The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
why aren't all 71 resolved? a statement only gets an assessment when the public record can support or contradict it. opinions and what-ifs never can, and 2 checkable ones are still open, waiting for their date. predictions held up or didn't; assertions are supported or contradicted. on every card: ▮▮▮▮▮ certainty · ▮▮▮▮▮ debate potential. speakers are clickable
McCusker: Pure institutional, RIA, and retail channels will vanish within 20 years
“I would say, 20 years from now, there's not many purely institutional, or purely RIA, or purely retail players. Everything is blended together, whether it's asset managers, advisors, or the end participants, even.”
Samuels: NEPC resists paying 2-and-20 fees for PE returns driven by leverage
“We're happy to pay two in 20 for the first two, not so much for use of leverage, but it's interesting because some GPs think about the world that way, but many just say, well, it's all alpha.”
McCusker: Allocators will negatively view well-capitalized managers taking SBA loans
“For a lot of well-established, well-capitalized managers, that's not an appropriate use of that pool of capital, and In some ways, they're taking from small businesses on Main Street that can really deserve it, and I believe that list is going to be made publi…”
McCusker: More Institutional Firms Will Merge With RIA Platforms
“The other thing is this is going to continue to happen. I don't think these are the last two firms that are going to tie up with RIA platforms.”
Samuels: Early-stage private market return potential dwarfs manager fee impact
“And when you think about the return potential for some of those earlier stage private investments, it dwarfs the fee impact and it's well worth it.”
Samuels: Chinese Healthcare Offers Tremendous Returns Despite Allocator Fears
“We think that healthcare is for sure a theme in healthcare in China. China's a little scary for a lot of people right now. It was a big part of a lot of portfolios, and I would say it's a little scary for investment committees to think about committing new cap…”
McCusker: Business Travel Will Return to Normal Quickly Post-Pandemic
“While some are saying this is a breakthrough, and we're going to be a lot more flexible working from home, I think we're going to go back to normal pretty quickly, and we're going to be road warriors once again. So it's actually, I'm not answering the question…”
NEPC lets fund managers decide capacity allocations across clients
“We take that twenty million dollars, put it in a list, and we give that back to the manager, and they make the decision of how they want to allocate, so we're not making the choice of one client over another. We're not choosing OCIO over advisory. They all go …”
NEPC is pounding the table to rebalance out of US equities
“We've been talking about over the last year, and US equities have continued to do pretty well, but I think we're really pounding the table now that that's a place where we want to rebalance.”
Investors should avoid passive indexing in emerging markets
“You don't want to be passive in emerging markets. Even if it can be a challenging benchmark to beat, you want to be active there. You want to be trading there and not just stuck with what the benchmark offers you. And we see some skill there, too. We see that …”
Oros: Hightower acquired NEPC to centralize investment operations
“We also just made an acquisition of a business called NEPC, one of the largest institutional consultants in the U.S. And we made that acquisition and wanted to have NEPC part of Hightower specifically so we could start to centralize more of the investment oper…”
McCusker: NEPC avoided an auction because Hightower terms were fair
“It just felt wrong to bring in other players at that point, and we felt like having the external advisor validate that the financial terms were reasonable and at market just gave us some comfort that we were only going to screw things up if we brought other pe…”
McCusker: Distributing through Hightower's RIA platform provides scalable growth
“If we can bring solutions to Hightower's RIA platform and have them invest in it, that's a more scalable model than we've been able to create historically.”
McCusker: Inaccurate acquisition rumors are ideal because they can be cleanly denied
“There was a moment where there was a rumor out there that we were being bought by one of our competitors, which if you're going to have a rumor out there, having it be the wrong rumor is actually ideal because you can deny it and you don't have to give any mor…”
McCusker: Next-gen RIA leaders prefer planning over in-house investment management
“They are under allocated to private markets. There's a generational transfer happening within the RIA leadership where you have folks who led their RIAs from an investment perspective, and the next generation wants to be more planning oriented and wants to han…”
McCusker: TH Lee will face another Hightower transaction in a few years
“Hightower is owned by TH Lee. It's been a very successful investment for them. They've rolled it into a continuation fund. That continuation fund has a life on it, and they'll have to figure out something. There will be another transaction a few years from now…”
McCusker: Investment consulting is inherently unscalable without hiring more people
“If you have two great consultants with 10 clients each, you get to that 21st client, you've got to add another great person. So since it's not a super scalable business model, it's always somewhat inorganic.”
McCusker: Hightower acquiring 100% of NEPC was a deal-breaker
“A really important part of our culture is having ownership in our business, being really well aligned, and then being able to pass that ownership on to the next generation. So that was a deal killer if they wanted to go 100%.”
Samuels: Eponymously named firms indicate higher succession risk for LP allocators
“If it's somebody's last name, it's a bit of an indicator that perhaps there's maybe going to be some difficulty in imagining a firm without them.”
Samuels: Analyst spidey sense accounts for one-third of NEPC's evaluation framework
“A third of our investment framework is what we call analyst opinion, which is our instinct and our gut based on spidey sense.”
Samuels: Next-gen leaders lack capital for direct founder buyouts 80% of time
“And then the other way that we've seen is that next gen buys the ownership directly from the founder with capital that they've accumulated in their personal wealth. Eight times out of 10, I would say they don't have enough money to do that.”
Samuels: Ownership transfer requires at least five years of advance planning
“There's a lot of tension on price, and this is something that needs to be thought about at least five years in advance of a liquidity event or a transfer of ownership.”
Samuels: Nine in ten next-gen investment leaders don't know succession plans
“And I would say nine times out of 10, that next gen has no idea what the firm's plans are for them.”
