Kee Rabb_2.mp4

Back

Or filter by your interest

Browse all our content

SuperReturn

Unlock all the content with only {{price}}

Kee Rabb.vtt

ENGLISH

{{00:00:02}}
Kee,

{{00:00:05}}
thank you so much for joining
me here at Superinvestor.

{{00:00:07}}
You've just been speaking on the
emerging manager stage about the

{{00:00:11}}
differences between the US and
Europe in terms of allocation.

{{00:00:15}}
What would you say are the key
differences and where's that moving?

{{00:00:19}}
Yeah, I would say.

{{00:00:20}}
there's been a lot more focus
on emerging managers and people

{{00:00:23}}
wanting to have that exposure.

{{00:00:25}}
And a lot of that is because of
the outperformance that you get.

{{00:00:28}}
And I think you get that in Europe, too.

{{00:00:29}}
I think it's just the programs
are available in Europe, it's just

{{00:00:34}}
maybe harder to find some of those
pockets of capital for people.

{{00:00:36}}
So I think there's a lot
more funds in the US.

{{00:00:40}}
And so that's where there's more
spotlights on emerging manager

{{00:00:43}}
in the US because the number of
opportunities is just much bigger.

{{00:00:46}}
But I do think that in Europe there's
more of a focus on trying to find more of

{{00:00:50}}
those emerging managers and support those
just because people really do understand

{{00:00:54}}
the difference in return profile
that you can get by finding a great,

{{00:00:57}}
discovering really a great new manager.

{{00:01:00}}
Do you think there are
structural differences as well

{{00:01:02}}
in those two geographies that
make it trickier in Europe?

{{00:01:06}}
I this is my understanding.

{{00:01:09}}
And this is a broad
brushstroke, but in the U.

{{00:01:11}}
S.

{{00:01:11}}
there's still greater allocation to
private equity, which means it's easier,

{{00:01:15}}
I think, to have an allocation to emerging
managers and that allocation be reasonably

{{00:01:20}}
large, just given the larger budget.

{{00:01:22}}
Exposure to private equity in
Europe, that exposure is growing.

{{00:01:27}}
And it has grown significantly, but it's
not the same levels that it is in the U.

{{00:01:31}}
S.

{{00:01:31}}
Yet.

{{00:01:32}}
And I think as that pocket grows in the
private market exposure grows, it does

{{00:01:36}}
make more room for emerging managers.

{{00:01:38}}
And so that is part of
the structural difference.

{{00:01:40}}
And so there's opportunity there.

{{00:01:41}}
You see this as a growing
area, if you like.

{{00:01:44}}
So how do those new emerging managers from
your experience distinguish themselves and

{{00:01:50}}
make themselves stand out from the crowd?

{{00:01:52}}
Yeah a lot of it is so emerging
areas, how can you become one?

{{00:01:55}}
So sometimes it's you're spinning
out of a another firm, right?

{{00:01:58}}
And so that's an easier way because you
can then bring often the limited partners

{{00:02:02}}
that were with you at your prior firm.

{{00:02:04}}
that know you and help them come along
to help you start that first time fund.

{{00:02:08}}
But there's also a growing
community really in Europe that

{{00:02:11}}
the US has had for a while in the
independent sponsor community.

{{00:02:14}}
So it's not as big in, in Europe yet, but
I, my understanding, I've heard about it

{{00:02:18}}
here, actually at this conference about
certain conferences in the, in Europe

{{00:02:23}}
now focus just on independent sponsors.

{{00:02:25}}
And why I mentioned independent
sponsors is that's a great way

{{00:02:28}}
for people to work together.

{{00:02:30}}
build a track record that people can see
ahead of coming into a first time fund.

{{00:02:34}}
So not all the time do first time
managers lift out from the same

{{00:02:38}}
team, but people want to see that
they've been working together.

