YouSaid · the spoken record

Reuben Munger

lines on the record: 73
first: 2020-07-06
most recent: 2020-07-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“My wife and I figured this one out pretty quickly after we had kids, and it's that you don't realize just how little sleep you can get by on, nor do you realize just how much you should treasure your sleep. So either sleep way more or sleep way less when you're younger.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, my parents were teachers. And so that just brought forward the idea of education and constantly trying to learn and opening up the ideas of the power of a book and where you can go from there.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's an extension of the same, which is less the case now, but oh, aren't you facing a lot of regulatory risk when everything in electricity is regulated? And the same questioner owns a public stock that's an oil driller in Kazakhstan. And there's a lot of regulatory risk there too. So we used to face a disproportionate bias of risk because it was easy to dismiss the sector on that basis.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the idea that we're just waiting for an oil supermajor to solve this climate problem, this is a group of companies that have had terrible returns on capital. They earned 8% ROEs last year. This year's going to be worse. Exxon's down 40% in the last five years. Why are we waiting for them to be the bellwether that determines whether kind of returns an opportunity are here in this sector?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“I moved to Colorado from Boston in part because I love to ski. Little did I know I would become a hockey chauffeur on the weekends. Instead for my kids, but I still love to get out into the mountains as much as I can.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Five million dollars, but you can't scale there. And so it's a very harsh reality for a company that's had a philanthropic capital partner that hasn't been economic. And then they want 2050, $100 million. And the harsh reality of what the market says, and it'd be better if they just had to figure it out from step one.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“The good news is those buckets are crystal clear and distinct. You mentioned stocks and things. I actually don't do much of that at all, right? I know what it takes to be good at it and I don't choose to spend my time doing it. Therefore, it occasionally shows up where it really ties into what we do. So we're doing a take private in Norway. The stock was massively undervalued and completely misunderstood. And I had all kinds of flashbacks to the exact kind of situation that I liked 15 years ago. But within the nonprofit or philanthropic side, capital's not really the solution, right? The leverage comes from policy change and policy drives capital. So to me, at least, either something pays and real capital should do it, or it needs a structure or policy prescription that's different to make it pay. So the idea of subsidized capital or those things, that doesn't strike me as attractive. We see some opportunities where someone has been subsidizing it out of a family office up to.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where do you draw the line on investing on behalf of others in the fund and then maybe something you would do philanthropically that might serve the same mission but doesn't have the same kind of economic return?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really accelerating to where they matter. And so we're part of some of those as well, where big institutions like I refer to are starting to say, okay, well, how do I actually do this instead of make an announcement that sounds good but doesn't actually do very much?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the fun things is aligning the work you do as your day job with things you care about. And so some days am I working with this nonprofit because it's part of my job or because it's part of my interest, but it's one and the same every day. And so we've been involved in attempts to move and protect the U.S. oil exposure, both economic and structurally. It used to be just about foreign oil. It's still about the economic impacts of oil. And no matter what you do, that's driven by reducing our percentage usage in transportation. And so working with big CEOs and generals and admirals to really talk to government about how to do this right is an effective diversifier from a bunch of environmentalists. And so spend time on that, work with where and how markets are innovating with nonprofits with some of the politics. I think the big corporate change and transition discussions are.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Skeptical meeting with look, this isn't just rainbows and unicorns, and they kind of looked at me like, what are you talking about? Well, and gave her an example of some of the complexity of situations that we're grappling with. We haven't solved it. It's something we're spending the summer trying to think more about.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“So you quickly get into things that are complicated between funds and with fiduciary duties. We already have one investment that's in both of our first two funds, but you can always sell from one fund to another or do other things. But that's generally frowned upon and complicated. Our favorite approach is there's a price that solves the problem for us and for our investors. And ideally, we can convince someone to show up and pay us that price. And then they're effectively paying for the opportunity. That's sort of bucket one. And then after that, many of the structural solutions evergreen or otherwise have their own sets of complexities where you end up talking about why you're an evergreen fund instead of talking about what you do and why it's excess return generating. And so it's why we haven't tried to do anything creative on this front yet. We're trying to run around and tell people you're going to earn what we think of as excess returns and sustainable assets. I had to interrupt one.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“You put on your structuring cap, just think of that one example, which let's just say we agree this is an asset that's doing really well and likely will continue to for a time. How have you thought about solving that Structural challenge relative to having it in a fund that needs an exit because of the structure of the fund.