YouSaid · the spoken record

Daniel Adamson

lines on the record: 82
first: 2020-05-04
most recent: 2020-05-04
sittings or episodes: 1
sources: podcast

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“If I could send a message in a bottle back to me at twenty eight, I think I would say have kids earlier. First of all, it's just a great joy in life to have a family. But more than that brings you out of yourself and so much of trying to accomplish things is not actually about yourself. And the sooner you realize that in life, I think ironically, the more successful you can become.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“About structure. I don't accept the false distinctions like LPNGP, for example, as somehow set in stone, and that comes from my folks.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I describe my folks as academics, academics. I mean, these are history professor and a developmental psychologist, which is always a good line for a joke, which I'll avoid here. But what comes with that is love of the life of the mind. So growing up, we weren't focused on material wealth, but things were stable. They had lifetime tenure at their universities. And that just, that combination led us. And that's been a great contribution. I think that together with the kind of training that I got in philosophy and law school and undergrad led to a kind of contrarian thinking, not so much in the way that you would use it with investments if everyone else is viewing one thing, I'm going to go the opposite, which can be very valuable, that I'm not so much built that way, but I am contrarian in thinking.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I read a lot. Nothing that you wouldn't hear from a lot of folks try to exercise, spend time with the family, be outdoors, soak up the sun, enjoy natural beauty, but I've always been a voracious reader, just coming from the family that I do, and mostly nonfiction.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“This will be our first attempt to do that. So not well is the short answer. We've been, like a lot of folks skittish about social media, but I think we will make careful calculated attempts to share our message. That said, the nature of our business is not one where we need to connect with a wide audience. We don't view ourselves as influencers on fashion or vacation destinations. So I'd say we've used conferences and individual networks much more than social media.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“I hate the kind of tribalism that leads to so naturally and quickly for people to a me versus you mentality. We see it in politics, we see it in global politics with bridges between countries metaphorically being burned down these days. And going to your questions about positive sum game versus zero sum game, it just frustrates me that for whatever reason humans seemed hardwired to create clans and define success in a narrow way. And this is the problem of our generation is how to think globally. And it's a pet peeve and it feeds into investment pet peeves too because people tend to think, well, I want to pick the best stock or I want to pick the best deal as against thinking who should I partner with. Because the latter question implies that you're trusting and relying. On somebody else in a way that people are often not comfortable.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“I play the cello I grew up performing and actually went to the School of Music at Yale in addition to undergrad. A lot of my friends have gone on to be professional musicians and I both envy them and don't envy them because it's a really tough life. But they get to be surrounded by incredible art all day long. I don't play as much anymore, but my boys are five and six and our oldest is just starting to get into music. So whether it's something like the Star Wars theme or the Harry Potter theme where he plays the piano and we're starting to play together.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“All because we might have been looking at a deal. There was some event there that we wanted to go to or just because we had to get together. And so we decided to get on planes. And I think any entrepreneur will tell you that they feel lucky because they happen to kind of hit the straightaway on the Daytona 500 just when their car was humming and that they could make great progress. For us, it was this incredible alignment of smart people. And I've mentioned their names, but Russ and Paul and Steve and Angela and others who were at a moment in their careers where they could do this, wanted to do this, often for no personal gain economically, but for their institutions. And it took that kind of Herculean effort to get there.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we still meet all the time, I mean not just once a quarter for our strategic committee meetings or every other week on a phone call, but just catches, catch can in cities all over the world and up and down our respective organizations and now with our managers. Eventually there may be technology that helps us connect capital and opportunity in more efficient ways, but for now there's no substitute for shoe leather. So we are on the road a lot actually making the human connections down in some cases all the way to a deal opportunity, not just to a manager and not just to the C suite of the asset owners but up and down the masthead. We got together as I think I mentioned.