Private Markets Investing Outlook

EMS:
Absolutely. So, to kick off the conversation, tell us a little about the firm and how you got to where you are today.

CP:
TIFF is an employee-owned public benefit LLC, and you’ve mentioned in the opening that we are an OCIO organization, and we also manage private equity for our, not-for-profit clients. We focus specifically in that space and we will manage the entire portfolio for the clients who come to us for their outsourced chief investment officer function, OCIO. And then we’ll also then manage client private markets portfolios that they come to us dedicated for that strategy. We’ve been around over 30 years, so longevity, well-known in this space. And we’ve been working dedicated with private market strategists since 1997. My role today, I’m a senior member on our eight-person private markets team.

EMS:
Great. Carolyn, so that segues nicely into the follow-up question I have. Given your focus on private markets investing, I would love to hear your overall outlook for the space.

CP:
It’s constructive. There’s a lot written about private markets in the press. I believe it really matters what your focus area is. If you think about it, financing used to be virtually free for many, many years and it was easier to have a higher return and return capital to clients, in my opinion. When you had really low or zero borrowing costs, it was just a lower hurdle. And today you’re going to have a higher bar because you’re going to be looking at having to pay back that cost of capital. But from my perspective, that’s really more a return to a normalized market. I’ve been in the markets over 30 years, and this is really a return to what the investing landscape had been for a long time prior to the last 5, 6, 7 years. And so, you really need to think about that perspective and people who have been in the markets who have invested when there were single digit interest rate environments like we have today know this space well. So where TIFF focuses on the lower middle market for private equity and we also are focused on venture capital, early stage and seed stage, and it’s important for us for that space to think about how we return capital to our clients and how we can have exits in order to return that capital. And for us in that space specifically less tied to an IPO market or less tied to on those types of exits and more about a strategic buyer and we’re still seeing them within our space.

EMS:
And Carolyn, more specifically, where do you see the greatest opportunities in private markets investing and why?

CP:
There are so many exciting opportunities in the private markets today. We’re seeing some very interesting new emerging managers coming out of this environment who are looking to raise fund one or fund two. We’re seeing some really compelling opportunities in our opinion. And for us, we’re thinking about committing at a steady clip here so that we can have the opportunity to invest with some of these emerging managers and some of our favorite managers that are established we’ve been working with for many years as we believe we can potentially drive some better returns for our clients in this environment as things have been more normalized and return back to the pre-Covid era.

EMS:
Carolyn, on the other hand, what are some of the greatest challenges you face when it comes to private markets investing and why?

CP:
Yeah, and this is what I was mentioning where there’s been a lot written in the press about some challenges. We look at some of the opportunities, but there are challenges there, not the least of which I mentioned earlier, some of the higher cost of borrowing. We are looking to see if there’s stress on the companies and if they have any business challenges, but we’re not seeing these issues widespread across the investments that we’re looking at. For example, one area that we’ll look at is higher debt servicing levels, and we’re not seeing that to be a challenge broadly across portfolios. So those could be some troubling signs that we monitor and we’re looking for. We do see fundraising that’s slowed and there’s a lot written about that. This can be a positive actually because there’s more time for better due diligence or maybe the word isn’t better, but it’s thorough, more considerate more careful due diligence. And so that’s a positive in this environment with slowing fundraising. We’re also then thinking about could there be forced sellers? And we’re not seeing that broadly across the space either. So, I’m feeling pretty constructive and we at TIFF are feeling pretty constructive at these current levels.

EMS:
Carolyn, to shift gears a bit, ESG and DEI have been top of mind for the industry the last several years and wanted to see how the firms integrating these important topics.

CP:
Well, that’s really important for TIFF with our mission-based clients. So, a lot of our clients will come to us, and they will want to be working together to have their specific mission be expressed through their portfolio. And that is what we do. We work with clients to make sure that we can achieve their outcomes from a risk reward and mission-based perspective. On the private markets team, our focus is sourcing emerging and established managers who maybe early in their life cycle as well, and that’s very much aligned with these types of maybe diverse managers out there who are often some of the first ones to be forming companies. We’re able to source diverse managers for our client portfolios, definitely in the venture space, in the lower middle market private equity space. We’re always interested in sourcing new managers in this space as well. And this is really important for us to make sure that people know that we’re interested in further making investments in the diverse community on behalf of our clients.

EMS:
Carolyn, as an accomplished experienced woman in the industry, you’re such an inspiration to all and I wanted to hear your thoughts on what you’re doing to inspire the next women leaders to follow in your footsteps.

CP:
You’re very nice. Thank you for that. I try my best to be an example and also just to reach out. So, I really thought back when I hit a critical milestone in the industry in my career about what I could be doing more for women. It’s even more important when I look around and there are fewer women who have the longevity and the perseverance to be in the industry this many years. And so, I’m very intentional about thinking about those times in your life and your career when women might leave the industry, whether forming families when there’s challenges with taking care of an older family members. So either end of the spectrum there. And it was a wonderful time during the pandemic to not be traveling, to just reach out to some individuals I’ve known who are at that time period and share some of my own experiences that I’ve had throughout my career. It’s not always smooth and there are always things in your personal life that you need to be balancing, and that’s something that I really enjoy doing. I volunteer locally and reach out to universities, to women who are graduating to talk about careers in asset management. I just think it’s a wonderful industry to work within and I want to make sure we get the word out there so it’s not just people in undergraduate thinking they have great careers in investment banking, thinking about asset management and investments.

EMS:
Well, Carolyn, I wanted to thank you so much for sharing your perspective with our listeners.

CP:
Thanks so much Elana.

EMS:
And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics and join us for our next EisnerAmper podcast when we get down to business.