, in that sort of broad landscape of managers?

A Well, one particular area that is topical, given where we are in the macro environment, and, and the, you know, the devastation of the coronavirus, and the, the significant layoffs that have happened, is a mandate that we recently signed with a group called Zoma Capital in Denver, which is a terrific, long-standing Values oriented investor, which is to focus on, on workforce development. So helping retrain upskill employees who, you know, we thought this was a very relevant category even prior to the coronavirus, but helping prepare people to retrain to meet changes in, um, The workforce. So that's a particular area of focus right now. There are several others within private equity. Healthcare and financial services present some opportunities that are, that are very interesting to us and that, you know, we think have An ability to scale and have real impact. And there's a lot for us to do in real assets. Sustainable agriculture was our first subcategory of interest and remains a sector where we hope to do more. Water is an area of interest for us and, and renewable and energy efficiency assets are, are of real interest to us too. There's a lot of attention being focused on workforce and, and people. When, you know, people think about impact, often they divide the world into people and the planet. It'd be easy to, to push off climate right now. And there, there is some concern i…

AI assessment note: “one particular area that is topical... is to focus on workforce development”

Q And how does that translate into what alpha means to you?

A Each of the letters does represent a vertical and alpha. It helps us understand how a manager evaluates the Environmental and social risks throughout the investment life cycle. It helps us measure and manage the resulting outcomes of their investments or how it helps them do that. It helps us do that as well. And then, and then thirdly, it helps us understand how effectively they apply those same principles within the operations of their own firm. So to give you an example, the first A in alpha stands for approach to ENS, and that's the framework beneath that helps us understand how they utilize environmental and social considerations in their diligence process, how they think about evaluating risks and opportunities related to those factors during underwriting, but then throughout portfolio management, how they set goals and action plans for their Portfolio companies and how they think about those considerations at exit. So approach to ENS is the first A in alpha. The L is leadership. So what's the buy-in again from, you know, the senior management and, and what sort of internal and external capacity have they committed to? Have they invested in that aligns with evaluating these sort of considerations? How do they engage with their stakeholders, their LPs, their Employees, the employees of their portfolio companies, the suppliers, et cetera, the entire stakeholder universe, wh…

AI assessment note: “Each of the letters does represent a vertical and alpha.”

Q As you walked through that, you know, the question popped in my mind of what's the structure of Volery today?

A Well, we're an investment advisor, and we're managing capital on behalf of a couple of partnerships. The first is with Aries Management, who we partnered with about a year ago, and has been a terrific partner. By the way, incredibly thoughtful people and have been very available to us in understanding a few sectors in particular, and at a very granular level. So that's been, that's been really good. And the second is a partnership with Zoma Capital out of Denver, who are very committed, experienced investors in these categories. And that will be initially focused on workforce development, which is incredibly timely given the The crisis that we're all going through in the employment sector, but also other themes, energy transition, water, community development, for example. And we have intentionally not raised a fund yet. We likely will at some point in the next six to 18 months, but we have some terrific mandates to focus on in the meantime.

AI assessment note: “we're an investment advisor, and we're managing capital on behalf of a couple of partnerships”

Q What does the competitive landscape look like in particular? Let's start with what we, what you're doing.

A Every alt strategy is competitive and ours is no different. You know, when people think about equity investments in asset managers, I think they tend to think about the dials and Peters Hills of the world, which are, you know, sort of the larger cap, um, strategies in the space. And we think those are impressive firms and their strategies are compelling, but they're very different. They're investing in different types of cash flows than we are. We're ours is more growth equity oriented, and there are other folks investing in managers in, in the middle market, but none that are as focused on impact and sustainability. In the same way that we are. And there are firms focused on impact and sustainability and backing asset managers, but they tend to be focused on very specific themes or are in geographies that don't really overlap with ours. Probably the biggest competition, but we encourage it, is from high net worth families who, again, are focused on particular impact themes and want to support a manager or two who are addressing those themes. But again, we see that as room for collaboration.

AI assessment note: “when people think about equity investments in asset managers, I think they tend to think about the dials and Peters Hills”

Q Well, why don't you touch a little bit on your trajectory at Stonepoint and how that led to, you know, your shift into this space?

