YouSaid · the spoken record

Alex Abell

lines on the record: 72
first: 2024-05-02
most recent: 2024-05-02
sittings or episodes: 1
sources: podcast

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“In some ways, we do end up saying that. But what I would say is that we're talking a lot about data and benchmarking track record and things like that. But our evaluation, whether it be what I do today or what we did at Atlas, probably half or more is actually qualitative. And so the assessments that we do is a mixture of taking information about the team, their backgrounds, their experience, their strategy, and deciding, do we like these things, and then using references in a significant way to evaluate these people and sort of confirm a lot of the things they tell us as it relates to what they've done historically and how they've added value to companies. And so for us, I think that the biggest point we always like to make with our clients is that we think that the data stuff we do has a significant differentiation, but it's only part of what we do. What the data does and evaluating these unique ways does is it”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you create that as a service business, so there's a thousand different funds, you're doing this analytics that's the same analytics off of objective measures across the funds. It's not hard to think a certain small subset of those managers will be deemed the best ones. How do you then deliver that in such a way that you're not saying, well, you really only want to invest in these 50, forget about the other 950?”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“or break it down by strategy of fund. If you're not doing that and you're comparing a healthcare fund that you're evaluating to an index that might have seven consumer-oriented funds, three tech funds, seven generalists, you're not really comparing strategy-wise because the investment dollars that go into a deal in the tech side on any given time might be very different than what's going on in industrials. So when you look at the deal level, you can match up the timing in a more specific way. You can match up the size of the companies that are being targeted, and you can match up sector. And you can say with more certainty that this manager compared to all the other private equity firms that are doing deals that look like this at the same time did better or did worse or did average. And that helps us evaluate performance in a very unique way.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Percent of the deals done at the time actually did much better than that. And you can be more specific than just looking at median. So the idea was as relates to things like track record was to say, look, a vintage your benchmark has some significant flaws in it. First off, it puts against managers that have started their funds at similar times. These are managers that, of course, are investing over a two to five year period, depending on how quick or how slow they invest, and it doesn't really match timing. And the whole point of a benchmark, frankly, is to match timing of when investment dollars are going to investment and how would they do if you had just invested in the market or other deals. So timing is an issue. So even the best benchmarks that are doing fun level vintage or benchmarking data have a limited number of observations. And more importantly, you can make it more specific and break it down by size of funds.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's say you're evaluating a private equity manager in the healthcare space, and they did a healthcare services deal. And you could look into your database and say, I want to find all the healthcare services deals that are done within a six-month period or even a year period of this particular deal that were of a similar size. So let's say it's an $80 million enterprise value small company, family owned business that was acquired, we want to match the size, we want to match the sector, we want to match the timing. Let's say the performance of that deal is a 3x. Now on the surface, that looks like a great deal. They tripled money on that deal. That's usually what most private equity firms are trying to underwrite to. But if we were to look at the benchmark, let's say we find 35 deals in our database that look very similar done around the same time. And let's say the median was 3.2. Well, all of a sudden that three x when you put it into context tells you that over fifty.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“What we started doing was thinking about evaluating a manager's performance, not just simply on the fun level returns, which of course are important, so I don't want to make it seem like that's not something we look at. But at the end of the day, a fund is a collection of deals, and the deal level performance allows you to have a much more specific way to compare that manager to other”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“five hundred, seven hundred a thousand managers. So that was the biggest, I think, value that we had created at Atlas was allowing an overworked LP to help them better cover a part of the market that they valued.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“At first it was small. The good news is we had some institutions that I knew that were early clients of ours, that we could use their name as a way of saying to managers, we have people who are going to subscribe to this tool. And this is going to give you a way to reach those potential LPs in your fund. Now what we didn't do was we made sure that all the analysis was objective. And so for a couple years, we started building up that market intelligence and data. We were trying to cover at that time over a thousand managers. But over time, we were able to create a platform that had a nice login for our clients where they could come in and essentially get a library of investment memos. That frankly was just a huge time saver. And our clients were sophisticated LPs. They were folks that knew how to do a lot of the analysis, but they were very resource constrained. So how do we provide leverage for folks that want to do it themselves but don't have the resources to do this on five?”