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Conversation with my academic background, you know, it's a little bit like writing a PhD thesis. If you're not super into it when you get started, you're probably not going to finish. And we were super into it. We wanted to do this, to be a kind of standard bearer for a new type of institution that was owned by capital. I'm not going to say capitalists of the world unite. You have nothing to lose but your chains, but there was a real desire to do something innovative that would benefit pensions and sovereigns who are in frankly tragic circumstances in terms of shortfalls. This is an experiment which is going well so far in terms of a new model that could work. One we hope among many. But if I had to say whether I think there will be many followers, I think the answer is probably not because it's so hard to do.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I talked about that gear that we spent really getting together in person weekly, which may not sound like much, but you're talking about three continents and Juno is not an easy place to get to, nor is Kuwait City, London and New York are a bit easier. That was brutally difficult. I joke that I'm only twenty-five years old and I just aged by two decades over the course of that time. Wasn't difficult because anybody didn't want it to happen. It was just difficult to do. It was difficult to find a solution that could work for the regulatory tax and other jurisdictional considerations, the bespoke bylaws that this group has or that group has. Fortunately we had really involved people. And I think it's starting a partnership like this is going back to where we started our”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sometimes a fun three, despite the fact that we did a study with MIT last year that argues that those vintages tend to outperform. Why is it so hard? It's operational risk or the perception thereof, and so if we can come in and show through facts that over time we've been able to de risk these situations and allow the entrepreneur to focus on investment performance and that they have succeeded, I think the view is that we're adding value for our peace just as any other partner should. And so I think, well, asset owners may need to get comfortable with the notion that another asset owner who came in earlier got a bit better deal than they did. As long as they can get past that ego part of it and really look at the value that they're getting, in my view they should be happy with coming into a manager that has the support that our constellation managers have.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“They were accelerating that upside, and so they're getting a smaller piece of a bigger pie that's coming out of the oven faster. Also, we really try to earn our keep. So if I'm a potential LP and a manager and I see that a percentage, call it 10, 20, 30 percent of the manager is owned by a third party, who is that group? Is it just some passive minority interest that does nothing? Well, that could be a problem. If it's a group of peer asset owners that are actively credentializing that manager, supporting them in these areas we call core capital formation, operations, risk management, and enterprise strategy may be a positive because the big risk when you're an LP, why is it so hard to raise a fund one or a fund two or even”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we're very mindful of that point. And I think the first thing that has always given me reassurance is that the manager's alignment to performance, which is a big issue, is almost always better under a constellation partnership than it would have been for them back when they were at XYZ household name, private equity firm. Where at a big shop, you're contributing to the overhead, the founders are still there in essentially every situation. So it varies from firm, but let's say it's 50%, gets kept with the team and 50% goes up. We're always way below that level. We're a significant perpetual minority owner, but we're not interfering with the upside economics. And in fact, a lot of managers that work with us would say,”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you get outside of the ecosystem of these asset owners for one of the managers you've backed, there's always the question about the next LP and how do they perceive the outside owner of a GP. How did you think through either the amount that you'd be willing to own as constellation of a GP and the incentives as someone else investing in one of the managers you backed?”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's better for you. And it's also better for the asset manager too, because now they can think strategically about which co-investors come in. Maybe they want to think about stapling that co-invest to a future fund vintage investment. There's freedom to be creative when you have balance sheet combined with alignment, combined with smart people working together is the likely outcome of that situation going to be a positive sum? I think yes.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“How can we all do something that's to our collective benefit? Well, what's the manager's problem? He needs to be money good on that deal, or else he's going to be elbowed out by some other GP. And it's too big for his fund. And everyone knows that. So if we can come up with our balance sheet and say, here's $75 million, you put in $75 million from your fund, go pursue the deal. Huge help for him. By the way, that helps us because we own a piece of his firm. So already there's some mutualism. Then once that warehouse is put into place, it's famous that asset owners have eyes that are bigger than their stomachs when it comes to co invest. They just can't move at the pace that these deals move and get things done in two weeks. Well, what if we could give you a year or six months and hold it on our balance sheet while you and your team evaluate it in Juneau or in Sweden?”