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Team and going through the early lessons of what works and what doesn't. And so we can do what we talked about earlier, which is turn around and sell to someone bigger. But I think there's a mismatch between expertise and alignment that continues to evolve. And that's been a question in asset ownership in general. And there have been some attempts to fix that. But when you're doing it in newer categories, it has a second level of difficulty.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“If I go back to our mission, it's saying bring more capital and bring more ideas and bring more competition. And in some ways, that makes it harder. But I think the key is this process and economic pathway continues. And so just sort of sticking on it and grinding away is really important. I think there's some complexity to capital still. The ability to put together the right mix of capital to really drive and deploy projects over this change is complicated by traditional fund structures. We have an investment from fund one that it's been great and it's grown and it's five years in, six years in. And suddenly it may have a multi-hundred million dollar equity opportunity. It high teens 20% IRRs unlevered. Well, we're coming to where we need to be thinking about selling it. And that doesn't really make sense because we've had a fair amount of blood, sweat, and tears in building and expanding management.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're not doing this, and that transition has, I think, been really powerful to just get people to start to think about it. And you've seen really big moves. Excel, which is my personal utility, but they went from being and are one of the dirtier utilities because they have a lot of coal to committing to an aggressive timeline to clean up. And they're honest about it. We don't know how we're going to get the last 20%. We know how we can get to 80%. But by the time we need to get to 100, we're going to figure that out too. And that pragmatism and approach is partly driven by these big asset owners saying you got to have a plan here, people.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“A funny tension between divestment and influence and the balance of how you vote your proxies or what you buy and don't buy and how that manifests is a complicated piece. Larry Fink hired Brandis, who was the point guy on climate in the prior White House and is incredibly cogent and thoughtful on these things and other places you've seen an implementation, an increase in how prominent this thinking is within something like Goldman Sachs. And the big institutions are grappling with it. And it's really at that place that choices can start to be made. There are some nonprofits that have moved to where it's no longer just an ascetown or signatory, where Calperus has signed something, but that doesn't translate to the on-the-ground portfolio manager at Fidelity or wherever. I'm not trying to impugn or comment on any organization, but now there's a forum that has these same asset owners engaging directly with the CEOs and saying, look, we own 30% of your.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Private tide that you're attacking, you can at least see it's fairly straightforward in an alignment of what these objectives are and the activities you're doing. You shared earlier a little bit about why you chose to do private markets. It used to be public market investor. How do you think it makes sense to move this ball forward relating to the public markets?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think is really interesting, but the aggregate pressure is real. And one of the big challenges is how to do it. We've seen people say we're going to do it internally and just be completely unable to do so with all due respect to some of the best endowments or investor groups out there doing it internally is very complicated because you just don't have the expertise. Or you see lots and lots of opportunities that are decently scaled but low return. And so how you find something that matches your return and your social goals is a complicated ask of particularly small teams that are trying to sort out a lot of moving pieces and that's only gotten harder in the last six months.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, but it's convenient. Often the boards think about it more and the CIO is left with this question of how do I deal with it. And they end up in sometimes a more complicated position than they might have been. So for someone like us, the politics of it, as it were, is a double-edged sword. There's this question of are we doing it because it's being demanded or because it's a good investment choice? And those tensions often get in the way of good decision making instead of enabling it. And so it's been far more interesting to be part of conversations as people moved from we're not doing this because I think it's concessionary to now creating what I would call an alternate assets like it's a sort of a new private equity category that we're included, but so is data centers and a couple other things. But it's been hard to bucket because it's not traditional real assets in oil and gas and toll roads. But it's that evolution of thinking that I”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not hard to know at a high level just that the issues of climate change and social equality and things like that are more prevalent in the discussion than they have been. Has that transferred to what you've seen at the investment decision-making board level of these pools of capital?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“On that market viewpoint to begin to convince more and more people that this is in fact the case. And then expanding effectively our investor base or the investors in the category and in the sector, we expanded quite significantly our LP base between fund one and fund two. And it's bringing an endowment or a foundation into these investments, not just because it's good for the world, but because it's good for their portfolio. It's diversifying of their traditional real assets. It's got an inherently good risk return profile. That conversation and that conversation happening at investment committees is, I think, really important over time. And so that's kind of a motivating focus of us beyond that we are in an area with the same secular and structural tailwinds exist within asset management in this category that exists within assets.