{{00:02:41}}
So if you can do independent sponsor
deals, bring some institutional investors

{{00:02:45}}
along with you as co investors in those
deals it reduces a lot of the risk for

{{00:02:51}}
investors coming into that first time
fund, particularly if those LPs who

{{00:02:55}}
did the co investments with you, okay.

{{00:02:56}}
or funding your fund to.

{{00:02:58}}
It is a real relationship business
and, people is, a, key kind of

{{00:03:02}}
part of that structure, isn't it?

{{00:03:04}}
That's one thing that one
of your panelists talked

{{00:03:06}}
about how crucial that is.

{{00:03:08}}
Yeah, I'd agree with that.

{{00:03:09}}
So we, when we're underwriting a first
time fund, the human capital piece

{{00:03:13}}
is a huge piece of our underwrite.

{{00:03:15}}
And so we're oftentimes for the first time
funds and even second time funds as well.

{{00:03:20}}
We need to understand the team dynamics.

{{00:03:22}}
So the organizational behavior.

{{00:03:24}}
So we will spend one on one time with
each of the partners, each of the

{{00:03:27}}
principals, each of the VPs to understand.

{{00:03:31}}
It might say, Hey, Emma,
what are you really good at?

{{00:03:34}}
What do you think you do?

{{00:03:35}}
What do you not so well tell
me about your colleague.

{{00:03:38}}
What's their role?

{{00:03:39}}
What do they do?

{{00:03:40}}
What do they not do as well?

{{00:03:41}}
And you want to make sure that you
have a team that has all the skill sets

{{00:03:46}}
necessary to execute their strategy.

{{00:03:48}}
Because if everybody's good at sourcing
and nobody can has investment selection

{{00:03:53}}
or investment judgment, that's
clearly not a team that you want.

{{00:03:56}}
So you need to make sure that the
team is built a mosaic of skill sets.

{{00:04:00}}
to execute the strategy.

{{00:04:01}}
It's actually a parallel to
what people are looking for

{{00:04:03}}
in those portfolio companies.

{{00:04:05}}
Isn't it?

{{00:04:05}}
Yeah, exactly.

{{00:04:07}}
Especially too, when you look at service
businesses they're always people.

{{00:04:11}}
So the same thing here.

{{00:04:13}}
And so you really want to make sure
it's a cohesive team as well, and

{{00:04:17}}
that everybody is aligned with the
goal of what is a deal for that firm.

{{00:04:22}}
So what makes a deal for them?

{{00:04:23}}
So that's what you're looking for
in terms of what you're looking

{{00:04:26}}
for in those emerging managers.

{{00:04:28}}
What's the benefit of looking for those
emerging managers and what can they give?

{{00:04:33}}
The benefit for us has been
the improved performance.

{{00:04:36}}
So for us, if we go back to 93
and we look at all of what we call

{{00:04:40}}
emerging managers, so we define that
as first, second or third funds,

{{00:04:44}}
we've seen improved performance
of about 400 to 500 basis points.

{{00:04:48}}
What we first, what we've gotten on a
net basis for fund fours and beyond.

{{00:04:52}}
And so we're picking up return
by going to the emerging manager.

{{00:04:55}}
So that's something that's in it for us.

{{00:04:58}}
Another thing that can be helpful with
emerging managers is sometimes we can

{{00:05:02}}
come into a portfolio that's seasoned.

{{00:05:04}}
So maybe we didn't come into the
first close, but we're watching them.

{{00:05:07}}
They're raising their first fund.

{{00:05:08}}
We're able to see them
build their portfolio.

{{00:05:11}}
And so we can underwrite maybe three
or four assets that are already in

{{00:05:15}}
the fund, but the fund's still open.

{{00:05:17}}
So we can come into those investments
at cost, get that immediate markup.

{{00:05:21}}
And so that's a win for us as an investor.

{{00:05:24}}
Now for the emerging manager,
what's in it for them?