A Yes. Stonepoint was an incredible experience for me. I thought I knew and appreciated high standards and had worked with impressive people before, but that firm is a special place. They know what they're doing. And I was fortunate to be a part of it for 11 and a half years. And it's a financial services focused private equity firm. And when I joined, Stone Point had just begun to focus on investing in asset managers. And you might recall, Ted Stone Point's first investment in an asset manager was backing Todd Combs, who's now at Berkshire Hathaway. It's a funny coincidence, but Todd and I started at the, on, on the same day, me as an associate on the investment team at Stone Point and Todd to launch Castle Point. But it was a terrific evolution for me. I joined as a generalist on the investment team. And ended up focusing on the asset management vertical. And then along the way, I was also asked to start and run the marketing IR function for the firm, which was also a terrific experience. And Stone Point made investments in some excellent, very differentiated asset managers, and I got to work closely with a dozen of them. And it was great. They're great people, smart, committed to their businesses, and helping them grow and institutionalize their firms was fun for me. And it was It was a successful vertical for the firm, for Stone Point. I love Stone Point and had a great exper…

AI assessment note: “I had started thinking about Impact a couple of years before I left.”

Q So as you thought about starting a business, what was it about impact that led you to focus on the E and S issues?

A Fundamentally, we think focusing on environmental and social considerations is just a better way to invest. It's the same thing as regular investing, but it uses an extra set of filters, and that's using ESG factors to identify risks and opportunities in the material economic aspects of a business. So from our perspective, taking action on these considerations, investing dollars against them should, should be accretive. To just give you a few examples, companies that treat their employees well tend to have less turnover and greater productivity Because they attract higher quality employees, and there's lower risk around labor supply at important points in the production process, or companies that are Thoughtful about it and make products with less packaging eliminate both cost and waste. So it's considerations like that. And also companies with these considerations have shown to be able to reduce volatility and trade at higher multiples and access, you know, a lower cost of capital. So we think there are a lot of reasons that this is just a really thoughtful approach to investing thoughtful, additional approach to investing that the, the, The way to have the most significant positive impact is, um, and to do it on a sustainable basis is to first do no harm or proactively think about mitigating your negative impacts. And then second, integrate environmental and social considerat…

AI assessment note: “focusing on environmental and social considerations is just a better way to invest.”

Q I'd love to walk through the investment process. We touched on your mapping this landscape, but why don't we start with sourcing managers and how you've gone about that process?

A Our sourcing strategy is almost completely outbound, uh, in our part of the market. No one's really intermediating These deals, we go out and create them, and, and that's great. We, we like that. We, as I said, we map the market. We develop our thesis to, you know, where we think it makes the most sense to deploy capital, and then we pick up the phone. So we green, yellow, red the managers, and we reach out to the green managers when we can. We go visit them in their offices, or we, you know, we'll Zoom or video conference with them, but the, the idea is to engage in a dialogue so we can learn more about them, They can learn more about us and the kind of value-added partner that we like to think of ourselves as being, and then together we can decide if a path toward a mutually beneficial partnership makes sense.

AI assessment note: “Our sourcing strategy is almost completely outbound”

Q I guess the obvious question is always, how do you define what best in class means?

A Well, track record helps, obviously, but it's, you have to take a holistic approach to that, Ted, as you know. Show me your track record. Terrific. But that's not sufficient to make an investment decision. You have to understand their process. So how do they get there? How do they source deals? How do they underwrite deals? How do they think about adding value, you know, through a portfolio holds? How do they think about risk management? How, you know, what's the composition of the team and how do they interact together? How do they think about optimizing value on exit? All of those sort of considerations factor into what we think of as best in class. I don't mean to be glib in saying that we are, You know, we have sort of a structured way to evaluate it, but it does boil down to what we think are the highest caliber managers in a space. Investing is a hard business and creating market rate returns is challenging. So you really have to be partnered with managers who appreciate how challenging it is. Who have the experience of doing what they're proposing to do, and who are differentiated.

AI assessment note: “All of those sort of considerations factor into what we think of as best in class.”

Q Why don't we get started with just your background and how it led to your interest in this space?

A Sure. I grew up in Atlanta. That's my hometown. Love growing up there and love going back. My family is Still there. And growing up, my parents were both entrepreneurs in a way. My dad was a doctor, but opened his own practice, and my mom had a matchmaking business throughout my childhood. I went to college in Philly, which has become one of my adopted homes. My in-laws are there and a lot of good friends, too. And then when I graduated from college, I traveled for a while, including a little over A year in Africa, in the Middle East, and that was a formative experience for me, and I think relates to some of my orientation toward what we're doing at Wolverine.