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“I just wanted to invest to make money. I don't know that I would have gone out and raised a bunch of third party capital and taken on the obligation of working for others. We did that in part because we saw a profit opportunity, but more of a profit opportunity for them. So I think our whole genesis was from a position of impact. It's why it's worth doing this, but not impacting a given micro investment, but rather felt pretty strongly that this was not a concessionary activity. This is actually harkening back to my comments earlier about going to a small town in Europe to meet a CEO from a 500 million market cap company who doesn't talk to investors often and figuring out, wow, this is amazing, right? The level of work required is just different. And so now we're choosing to work on this because it actually creates opportunity and opportunity for really good returns and convincing other people that it does. So we see our mission as delivering.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you set out to sort of build Vision Ridge, there's this concept, at least, imagining that you were investing in a certain way to just make money and now you're in a space that has this bigger mission attached to it. How have you felt about the day-to-day difference?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then from our team and our process perspective, it's the same thing other than a shift in both that higher marginal cost of capital, even though the markets are very strong in our view, the incremental bar is definitely higher because uncertainty is much, much higher. And then how due diligence. We have something we'll probably close in the next month or so, but we had already spent a lot of time with that team. Given that I've already alluded to it, often takes six months to get something done. We spent a lot of months pre-pandemic with the team. And so once it switches to something where we haven't spent a lot of face-time with a potential investment, it'll be a little bit more interesting.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“We liked that we're in real assets and that there are things that are inherently defensive, but it's been particularly nice to have the kind of frameworks that we have where most of our focus is on operating activities and developed assets, as it were, or construction, which has often been an allowed workforce depending on the state that you're in. Obviously, face-to-face transactions slow down a little bit, but there are as many things that are accelerating a lot of the transitions and changes as challenges. So every team went through that cycle of is every individual safe? Is every person safe? Okay, what's my budget look like? How am I going to make changes? And at this point, everyone is pretty much settling into kind of the new status quo. And that's running business development as it is, figuring out new ideas, executing on the existing asset base, plowing ahead with business as usual.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“We end up with areas of expertise, particularly at the partner level. I spend a lot of my time in mobility and electricity. My partner Justin spends his time in ag water and electricity. George is most spends a lot of time in waste. And immediately those start to dictate the kinds of deal flow that we see. And then within our team, we run that massive matrix of building optimum expertise, giving people the highest level of development, exposing them to lots of different teams. We have a New York office and a Colorado office. And so how do we make sure that that's cross-fertilized? So we have sort of all the traditional challenges of being in two offices, I guess, now being in 15 home offices. But that effectively leads to ending up with a fair amount of broad depth and having touched most of the things we can find out there.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have 13 investors. There are three of us that are partners. We've sort of worked together from the beginning in one way or another. I have a couple of principles that joined us right off the bat there. And then a group of VPs and senior associates that come out of that traditional mode, a bunch of them worked at oil and gas private equity firms or a utility group at a bank or investment firm. And they kind of saw the writing on the wall and said, hey, I want to get onto this side of the ledger. But that gives us depth and firepower to look at most things that come in. And then we obviously have a full operations team.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Inconsistent with the way we think you can make money in these sectors. And so that's been the biggest sort of groups coming in and out based on WIM. You also see the same thing in incorporations where the interest in electric vehicles goes up when gas prices go up and then gas prices go down and you see corporate programs sort of collapse versus over the last 18 months you've also seen major sustained investments by the automakers that are of a scope and scale that mean it's not clear when the curve ramps in the small amount but four years from now since people aren't doing new engine programs they're switching to electric”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going all the way back to 2008, there was sort of a surge of interest. You had some really big allocations made. And the problem was everyone was betting on three things. Cheap credit, high gas, and a carbon price. And it took about six to nine months for all three of those things to completely implode. And so there was then kind of a retrenchment phase where most people weren't looking. And they began to perk their heads up again, but you kind of bounce around with the oil cycle and other things. So energy investors in particular are going to bounce back and forth based on how they think about oil. It's almost like their capital flows into this sector are a derivative of the commodity to which their life is actually attached. And I think that's one of the really exciting things for us is their framework tends to not quite be the same as they think about risk and return and what has been the way they've made money is totally.