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“The owners of this new entity, we have to have a value creation story for them which may go beyond what we do specifically within constellation, where we're helping them in other source other deal opportunities and improve their ability to execute in a range of markets across the world. So what I typically do is instead of attacking that bias that people have in some sort of philosophical way is we'll just give a real world opportunity. One of our managers that you, by the way, as an asset owner own a piece of their business, has a $500 million.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the easiest way to do it, I mean, look, one of my biggest pet peeves is that people tend to look at financial markets as either zero-sum or even negative sum. And I think that comes from the fact that we were raised to view public markets as the archetype of how things are done. And I win, you lose, you win, I lose. And that is the case. If I'm writing an option and you're on the other side, one of us is going to do well, the other's not. In private markets, first and foremost, things are very different. This is about value creation fundamentally, and I think that's never been more true than today given where entry multiples typically are, is that you have to have a value creation story with respect to GPs that we back and who are essentially the portfolio companies of Constellation, we have to have a value creation story around them. And with respect to the asset owners that partner with us and have been the”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“You mention at the onset this notion of this activity being positive sum. And that is something you don't hear that much about. It's a nice ideal, but in a lot of capital markets and a lot of these pools of capital individuals' incentives people are compared to others. How have you tried to engender that positive sum game across these constituents?”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's just a natural community of people that we can draw on. And where appropriate compensate to help us build something”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm proud to say that because we had really smart people around the table as we were designing the governance, that we built something that has a lot of flexibility in it. So every year the board gets to decide who's contributed. And we also have flexibility which we plan to exercise to build advisory councils and to bring in industry leadership from around the world to support what we're doing. We have a kind of convening function within constellation so that that extends to more junior professionals, that we want to ensure can grow with this business, and it has to do with ensuring that we're working closely with the asset owners up and down their mastheads, and with others who can support us. And because we were born out of institutions like the International Forum of Sovereign Wealth Funds and the IR, etc.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm still curious about the structure of your team, and you mentioned that the management team can kind of earn their way into ownership of Constellation. How about the people below the management team, and how do you compensate someone in a competitive world for talent?”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“People talk about getting fee discounts. That's probably the most common way of approaching an early stage next generation manager LP investment. In our case, we're looking for alignment that could lead to effectively kind of negative fees in the long run, where as the manager grows, we have this other return stream which can add significantly to our bottom line, which is to say giving asset owners their rightful piece of the enterprise value that they help create by catalyzing these new businesses.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“That will self liquidate touch wood. And then we have our GP ownership, which grows as their business grows and becomes this kind of growing annuity, which we can hold indefinitely. And yes, at some point they may come back to us and say, gosh, this has gone better than we expected. We'd like to buy that piece back from you. Or it makes sense for us to sell it to some third party or finance, come up with some financial solution that allows us to return capital to our asset owners. But the basic view is that.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not to knock Goldman or Morgan Stanley or JP Morgan, but if you're a family-owned business, who do you want as a partner, somebody that's going to come in for five or seven years and force you to restructure? Maybe sometimes, especially if you're looking for the best price. But what we find is a lot of folks are looking for a generational timeframe partner. So what that means is that in terms of the structure of our capital, it has to be quasi-permanent. Yes, there needs to be a way for the investors to eventually pull money out, or what's the point? But on the flip side, it can't be tied to a specific arbitrary deadline of its eight years or its ten plus one plus one. So in our model, when we back a new manager or a next generation manager that may already have a couple billion of AUM, we think of our return stream as well, there's the LP commitment that we've made to them.