{{00:05:28}}
They're building a relationship
with someone that hopefully

{{00:05:31}}
lasts multiple funds.

{{00:05:32}}
And so you create a lot of goodwill
with managers when you come in early.

{{00:05:37}}
And so we want to
capitalize on that goodwill.

{{00:05:39}}
As well as those interesting
structural investments like

{{00:05:41}}
that, and how you structure your
involvement and partnerships.

{{00:05:44}}
What is it that brings that
success to those emerging managers?

{{00:05:47}}
Is it that they Are out there on their
own doing this potentially for the first

{{00:05:51}}
time they've got something to prove What
where is that success historically come

{{00:05:54}}
from do you think that is a piece of it?

{{00:05:56}}
I wouldn't say every manager, but it's
something we look for is that like

{{00:05:59}}
hunger factor And so you do you know
that or maybe a chip on your shoulder?

{{00:06:03}}
So sometimes that negative influence
can be a positive outcome of like

{{00:06:07}}
exactly I've got to prove myself
I want to raise more than the

{{00:06:10}}
predecessor firm that I left from.

{{00:06:12}}
And so that can often be a fuel that
has someone very focused on the mission

{{00:06:18}}
and what they're doing and growing
the business and the value creation.

{{00:06:21}}
So that is an aspect.

{{00:06:22}}
But we're definitely
looking for alignment.

{{00:06:24}}
I think that is something.

{{00:06:25}}
So the hunger factor alignment.

{{00:06:28}}
So not often with emerging
managers or established managers

{{00:06:32}}
per se, you worry about is the
manager going to call in rich?

{{00:06:36}}
And and take their eye, like less, be less
focused on the each individual investment.

{{00:06:41}}
And so it's nice with emerging managers,
they're building a business and

{{00:06:44}}
they're really in that foundational
stage, but there's more risk, right?

{{00:06:47}}
There's a, definitely a wider
dispersion of returns in the

{{00:06:51}}
emerging manager, segment.

{{00:06:54}}
And so you really do have to be careful
of trying to eliminate that bottom half.

{{00:06:58}}
We think returned will take care
of himself if you can get first

{{00:07:00}}
quartile and second quartile managers,
but eliminate the bottom half.

{{00:07:05}}
And so it's a lot each year a number
of emerging managers that come out.

{{00:07:11}}
When I think about our deal flow
each year we're probably looking

{{00:07:14}}
at around 300 managers and roughly
in a given year, probably somewhere

{{00:07:19}}
between 45 to 55 percent of those are
more in the emerging manager side.

{{00:07:24}}
So first, second or third funds.

{{00:07:26}}
And you need to see all of this.

{{00:07:27}}
So you need to see the A manager
and the C or D manager so you

{{00:07:31}}
know what good looks like.

{{00:07:32}}
And, It helps you calibrate.

{{00:07:35}}
And so not everyone has
the time to really look at.

{{00:07:38}}
All those managers, the way you speak
about it, you can tell you're still

{{00:07:41}}
obviously very excited about that.

{{00:07:43}}
And then the newness of it and actually
the fact that is an evolving area

{{00:07:47}}
and space with new talent coming in.

{{00:07:49}}
So how excited are you now going forward?

{{00:07:51}}
And what do you see as a sort of
opportunities in the future for this area?

{{00:07:55}}
Yeah, no, I I definitely enjoy the area.

{{00:07:57}}
I think the discovery part of it, the
ability to partner with someone early and

{{00:08:01}}
then build that relationship over time
and watch them grow is an exciting part.

{{00:08:05}}
I think where we'll continue to see
emerging managers are particularly

{{00:08:09}}
around certain defined investment themes.

{{00:08:12}}
It needs to be where someone has
experience, but certainly we're on

{{00:08:16}}
the venture side, which I don't spend
as much time or any time really on

{{00:08:20}}
you're seeing it around Cyber security.

{{00:08:22}}
And we're seeing that some to
and some of the tech funds.