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“You've sort of participated in this market over the last decade, where have you seen the players come and go effectively through past cycles before this last period of year, year and a half where there's clearly a surge in interest?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, how do you balance those two things, their cost of capital is incredibly low? And so it's both a complicated ESG question and an inability to exercise outcomes in something that's this dynamic. And so a darling like Satan Edison can go from favored stock to bankrupt if you're not careful.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“So this change, there are some great public companies that are part of the change, but it's actually a relatively nascent and complex world where finding teams and finding the people who are really going to dig in and do the work makes a huge amount of difference. I'll use EeveeGo again, bringing in a new management team there has led to an acceleration of that business's performance, its network performance. All of the key metrics as you went from 1.0 of the industry to 2.0 of the industry. So people that had grown up in that business between 2008 and 2015 are different than the people that are growing it now as it's gone 5x the size and it's going to 5x again. So you really need to be able to roll up your sleeves and both figure out structure and find the right places to invest whereas next era is the biggest renewables owner in the United States. It also is regulated utility in Florida.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we've seen our transaction size go up over time, partly because we have more capital, but also because as more and more things are economic, the scope and scale of what you can do and still be at an attractive bite size. So we see bigger opportunities, but we also see this second point where the really big guys are starting to look and they can't reach all the way down. And so the mid-size space, we start to bump up against them now that we're looking at certain situations that are well above $100 million. But that's kind of been the floor where you're just not going to see them come below it. And they still, I think, see value. If you want to put a billion dollars of equity into something, it's very hard to start at 10. And so we're willing to start at 10 or write $100 million check and then go from there while they need to start with two or three hundred million dollars to start.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“You've seen some of these areas blend over. So when we sold EVGO to LS Power, right? It's a third example of bigger PE trying to figure out how these trends move. So they're electricity-oriented firm that is moving into mobility because of that interrelationship between power and driving.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really depends on which sector the power side, there are a lot of actors and many people are trying to get smarter about how to move on. Going back to energy storage, in the last three months, we've seen both energy capital partners in Blackstone make big moves. And that's sort of saying, okay, what are we doing here? This is not oil and gas, oil and gas is suddenly a problem. How do we move into these sectors? There's a fair amount of activity in electricity and mobility, there's sort of a huge tech side work, but there's much less experience outside of the technology and venture capital side. There are just less players who play within transportation. There are a series of big transportation companies, but it's an evolving and shifting framework that intersects with low-cost finance where the least finance companies are able to operate vehicles at 4%. And so what and how does that transition interface?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“So you've thrown out two differences of things that we are willing to invest in today and things that we want to be cognizant of for tomorrow. So the transition towards electrification is a really easy one. It's a mathematical equation When and how autonomy applies is much, much more complicated. And so when we think about assets we're building, how do you align with both trends? When we own DVGO, we had partnered with NRG and we grew the asset base over two times. But you wanted to be cognizant of where and how that was going to make the most sense.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“The cheaper, greener, lower cost is easier in some sense than the uncertainty about, say, autonomous vehicles. We know that trends happening. Where do you think the mobility curve looks like maybe five years from now”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Deliver that lower cost green architecture. We have a business that's helping cooperatives get off of traditional coal partners. And so you go in with a simple proposition. I'm going to make it cheaper, greener, and local. And it carries a lot of weight. And so those are things that are pretty easy to want to get behind. And I think that trend is powerful and longstanding. The question is just which of the 1,300 utilities in the US is going to manifest it at any given time. And so that's a long list to just continue to chip away and move through.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our playbook doesn't really change other than this sort of COVID window has created a fair amount of financing uncertainty. And so whereas we haven't been looking at solar, for example, in particular depth in the United States for a few years, we've seen three or four things that I would call distressed renewables come into the office. I'm not sure we'll do any right now, but that's the biggest change in the last few months where things that were previously pretty easy to understand are coming back just because someone is not able to step through and find what they were planning to do. Otherwise, it's that same theme. How are batteries going to drive change? Mobility is a little bit disrupted right now, but I think there's a lot coming in that technology interface between vehicles, the electricity grid and charging infrastructure. And we really like that sector. We continue really like where and how renewables can play out on the grid.