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ways to analyze those managers at their fingertips, even if they didn't have a large staff to go ahead and do that for them. That was the sort of thesis behind Atlas diligence. And when I founded it, maybe the most important component of it was what I was going to focus on. So my grand vision was, oh, I might do the whole private capital world. But there's big parts of the private capital world, especially big market buyout, for example, where this type of tool isn't as useful. There's less firms to cover. And if you're doing very large checks into some of the larger players like a KKR or a Blackstone, you probably don't need this type of tool to cover that part of the market. And so that was why I decided to focus our energies at Atlas Diligence originally on small market buyout. That made a ton of sense. And frankly, historically, it is the most attractive part of the private equity markets from a returns perspective. And so when we created Atlas, we were focused on trying to create a value add tool in the most value.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Limited partner organizations, even sometimes a very large institutional platforms, they don't have a huge staff like a private equity fund of funds does. They might have two or three people working on investing $10 billion. And that's usually across multiple markets. So it's usually different types of strategies that are included in their illiquid alternatives allocations. So the idea that I had when I founded Atlas and left BlackRock was to create a similar type of tool that could be used not just by the BlackRocks of the world, but could be used by a $3 billion endowment who was trying to do better alternative investing and had one person who was the head of alternatives covering hedge funds and private equity and venture capital and provide them with a tool that would allow them to screen the market much more effectively and then have advanced”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“I couldn't take that data with me, so we had to recreate it, right? So more importantly, we had to make sure that we were. Collecting the right data. So there's tons of data that we would collect on managers that we were doing deep level due diligence on at BlackRock. So we would track their operating performance of the underlying companies and how well those managers had done an increasing performance in the operational level, not just the marks or their performance at a cash on cash level, for example, of each deal. But we weren't tracking that kind of data systematically for all the other managers that we didn't invest in, which was the vast majority of the universe that was out there. So Atlas Diligence, the idea and the goal was to create a platform where we could create a similar type of database, the idea behind it at least. That was a sophisticated, extensive database that would be a tool. In BlackRock and Quellos, this was a tool that we used as investment professionals to do a better job of tracking the market, evaluating managers. The problem is that most”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“To do it in a much more sophisticated way, including incorporating things like risk into that equation, which on the private side, all private equity limited partners, I think, think about risk. There weren't the types of metrics that had been developed on the public equity side. So things like a sharp ratio doesn't exist in private equity. And so we do it through other means, but it was all relatively unsophisticated at that point. And we're talking about now over 10 years ago still. I felt like there was interesting different ways that we could use to do a better job of trying to figure out whether a manager has outperformed their peers in deals that were done at similar times. But to do that, you had to have a lot of data. And that was the key.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Worked for, and as Quellis started to grow and also again that's BlackRock acquired it, one of the things that I found lacking in it was that we were still stuck analyzing track record in the way that the private equity professionals on the limited partners side have been doing for probably decades mainly on vintage year benchmarking and vintage year benchmarking was the best useful tool given the data that most people were collecting and had So fund level returns, how do we compare that to in most cases historically Cambridge's big consultants fund level aggregated returns across multiple managers and how did a manager that started a fund in the specific vintage year due to all the other funds that started at the same time and that was some ways the best we could do on the private equity side to benchmark the public equity markets and even fixed income had many more ways”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Didn't exist. And what was great about it was it created an institutional market intelligence. So we had meeting notes that went back ten years in some cases. For us, it was a way of keeping track of managers, to keeping track of data as well, track record data historical, and current, as well as keeping track of what I'll call more qualitative market intelligence about their strategy, about their team, about what they said they were good at, so that when you meet with managers, when their next fundraise, maybe after you turn them down in the first fundraise, you can see what they said three or four years ago and then compare it to how they're pitching themselves today. So all that sort of institutionalized knowledge wasn't sitting in people's notebooks. It was sitting inside of an electrical database that all of us could access, regardless of whether the people that had had those meetings were still with the firm or not. And that was a really significant difference from a lot of the other organizations I'd ever.