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our asset owner base has a generational time frame. Most of them are cash flow positive through twenty sixty, twenty seventy. If I had to list of kind of fourth megatrend back when we were starting our conversation, I would have said it's a move to longer duration capital that matches longer duration underlying opportunities. Blackstone's been working at this. You see new structures all the time. It is hard for conventional GPs to operate in that way because they're looking for a crystallization of carry after five to ten years, depending on the asset class. In our case, the opposite is true. It would be hard for us to operate if our plan was to sell in five to seven years. Because if you think about GPs, the kinds of groups that we back, there are either family owned businesses or closely held partnerships”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Still early in the iterations of these investments, and today you could go and present to a new manager and say we have effectively permanent capital, there's no need to sell our stake down the road. At some point in time, it's likely that one of the partnerships that you back will fail. I mean, in theory, all of them fail, but many haven't. How have you thought about what the message is?”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“and our goal is to solve a certain type of problem for institutions, to get them better deals, better access, better economics.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. And that's why we've been very cautious and conscious to that point about partnerships and how difficult it is to succeed to start with measured steps. So a lot of people would look at, I think we're at about 1.2 billion right now, would look at that as terrific first effort. It's off the charts. But the reality is in light of the hundred trillion dollar problem that we're trying to solve, which is how to empower asset owners to get better access, better intelligence, their fair piece of the enterprise value created within GPs. It's a drop in the bucket. And that's why we want to use seeding as a wedge into a more aligned relationship between GP and LP that can lead to all these other non-niche, broader asset classes that can work together. And we have no specific AUM goal for constellation.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“That balance sheet structure a capital call? Is commitments in capital calls? Yes. And then, is it as you invest that capital, you go out and see who's interested or? In contributing more because you think about a billion dollars in the context of however many trillions are on the balance sheets of these institutions, it still is a drop in the bucket.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where they're sometimes constructive tension is, how quickly should we go into those markets and can we time our entrance into those regions with a new partnership with an asset owner in that region? So what's the phrase never bring a knife to a gunfight? You know, if we're going to do something in a region, we want to be partnered with somebody that really knows what they're doing. Maybe the better analogies, don't be the dumbest guy around the poker table. If we're in Asia, how much would we benefit from a sovereign that has the local knowledge there? So this is a big strategic priority of ours, is to continue to build out our base of asset owners, not with a view to raising new AUM because there's plenty in our current partnership group, but with a view to increasing our expertise and then increasing the aperture of investments that we can consider as a result.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not within the board structure. By the time something's gotten to that stage we've previewed it, we've talked about it, the board's been involved in meeting the manager, looking at a particular deal, where I think there's constructive tension. And if we didn't have this, it would be a shame because if you're bringing the best minds together from around the world and they don't occasionally disagree, then what's the point? Our mandate is broad. We can do anything in illiquid alts from infrastructure to private credit to private equity to real estate stuff that doesn't have a name. We can do it anywhere in the world. We can at times do it directly in the form of a co-invest, or we can do it through a manager that we align with. To date, all of our deals have been in the US and Europe. I don't think anyone's surprised by that. We've looked at opportunities in Asia and Africa and Latin America. Those are research projects for us now.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, if it's a seed, it's in Wafer's discretion to pull the trigger, and if it's something else, then it goes to our board. And I mentioned that our board is the three people that speak collectively for our balance sheet. And this is part of the challenge of setting up something like this, is the regulatory challenges of managing third-party capital, the fiduciary obligations that come with that. That's why it took us a year. And that's why we benefited so much from what I started by saying, you know, Wafra is unusual. We're a GP and an LP. So we were able to have conversations with other LPs, other asset owners on a peer-to-peer basis, but we had the infrastructure of a GP as a SEC registered investment advisor to manage capital. And we'll continue to innovate structurally so that we can keep pace with the set of opportunities.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of our managers in the fall did a large, high-profile financial services transaction. FISERV was bought by Motive. When they did that, we helped them warehouse the transaction. Others from our investment community, the asset owners behind Constellation, came in, took pieces of the Coinvest in addition. And so we've created this kind of beehive of activity and a lot of our job is just to not mess it up. because we have smart people around the table. And so while Waffer may be making the decision around seating, you're opening up all these other much broader asset classes for ease of use for all the sovereigns and pensions that are involved.