AI assessment note: “that was a formative experience for me, and I think relates to some of my orientation”

Q And given the nascent stage of this kind of sub group of managers, do you have a preference for the stage of development of a manager?

A We're flexible around stage. What I would say is there are There are a handful of criteria that are very important to us. And if we can satisfy those, we can be flexible around other criteria. And so the starting points for us are that we're talking to a best in class manager, that they have a differentiated and repeatable investment strategy, that we're getting into business together on an aligned basis, that we've already know how we're going to add value as a partner in the business. We think about structuring our investment with downside protection. And then the last and certainly not the least is that the manager actively takes social or environmental considerations into account throughout their investment process. So if we can satisfy those six criteria, we, we can back a manager that is more established or one that is still emerging. And we have partners, LP capital partners that are committing to support Managers in the impact space that are both established and emerging.

AI assessment note: “We're flexible around stage. What I would say is there are There are a handful”

Q What are you seeing on the other side in terms of reception and interest in the allocator community for these strategies?

A It's interesting. It's unlike the asocial market in that, you know, in the asocial market, most allocators are appropriately focused on Initially on the risk of return profile of an investment strategy, and they want to do their diligence to understand that it's valid that the, you know, what the manager is proposing to do is something that they can execute on. But, you know, there's not a particular theme that that allocator is necessarily focused on. In the impact universe, There are allocators who are focused on particular impact themes. So some folks are more focused on, again, people, some are more focused on the planet. And obviously, you know, within those broad categories, there are, you know, subcategories that people are particularly focused on. So it's a different approach when you bring products, investment products to, to this market and different LP types are further along. Then others. There are a lot of high net worth investors that have been very committed to impact and have helped lead the way and have helped prove the alpha generating ability of some of these investment strategies. And they're, you know, they're followed by a number of foundations and endowments have been allocators. Number of the public pensions have specific mandate to allocate to climate or emerging manager strategies or other impact oriented strategies. And so there are very committed LPs…

AI assessment note: “There are a lot of high net worth investors that have been very committed”

Q You've chosen to focus on the E and the S in the common ESG. Are there particular reasons why the G part isn't as much of a focus for you?

A It is. It is. And we don't mean to take it for granted. We think governance is vitally important, but in our strategy, we're more focused on private market strategies than public. And so through our investment structures, we are explicitly able to, to impact governance. So that can be through minority protections. It can be through overt Control or through other ways that we interact with our managers. So for us, that's something that we engage with directly on a negotiated basis with the firms that we're investing in. And governance is actually, there's data that supports the idea that governance in public companies does have a meaningful, positive effect on the, you know, the earnings of those businesses and the way they trade. Public market strategies are a little tougher for us to invest in. We like certain hedge fund strategies, but long only Strategies, which again, we believe are important and can outperform, but that are, you know, those strategies focused on ESG. Tougher for us to invest in asset managers focused on those strategies because it's, you know, the independent managers prosecuting those strategies have tough competition. We're supportive of them for sure, but tough to compete with the distribution capabilities of a BlackRock or a Fidelity. So it's, it's no less important to us, but it's something that we address In a more specific way through the deals that…

AI assessment note: “It is. It is. And we don't mean to take it for granted.”

Q And so if you go across both of those, where do you see the preponderance of potential opportunities across asset classes?

A So in order to focus our prioritization, We think about a few different factors. We tend to like large categories. So if we're going to take the time to study up, we'll have multiple ways to invest. We think about cyclicality as we think about portfolio construction. So we want a mix of counter cyclical, acyclical, and pro cyclical strategies. We like secular tailwinds and, you know, those can be driven by any number of factors like consumer demand or, or, Technological developments or capital flows. And then we, we want to understand the potential for positive impact, and that's both because we care about the impact, but also because we believe that impact is accretive to the investment theses of, you know, of our managers and of our investments, and so we want to make sure that we understand the alignment of that impact with our investment thesis, but also the potential scale. Using those factors helps us prioritize and then deprioritize Some of the, the asset classes and the, the sub themes that we're targeting.

AI assessment note: “Using those factors helps us prioritize and then deprioritize Some of the, the asset classes”