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, one of the things that Quellos had done was created a proprietary database that was really amazing. And unfortunately for them, they did it before things like Salesforce existed. And so they spent a lot of money to develop something that was unbelievably useful. We used to have a philosophy.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“has historically generated less returns and certainly in a less risky way as well. The biggest change for me was a broadening of strategy outside of what we had been used to in a much more smaller niche based company.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say that the differences between sort of a more specialized entrepreneurial funda funds platform like Quellos and the larger private equity markets type platform like BlackRock was that Quellos was very happy to have very specific strategies that they believed, whether it be on the hedge fund side or in our case, the private equity side. And then finding clients that fit those strategies that said this is what we want, whether it be smaller market investment or venture capital. And I think that for BlackRock, the platforms had larger asset management firms like that are trying to sort of create solutions for everybody, or at least a mass appeal market. What that does, though, is that theoretically, and I think some ways practically, changes the risk return behavior of your investing. We were doing at BlackRock larger investments on the fund side, larger investments on the co-invest side and secondary side. And that part of the market”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“managers, and not just on the quantitative side, which ultimately became very important, but also on the qualitative side, how to grade and evaluate characteristics of managers that had the highest probability of outperformance.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really interesting platform that would become very relevant later on in my career. It was a database, but it was a very sophisticated database, nothing that I'd ever seen before as a related to manager research. So that database ended up sparking ideas later on in my career about building something better for other limited partners. Then eventually Queelos was an attractive asset management platform. It was acquired by BlackRock and became part of BlackRock's alternatives platform. And then more specifically, I started working within what was called BlackRock private equity partners, which is the private equity platform. Again, great experience. I was able to do a lot of the same stuff we were doing at Quellos and then had a whole set of colleagues that were doing investing. I would say a little bit more on the bigger side of the private equity worlds. And there we started again to incorporate this database into the BlackRock platform as well and started to really develop and try to think about unique ways of evaluating.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“After Hewlett Packard, I took a job with a funda funds platform, a firm called Quellis Group that was based out in Seattle. They originally started as a hedge fund of funds, but they decided they wanted to move into private equity as well. This was also a very unique and, in some ways, fortuitous opportunity for me from a professional development standpoint. The folks that they brought on to run what was a new private equity platform were folks that ran Duke University's Dumac, the management company that manages the endowment assets. It was the chief investment officer who had actually founded Dumac, had a private equity there. Sally Shipping Russell. And they had a track record that went back again 20 plus years of relationships doing this in private equity, traditional buyouts, venture capital, as well as other areas like real estate and real assets. So for me, again, after HP, I got very lucky to found myself in a group where it was a tremendous learning experience. And Quellis itself had developed”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Started doing work investing in private equity as a limited partner, going on 22 years now, so a long time. My first job doing this was out of business school. I went to Stanford for Business School and took a job with Hewlett Packard's pension fund. So a small investment group at HP Corporate that was managing about a $6-7 billion pension fund. And I think partly because they were located in the valley, we had a tremendous amount of exposure to private equity generally, but also venture capital more specifically. And they'd been investing in alternatives for probably 20 years. Had a great track record. And for me, frankly, it was an amazing place to start a career doing this type of work as I was working for some of the people that have been doing this from maybe even the beginnings of the industry, we might say. It was a fantastic learning ground for me as I started my career out of business school.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source
“Guest on today's sponsored insight is Alex Abell, a managing partner at RCP Advisors, which at $14 billion of committed capital is one of the largest firms focused exclusively on lower middle market buyouts. Alex has spent 23 years in the business, starting on the LP side, building Atlas diligence, a research and advisory platform focused on advanced analytics, and then merging Atlas with RCP a decade ago. Today, he helps manage RCP's research efforts, its customized solutions, and advisory services. Our conversation covers Alex's path and lessons learned investing in lower middle market buyout funds across assessing managers with data, benchmarking, lending quantitative and qualitative factors, and applying insights to primary and secondary investing.”
2024-05-02 · Capital Allocators · Alex Abell - Lower Middle Market Buyout Investing at RCP (EP.383) · IDENTIFIED FROM THE TRANSCRIPT · source