Juliet Clemens’ Post

The perennial debate between established vs emerging managers: which group delivers better returns to capital allocators (LPs)? I'm excited to share that PitchBook's latest analyst note, Establishing a Case for Emerging Managers: Exploring the effect of manager experience on private fund returns, has gone live. Established managers have the advantage of accrued experience managing capital across market cycles, which they leverage to demonstrate a track record of success to potential LPs. Emerging managers, lacking such a track record, must rely more heavily on forward-looking narratives. In this note, we compare the historical funds returns data of established managers with that of emerging managers while providing additional nuance on the impact that fund size has historically had on performance. We also include “ancillary” emerging fund offerings of established GPs as an alternative comparison. The analysis focuses on the US private market and spans across multiple asset classes, including PE (buyout), VC, real estate and private debt. A snapshot of venture: VC funds offer significant upside potential, with emerging managers having consistently outperformed since the late 1990s. However, returns from emerging VC managers are more volatile than their established peers. This research is a collaborative project with the Quantitative Research and Data Analysis team. A big shout out to Zane Carmean, Susan Hu and Van Le for co-writing the report. 🔗 Link to download the (free) report: https://lnkd.in/ggKYB2Yr

Emerging investment managers (those with 3 or fewer fund launches) often carve out niche strategies that allow them to exploit opportunities not readily available to larger, more established firms (4+ funds). These can include technology specialization in VC... According to PitchBook, "...data indicates that portfolios constructed of emerging managers could, in many cases, have outperformed those constructed solely of established firms—and with lower downside via diversification. In VC, specialist managers, regardless of firm experience, have tended to be the winners compared with generalists For LPs, the decision to invest in emerging versus established managers should not be a binary one. A strategic blend of both can potentially harness the strengths of each. Emerging managers can offer thematic exposures and greater alignment of interest, while established managers provide stability and experience." https://lnkd.in/e7JYQM45

This is a game-changer for emerging managers. A shift in the financial landscape that brings new challenges and opportunities. Here’s what’s happening ⬇ Over the past decade, emerging managers' share of US private market fundraising activity has steadily declined. In 2023 this figure dropped to 12.7%, marking the lowest share of capital raised by newer fund managers since before 2000, according to PitchBook's recent report, "Establishing a Case for Emerging Managers." https://lnkd.in/eT5gSJex Limited exits in private equity and venture capital over the past two years have intensified this trend. With minimal distributions, LPs are operating with smaller private market budgets, making it challenging to allocate funds to both new and existing managers. Emerging managers now face bigger hurdles as mega-alts funds appear. By focusing almost exclusively on established managers, LPs may be overlooking significant potential returns that emerging managers could offer. These smaller players have great potential but must navigate a complex environment. But with the right strategies, they can still thrive. Here are a few things they need to consider: ➡ Embrace innovation Emerging managers must leverage technology and innovative strategies to stand out. They need to be agile and adaptable, using data and analytics to make informed decisions. ➡ Build strong networks Networking is crucial. Forming alliances and partnerships can provide the support and resources needed to compete with larger funds. Relationships with investors, advisors, and peers are key. ➡ Focus on niche markets Instead of going head-to-head with mega funds, emerging managers should identify and target niche markets. Specializing in specific areas can help them create a unique space and attract dedicated investors. ➡ Enhance transparency Trust is vital. By being transparent about their strategies, performance, and goals, emerging managers can build credibility and attract more investors. Clear communication and accountability are essential. I’ve seen these strategies work in various scenarios over the years. The idea that emerging managers can overcome significant challenges with the right approach is incredibly motivating.

Are risk-averse allocators sacrificing performance by overlooking emerging managers? Recent data from PitchBook suggests so.   Consider this: PitchBook’s analysis found that emerging managers in venture capital have consistently outperformed – delivering higher median IRRs than their more established counterparts since 1997.   Newer buyout fund managers are also gaining momentum, outperforming their more recognized peers in the last investing cycle.   Across private markets, the dedication of today’s emerging managers shines through, despite market uncertainties. This has certainly been the case with the ones we have worked with.   Learn more from PitchBook: https://lnkd.in/dZuYqeA6   #VentureCapital #Buyouts #EmergingManagers

🚀 Excited to announce the release of our latest Analyst Note: Establishing a Case for Emerging Managers! 📊 In this research, we delve into the historical returns of emerging vs. established GPs across various sectors including buyout, VC, real estate, and private debt. Our aim? To equip LPs with valuable insights for portfolio construction in private markets and decision-making when considering external managers. 🔍 Key Highlights: Buyout Managers: Established managers demonstrate consistent performance, while emerging ones offer higher upside, particularly as established peers transition into megafunds. Emerging buyout managers have delivered better outcomes for LPs since the GFC. VC Funds: Emerging managers consistently outperform since the late 1990s, but with higher volatility compared to established peers. Real Estate Managers: Emerging players in niche areas show alpha potential post-GFC. Ancillary strategies at established firms exhibit attractive upside with moderated downside. Private Debt Managers: Emerging managers display higher upside potential but with increased downside risk, especially among bottom-decile performers. Favorable trends emerge for emerging debt funds, particularly in a higher-interest-rate environment. 📈 Our research integrates fund selection simulations, economic period analysis, and portfolio diversification strategies to offer actionable insights for LPs navigating the dynamic landscape of private markets. Check out the full note for in-depth analysis and implications! #PrivateMarkets #InvestmentInsights #EmergingManagers

Co-investing with emerging managers offers several advantages, despite the challenges they face in standing out. Emerging managers, defined as general partners (GPs) with three or fewer successful fund launches, can be more nimble and less constrained by legacy portfolios. This flexibility allows them to pursue complex deals that larger firms might avoid. Additionally, investors can build deeper relationships with emerging managers, as their capital often has a more significant impact However, there are red flags to watch for, such as a lack of a deep track record or overambitious capital raising. It’s crucial for investors to spend meaningful time on due diligence to ensure the competence and character of these managers https://lnkd.in/dqt59dUn

GCM Grosvenor’s Head of Real Estate, Peter Braffman, contributed to a recent blog post published by Alliance Global Advisors where he shared his insights on elevating emerging managers in today’s competitive landscape and offered actionable solutions to some of the most common obstacles faced by emerging managers in their journey to connecting with institutional investors.  https://lnkd.in/eFJGjHNx  #emergingmangers #realestate #sharegrosvenor 

Emerging buyout fund managers are making significant strides in the investment world, showing impressive performance against established peers. Recent data from PitchBook reveals that top decile buyout funds from new managers, particularly those started between 2015 and 2018, outpaced their seasoned counterparts by 6.6 % points. New York’s focus on diversity and access to unique lower middle market opportunities highlights the strategic value of including emerging managers in a robust investment portfolio. #InvestmentTrends #EmergingManagers #PrivateEquity #Avestix #AVXI

For emerging managers not coming from big-name firms, grabbing investor attention can be difficult without the tailwind provided by a well-known company’s reputation. One obvious way to become institutionally relevant (without relying on pedigree alone) is to be better than the competition in building a business, not just a return stream. Kevin Becker of Kiski Group Inc. explains more in a guest article on our blog - click the link below to read! https://lnkd.in/euxnzRDG #alternativeinvestments #hedgefunds #fundadministration

Discover the power of patience for successful investing in emerging companies in this #ASXInvestorUpdate article. Sebastian Evans, NAOS Asset Management explains how the strategic value of a business may take years to be fully realised. Read now. #EmergingCompanies