Samuels: On-site diligence remains essential despite remote work tools
“When it comes to the future of diligence, I do think we can do a lot more virtually, but we still need to be traveling and meeting with managers. You miss a lot of stuff when you're not there face-to-face, whether it's the dynamics of the junior person with th…”
Samuels: Managers Needing an Information Ratio of 2.0 Won't Succeed
“And if they need an IR of two to be successful, I don't think they're going to be very successful.”
Samuels: Smaller asset managers manage risk by gut compared to larger firms
“The larger firms generally know what their exposures are because they have risk management teams who are looking at these things. The smaller firms are much more gut-driven in general in terms of managing risk, and they are sometimes surprised.”
Samuels outlines six-phase change management cycle including a critical danger zone
“The first is loss, so people don't want to change the way to do things usually because we're humans, and then doubt in the new process and their new leader, and then discomfort, and I watched all this happen. It's like a cycle. After discomfort, it's this dang…”
Samuels: Replicating Swensen's Yale Model Requires Differentiated Selection, Not Formulaic Allocation
“When you think about the David Swenson model, people think it's this recipe that you can replicate by just throwing ingredients into a bucket and throwing them into an asset allocation model, and you're going to get the same results. And the reality is you hav…”
Samuels: NEPC Assigns a Low Weight to Past Performance in Manager Model
“One is that performance is actually a pretty low weight in the model.”
Samuels: GPs must groom next-generation leadership at least five years before succession
“Really, you need to start grooming that next generation at least five years before it's time.”
McCusker: Solve Denominator Effects Through Multi-Year Repacing, Not Sudden Cuts
“You work your way out of it over time through repacing year over year and not by making a dramatic move in one year.”
McCusker: 2020 Vintage May Offer Best PE Opportunities in Years
“This could be some of the best opportunities that come along in years for new private market funds.”
McCusker: NEPC 10-year assumptions project 6-7% equity returns versus 0.6% Treasuries
“We just went through a full rerunning of all of our assumptions, and we've got equity assumptions in the sixes, the sevens, even higher for emerging markets, and then a treasury assumption at . Six percent right in line with the yield right now. And you run th…”
McCusker: Due diligence will stall briefly before surging in distressed credit
“I actually think it'll be slow right now, and right now being the next One to three months, call it. And then I think it's going to ramp up like crazy. One, it'll be a little bit of a backlog. And two, what we were talking about earlier, some of those credit o…”
McCusker: PE Capital Calls Will Drop by at Least One-Third
“Our expectation is that calls and distribution will both be lower. I think when we analyzed it, calls and distributions were down by a third to half through the global financial crisis, and that's sort of our base case right now that we can expect At least a t…”
Passive investing in high-yield debt is counterproductive
“You don't want to be passive in high yields. And, you know, even if you just want to get exposure, you still want to be active there. You don't want the biggest bonds in your portfolio to be there just because the company's issued more debt.”
Quantitative filtering reliably predicts persistent manager underperformance
“It's very predictive on the bottom half. The managers that are drifting down towards the bottom tend to continue underperforming. So it allows us to say, cut the universe in half.”
Clients undermine long-term views after just three months of underperformance
“We're setting five to seven year views, and if they're not working in the first three to six months, we've got all of our consultants and clients saying, why do we do this? How do we not see this? And I think Behaviorally, we all fall victim to it, so I fall v…”
Room dynamics reveal true decision-makers over named portfolio managers
“I think the people part to me is the most important. It's not just who they are, but it's how they work together, how they interact, and sometimes that's more subtle things. Sometimes, sometimes there's a named portfolio manager, but you get a group in the roo…”
Mid-sized endowments drive venture capital demand over large public funds
“The large public funds aren't doing much in venture. So it's, We definitely think it's worth it. I'd say there's more of an appetite for venture from our smaller and medium sized endowment clients. A 500 or billion dollar endowment can make a five or ten milli…”
Oros: Hightower expects at least $100M raised per NEPC private vehicle
“So we're going to roll our first one out the first half of this year with any PC. Our expectation is We're gonna get at least a hundred million dollars of capital raised with each one of these.”
McCusker: NEPC hired an investment banker for market education, not auctioning
“We engaged an investment banker to help us not so much scan the universe and bring in other potential suitors, but just help us understand who are the other players besides Hightower. Where does Hightower fit in terms of how they work with their advisors”
McCusker: OCIO Has Been Major Growth Tailwind for Consulting Firms
“The tailwind that has helped all of us the last decade is the OCIO channel. And that has been a great source of growth for us and many others.”
McCusker: Large PE firms built 100-person sales teams for RIA market
“We looked at some of the big private equity firms starting to raise hundred person sales forces to attack that market, and we thought, well, that's not really implementable for any PC, so let's keep it on there, but we don't really have anything right now.”
McCusker: All 350+ NEPC employees receive bonuses upon deal close
“We made sure that all of our 350 plus employees are getting something out of this transaction. There's a bonus for every single person who's employed when the transaction closes.”
Samuels: Extended underperformance triggers founder fatigue and fund turnover
“If we have an extended period of underperformance, it's going to lead to fatigue on behalf of not only the founder, who has accumulated a great deal of wealth in this organization, and may be tempted to fold and say, you know what, I've made my money. I'd love…”
Samuels: Oaktree floated 6% in its IPO and founders cut equity sub-15%
“They thoughtfully saw the need to begin transitioning ownership, and they had a number of liquidity events, including selling a percentage to clients and then to institutional investors via private placement, and then ultimately via an IPO, and they floated si…”