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“How does that interface with the utility and what's the right way to bid and underwrite in a competitive dynamic in this new world? How do you kind of work through some of those issues? And we had owned the largest electric vehicle fast charging network here in the US other than Tesla. And so we were comfortable with a lot of those same things. And it allowed us to quickly build an affinity with the family who continues to be our partner.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Quickly. What's really nice about those things is you're able to build a team and build expertise and you have increasing confidence. And if it's not happening, you're able to keep it relatively small. We have a couple of things that are $10 or $20 million in fund one in total, whereas the best things are three or four times that. And so you're able to really create some nice portfolio skew with things that you like. At the same time, you're in the middle of buying a business in Scandinavia and Norway that has operated for years. It's an existing traditional business, but it's undergoing a transformation as, in that case, ferries electrify. And so finding the best operator who is then leading this transformation is the way that makes the most sense. And in that case, the management team is really good at making sure that the vessels go back and forth and crewing it and doing all those things. What they weren't as good at is understanding how charging systems work.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ended up relatively diversified across agricultural water, power and mobility in both of our funds, it seems intentional, but it's also a mixture of how we source and wanting diversity. And so when you're looking at a broad array of things, you're going to end up with a broader array of things. And we also are try to apply a kind of a best return framework to things. So we're not going to just keep pounding out solar deals, even if returns are compressing. And so that flexibility gives us that diversity of portfolio construction just because our focus is on a broad, attractive set of best returns within what we look at. We then have ended up with a mixture of a few really good platforms where that first investment is a $10 million project, but it turns into $100, $120, $150 million of projects.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“You've built out across these funds, how have you invested both across the different thematic categories and then also across the different stages of development of either the business or the projects?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then figuring out the right platforms to scale. We had a couple of things in Fund one where the financial opportunity didn't scale as quickly as we hoped. And so while interesting project level returns, you don't get the kind of operating leverage that is required to do really well.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“I alluded to one which is assuming that a developer is going to be able to continue to say stay as solvent as they think they will be just doing your project. So you can be capital protected buying a project at construction ready is one of the places we like to invest because often construction risk is well known. We don't want to wait and know whether you'll get your interconnection or whether you'll get a permit or those things are much either binary or harder to control versus having a construction company show up and build the thing they've built five times is relatively easy to underwrite. But usually delays show up and a developer runs out of money when they would have thought that they were going to be fine. And so we're increasingly trying to just avoid getting into that conversation, having been through it a few times, which says now we need to bail out our partner. And that creates an uncomfortable discussion. So it's better to sort of sort it out so you're aligned upfront. I think that's probably been the most frequent issue.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“Developers and executives. While the tailwind is there, they're pushing against most traditional energy systems and traditional ways that the business world operates. And so they have an innate optimism. And so we're able to usually find really good alignment between our goals for returns and their goals for returns.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think some of it goes to that structural question. We are able to offer a couple of different approaches to providing capital. And so a management team may say, hey, I want you to finance each of my projects, but then they realize they need capital at Topco or the developer. And so once you start to get into the push and pull of who pays for the team, how do they pay for it? Having been around the block and seen things that work and don't work allows you to help them on that journey where you say, look, here is what we need. We need to be able to get access to the assets. If things aren't working, with all due respect to you, we need to be able to get our hands on those and protect our capital. At the same time, you believe in yourself and we believe in you and therefore how can you earn the kind of personal and team upside that you think fits with executing on your value proposition? And there sort of are inherent biases and people who are willing to be”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you refer to sort of the way we work, are you taking that financial analyst lens and saying, okay, we're modeling this out, we're looking at certain required rates of return? Or what is it about the way that we work that might be different from others?”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've built up over time to start to help them narrow the competitive playing dynamic over time. I think someone came in late and tried to take that deal, but ultimately you've built up a relationship over a year.”
2020-07-06 · Capital Allocators · Sustainable Investing 9: Reuben Munger – Private Capital Perspective (Capital Allocators, EP.147) · IDENTIFIED FROM THE TRANSCRIPT · source