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“About seeding and working with entrepreneurs is a great joy. Seeding, let's be honest, is a fairly niche business. We will never be deploying tens of billions of dollars in this way, at least not in a year. But what that seed gives you access to is all these different asset classes across illiquid private markets, all that coinvest, all the special situations, all the potential for warehousing a deal to support the manager and the asset owner to give them more time. The potential for direct lending that sponsor originated to the underlying portfolio company, what could we do in secondaries? I mean, we are just now thinking about how to connect this network of asset owners and asset managers, and it's going well.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“To New York that can manage the capital collectively. What I will say though is that twenty three months ago when we set out to do Constellation, we thought we were getting into the seating business jointly, and we have done that, but taking a step back two years later, there have been a few surprises that speak to your question. First, we've noticed that slightly more mature GPs that might have two or three billion in AUM are still interested in this value proposition because if they can get a catalytic investment from their ideal client base, which is large pensions and sovereigns globally, groups that can serve as a kind of golden reference in each geography that they need to build their business in, that's got a lot of value even at that stage. And the second more important realization is that while we're very excited”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there are certainly some sovereigns and pensions for whom this sort of partnership would not work. If you have the luxury as a GIC, a Tomasic, and Omers to effectively operate as a large non for profit GP with well compensated direct investors, you may decide you don't need to ask the question who should I partner with? You should ask the question, what should I buy? And then go buy it. In our case, most pensions and sovereigns don't have that luxury for all sorts of reasons. The highest paid person in Wyoming is not the guy that runs the $20 billion state mineral wealth fund. It's the college football coach. So there are compensation issues globally. There's talent retention. These entities are not generally located in financial capitals. So there are reasons to pursue this kind of joint effort, even if that means giving up discretion to a group that's based.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Why should one sovereign or pension want to give it up? And so I think the hardest conversation that we had along the way was to talk to Kuwait about, look, this is an investment strategy that's going very well. But think about it. If you're a new GP and you're interested in taking $100 million to be backed by Kuwait, how much more exciting would it be for you to be backed by a North American sovereign, a UK pension, a Scandinavian pension, two large Kuwaitian institutions? And then you've got three continents, and by the way, that proposition is growing, and they have a total of a trillion of AUM. That's a different conversation, and it's not one that our presumptive competition in the seating space can have with you. So the view was this is an asset class where teaming up makes sense. I think there's some”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, so you can think of us as the management group. Sometimes people ask me, why is this the only example of a sovereign to sovereign pension, a pension collaboration that has discretionary capital? And we're at a billion of discretionary capital at this stage. Why is it so hard? Other people seem to want to do it. And I think you either put the partnership together and then go find a GP, which can be challenging because investment committees don't want to improve an idea until you have the team. Or one group can contribute a team to the partnership, which is also challenging because if it's going well as an investment strategy.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Constellation. So we have the benefit of a 37 person investment team that's led by Russell Valdez, who's one of our board members, Connor Stewart, others who are intimately involved. So one of the benefits of bringing together so many institutions, if you build it as a virtual company, is that while each of those groups may be short-staffed, which is a common problem in the pension and sovereign world, collectively, if you do it right, you have the resources and bandwidth to do so much more. And we get together all the time. It helps that Stockholm is amazing in June and so is Alaska and London is pretty much great any time of the year and New York. So we get together at least four times a year all over the world we've met in Tokyo, we've met in New Zealand, we've met in Amsterdam to exchange ideas both within the asset owner and with the asset.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“To me, the analogy has always been should feel like a seminar, not a lecture. People are really exchanging ideas back to that philosophy degree. So we created a strategic committee, which includes Sweden and the Quaid Investment Authority, and we'll continue to grow it from there. So that's the simple governance piece in terms of the team. Each of those organizations is really involved. So Railpen has contributed a great deal when it comes especially to things like sustainable ownership where they have a lead. Alaska submits countless potential seed and growth stage GP stake opportunities for us. The Wafra investment team has a mandate to source diligence and execute, seed and growth stage GP stake transactions on behalf of”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, first and foremost our board, so we have a board of the three founding asset owners, Paul Bishop, who's the head of private markets at Railpen, Steve Mosley, who's now the Deputy CIO of Alaska, and Russell Valdez, who's the CIO of Wafra, or the three founding board members. It couldn't be simpler in terms of a structure, one organization, one vote, and because everyone put in an equal amount, it's very, very straightforward. And we like that. I think our best move in building Constellation has been the choice of partners, both the individual people and the organizations. I think the ultimate goal would be to have, let's say, 10 to 12 asset owners be part of this. Beyond that, I think we start to get diseconomies of scale, and it's harder to share information.