{{00:08:24}}
So there's certain themes that you may
see, and there's more defined investment

{{00:08:29}}
strategies to which I think that's
what we'd like because it helps us

{{00:08:32}}
understand what makes a deal for you.

{{00:08:34}}
So Within, it used to be I was a
healthcare investor and now it's I'm

{{00:08:38}}
a pharmaceutical services investor or
medical device investor and so it's having

{{00:08:43}}
more of these niche areas so it helps
us really define like what makes a good

{{00:08:46}}
fit and a good deal for that manager.

{{00:08:48}}
Okay, it's absolutely brilliant to hear
your enthusiasm for the space and thank

{{00:08:51}}
you so much for sharing it with us today.

{{00:08:53}}
Great to talk to you.

{{00:08:54}}
Appreciate it Emma, thanks so much.

thank you so much for joining
me here at Superinvestor.

You've just been speaking on the
emerging manager stage about the

differences between the US and
Europe in terms of allocation.

What would you say are the key
differences and where's that moving?

there's been a lot more focus
on emerging managers and people

And a lot of that is because of
the outperformance that you get.

I think it's just the programs
are available in Europe, it's just

maybe harder to find some of those
pockets of capital for people.

So I think there's a lot
more funds in the US.

And so that's where there's more
spotlights on emerging manager

in the US because the number of
opportunities is just much bigger.

But I do think that in Europe there's
more of a focus on trying to find more of

those emerging managers and support those
just because people really do understand

the difference in return profile
that you can get by finding a great,

Do you think there are
structural differences as well

in those two geographies that
make it trickier in Europe?

And this is a broad
brushstroke, but in the U.

there's still greater allocation to
private equity, which means it's easier,

I think, to have an allocation to emerging
managers and that allocation be reasonably

Exposure to private equity in
Europe, that exposure is growing.

And it has grown significantly, but it's
not the same levels that it is in the U.

And I think as that pocket grows in the
private market exposure grows, it does

And so that is part of
the structural difference.

You see this as a growing
area, if you like.

So how do those new emerging managers from
your experience distinguish themselves and

make themselves stand out from the crowd?

Yeah a lot of it is so emerging
areas, how can you become one?

So sometimes it's you're spinning
out of a another firm, right?

And so that's an easier way because you
can then bring often the limited partners

that know you and help them come along
to help you start that first time fund.

But there's also a growing
community really in Europe that

the US has had for a while in the
independent sponsor community.

So it's not as big in, in Europe yet, but
I, my understanding, I've heard about it

here, actually at this conference about
certain conferences in the, in Europe

And why I mentioned independent
sponsors is that's a great way

build a track record that people can see
ahead of coming into a first time fund.

So not all the time do first time
managers lift out from the same

team, but people want to see that
they've been working together.

So if you can do independent sponsor
deals, bring some institutional investors

along with you as co investors in those
deals it reduces a lot of the risk for

investors coming into that first time
fund, particularly if those LPs who

It is a real relationship business
and, people is, a, key kind of

That's one thing that one
of your panelists talked

So we, when we're underwriting a first
time fund, the human capital piece

And so we're oftentimes for the first time
funds and even second time funds as well.

So we will spend one on one time with
each of the partners, each of the

principals, each of the VPs to understand.

It might say, Hey, Emma,
what are you really good at?

What do you not so well tell
me about your colleague.

And you want to make sure that you
have a team that has all the skill sets

Because if everybody's good at sourcing
and nobody can has investment selection

or investment judgment, that's
clearly not a team that you want.

So you need to make sure that the
team is built a mosaic of skill sets.

It's actually a parallel to
what people are looking for

Especially too, when you look at service
businesses they're always people.

And so you really want to make sure
it's a cohesive team as well, and

that everybody is aligned with the
goal of what is a deal for that firm.

So that's what you're looking for
in terms of what you're looking

What's the benefit of looking for those
emerging managers and what can they give?