YouSaid · the spoken record

Sarah Samuels

lines on the record: 62
first: 2024-08-12
most recent: 2024-08-12
sittings or episodes: 1
sources: podcast

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“At least five years before any planned event. We want to see that next generation being brought into the fold. And that's both from an economic standpoint, as well as from a running of the business, running of the firm. So people who have done one role their entire career, whether it's picking stocks or bonds or doing deals, might be very good at that. But running a firm is a completely different skill set. It requires coaching and training, both from the outside and the inside. We want them to be brought into different processes, to be given that power and to be positioned in a role that has autonomy in the cloud. And then we want to see a program to reduce ownership, to bring that next generation into the fold. In some cases, we've said to managers who really just didn't know about the fact that they need to be thinking about succession, we've said we really need to engage with outside counsel and we'd like to see a management group. We're bringing in that next gen into the discussions that you're having about the partnership.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a good point. I think what we're really looking at is does the founder own 100% of the management company or a meaningful majority or have they been bringing people along, offering people opportunities to buy in or maybe provide a loan for the next generation to become owners? Have they been reducing their ownership over time? If there's a large lump sum, whether it's a boutique firm or a huge organization, it's probably going to be tricky for that next gen to buy them out, which leads to increased risk of a GP stake coming in or an outside minority or majority investor, which necessarily changes the incentives and the way that the firm culture works and what they're striving to achieve.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is always a tricky one because age is not something that we use as a solid metric. It's obviously very, very soft and we need to be able to accommodate that every single person is different and some can work very late into their careers and others maybe won't want to. But if we see a founder approaching retirement age, we're really going to look to see have they groomed that next generation what type of economic stake have they built up in the firm, especially with those founders who've had the firm for 20, 30 or more years? It's going to be really tricky to see who's going to be able to buy out their stake, the next generation likely has an accumulated enough wealth. There's a lot of tension on price, and this is something that needs to be thought about at least five years in advance of liquidity event or transfer of ownership.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is where meeting with the team in person is really important. You want to be able to look at the body language. You want to speak with other LPs to understand what kinds of discussions that they're having. And so it's really a matter of qualitative and then looking at those outflows. We can look at a number of different performance metrics, whether it's looking at sharp ratio for hedge funds, a drawdown. And we really want to understand, number one, are the junior and mid-level people and even senior people getting paid or have they gone years without making a meaningful income because they're underwater? And number two, how likely is it that this founder is just going to wave the white flag?”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, we are a fiduciaries for 400 plus clients and 1.6 trillion dollars in assets. And our job is to ensure that the strategies that we are putting our clients' dollars in are sustainable, can generate returns, and are going to be good investments for the long term. Our allegiances to our clients. That said, we view part of our job as providing feedback to managers and GPs. When you think about it, they have a sample size oftentimes of one, maybe a little more than one. But as you know from your time in your seat on the hedge fund side, head, you've seen hundreds, if not thousands, of situations. And so that's a real advantage for someone in our seed in an investment consultant. I could share stories about times when we've met with investment managers, identified some red or yellow flags in terms of their succession management, provided feedback to them. And then within two or three weeks, they've implemented changes. They were so good.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“In our experience, this is predictive. I'll tell a story. We did this analysis in one of my former roles and we looked at every hedge fund portfolio in our program. And we presented it to the investment committee. We identified a list of GPs that were of higher concern to us on this succession framework that we built. And two weeks later, one of the firms that was at the top of our list, High Fields, announced that they were folding and turned into a family office.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we're looking at both short and long term performance, and it's very important to think about succession through the performance lens. If we have an extended period of underperformance, it's going to lead to fatigue on behalf of not only the founder who has accumulated a great deal of wealth in this organization and maybe tempted to fold and say, you know what, I've made my money. I'd love a higher quality of life. I want to be happy and hang out with my grandkids. And then also underperformance leads to turnover. And if people aren't getting their incentive comp that's based on performance.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so it's really three things that we are looking at. One is performance. The other is the key investor age. Are they approaching retirement? And then the third is the degree of next generation grooming. So those are three things that have a lot of subcategories underneath them”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, as you recall from when you kindly had me on your show a couple of years ago, we have a pretty rigorous investment framework here at NEPC. I believe that it marries the best of both worlds, that highly quantitative process that we use at the public pension fund and the highly qualitative.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not something that's always been on my radar. And so when I think back to my early days of selecting investment managers, it was much more quantitatively oriented. And these are my days at the public pension fund. And when I went over to the endowment side, a lot of the capital was locked up into a liquid strategies and it really became much more of a critical thinking exercise to select managers. We had to be subjective and think about the softer things. And so this was something that we focused on at the endowment and really built out that skill set there.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“To help you learn best practices for understanding allocators, developing relationships with investors, and building a brand through workshops and peer discussions. You can learn more and sign up to join us at capitalallocators.com slash university. Thanks so much for spreading the word about our newest capital allocators university course for investor relations and business development professionals. Please enjoy my conversation with Sarah Samuels. Sarah, thanks for doing this with me.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source
“The first generation of investment firm founders approaches retirement age, the issue of succession to the next generation is increasingly at hand. We've seen several successful transitions of firms, many that haven't survived their founders, and an entire sub-industry arise to help facilitate generational transfers across GP stakes, structured transactions, and public offerings. With both managers and allocators thinking more about the inevitability of succession, I thought it would be helpful to share what a leading allocator who reviews thousands of managers has learned about the issue. My guest on today's show is Sarah Samuels, partner and head of investment management research at NEPC, which advises on $1.7 trillion in assets. As part of her work assessing managers, Sarah has created a framework to analyze succession as an investment risk.”
2024-08-12 · Capital Allocators · Succession - Sarah Samuels on Generational Transitions (EP.400) · IDENTIFIED FROM THE TRANSCRIPT · source