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Has to work. And we started with a white blank sheet of paper on that point. And because we had the benefit of three parties around the table and a year to build this right, it was crucial to us that we have the right long-term alignment. You can't forget about management. Our principles there were it should be very long-term alignment, so ten years plus. It should still be a situation in which the vast majority of the enterprise value created is owned by the asset owners that set us up. So we kind of started from the opposite end of a typical GP. So on a typical GP set up, the founder owns 100%, and maybe they get diluted later by selling a piece to a large asset owner. We started with asset owners own 100%, and management can invest in if certain milestones are reached over a very long period of time to something that will be meaningful to them and keep them.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's certainly an elegance to the flow of value creation in that economic structure to those asset owners, though ultimately you and your team or individuals working for these asset owners. And so how do you get aligned in your incentives as individuals, as the people doing these deals and creating these economics?”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“Large shop and the house took 50%. But the deal that they get is aligned with us. And that enables a really different sort of relationship when it comes to co-invests or support to them on value creation activities like forming capital or underwriting new deals.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then it goes public. None of the pensions that put money into Blackstone in its early days get any benefit directly from its IPO. In fact, you could argue that it creates misalignments and confusion because now Blackstone has two masters, they're shareholders and they're LPs. Here we wanted to keep it simpler where if constellation as a GP grows and creates enterprise value, and this is not a negligible point, right? There's $15 trillion of enterprise value held in asset management firms. Compare that to the hundred trillion of AUM held institutionally and you realize this is a massive migration of value from institutions to the managers that serve them. So getting a fair piece of that, number one, constellation should be set up to benefit the asset owners that set it up. And number two, when we seed a new manager, we become their partner for life. Yes, they still control the majority of their economics. They probably actually get a better deal than they had when they were at XYZ.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“But you also align them with the goals of the end constituents. So when we set up constellation, our first challenge was to set it up in a way that had those benefits as a new GP constellation should be owned in equal parts by Alaska, railpin, and Pythasincoate. And it's as simple as that. It's owned thirty three percent by each group. We then structured it in such a way that other investors such as the Swedish and the Quaid Investment Authority, who by regulation generally don't own an operating company, could come in in parallel. We continue to grow and we continue to grow in a way that if enterprise value is really created in this, which we expect it to be over the next five or ten years, who gets that? When Blackstone builds a multi hundred billion dollar institution,”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“The first thing people talk about seeding obviously I know you're very familiar with hedge fund seating and that was where these things began. I've been surprised over the years that asset owners, big pensions and sovereigns that is haven't done more to not just seed managers but to create new ones that they own 100%. Arguably that's what Omers and GIC and Tomasic and others have done, but with a one to one relationship between the GP and the pool of capital. There's been press out of Calpurs in the last couple of years about creating an internal GP. If you can do it and not everybody has the governance to get it done, what a great way to become aligned. You give the GP the flexibility to operate commercially. Outside the reach of the politics of whatever government is leading the particular pension or sovereign”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, not necessarily if you structure it the right way, if you've got the right spirit in terms of how you're going to work together and add value to each other, from the perspective of an asset manager, we have a trillion dollars of AUM amongst our partner institutions. And that's just today with the five that we have. They should be focused on doing what they do best, which is pick securities, as you put it. The ability to add value in both directions is so obvious that if we just clear our minds of other distractions and focus on making the flow of ideas and capital happen between those two groups, the opportunity for value creation on both sides is enormous.”
2020-05-04 · Capital Allocators · Daniel Adamson – Innovation from Asset Giants at Capital Constellation (EP.136) · IDENTIFIED FROM THE TRANSCRIPT · source