YouSaid · the spoken record

Steve Moseley

lines on the record: 102
first: 2021-05-03
most recent: 2021-05-03
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

“Work really hard by yourself facing straight ahead in a dark room, and I think that is a less pleasant process, and I think it leads to worse outcomes. So that's a long way of saying asking for help, not being helpless, but being willing to ask for help is a good thing.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“So here's one that I still wrestle with, which is to say maybe I've learned the lesson, but there's still some learning to do. What I've discovered seems obvious to some people, which is that it's okay to ask for help. It's a good thing that you get better outcomes if you engage other people. And the sort of goofy example would be the cliche of a couple driving a car and the man refuses to ask for directions because that stereotype exists for a reason, and I think it has relevance to personal and professional relationships. And I've realized slowly over time, because I've really enjoyed helping other people advance professionally to make it more specific because helping people sound sacrine. But because I've enjoyed it, I realize other people really do want to help you. If you ask somebody for advice, it's not painful for them. People normally genuinely want to engage. So I find I have to constantly remind myself of that. And the alternative is that you just...”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Know if he's going to be able to use that Japanese anytime soon, but I share that. I think it just kind of leads to a richer life.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“I said that I grew up Academically oriented household that's true. I mean, I would say that my parents have always, and they've been infused with this to my DNA, they value knowledge and education just for the sake of knowledge. It doesn't have to have a practical application. share that. I think that applications, relevance emerges over time, but I think there's value and pleasure just in knowing something. I mean, my dad's a surge and he's retired now, the year after he retired. He went to work in Nepal for a few years with my mom. Now he's back. He's 85 years old. He's back from Nepal. But he's 85 years old and he just wrote a book on the evolutionary basis of morality and published it. And he's taking Japanese at Princeton. So he's not bored. He's learning because it's fun to learn.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today, I would say may be the selfish gene Richard Dawkins. The selfish gene is a great, but it's been around for a long time, but it's very accessible science but still foundational. And I guess this sounds like a crazy overstatement, but I mean, it basically explains life, not just human life, all life, right? So that seems like a book worth reading.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of an LPA, but if your overall objective is to create a fund that has the tools it needs to deliver, to win and make money for us, then that's a good outcome. So I would like to get away from that pendulum metaphor.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“So here's one that just came up this morning actually. We're investing in 15 or 20 funds a year, so we're negotiating, in spite of what I said about the convergence of GPs and LPs and want to team up with GPs and everything, there is a negotiation and a negotiation around the LPA. And the metaphor that comes up endlessly is that it's a pendulum. Every time I work with a different lawyer, they'll say something about how the pendulum has now swung a little bit more to the GPs or a little more to the LPs. And the reason I hate that metaphor is not just because I hear it a lot, it's because it implies a zero-sum game. It implies that if you're on one side of the pendulum, you're winning or losing. And I think the better framework is to look for opportunities to create value in the ecosystem and make a lot more money together. And that may sound a little bit starry-eyed, but it's real life. You can negotiate one.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“My kids will tell you, I hate recurring periodic billing on my credit card. I mean, I hate it vehemently for the same reason that I love it as an investor. These business models with recurring revenue are great if you're on the right side of the trade, but the $2.99 monthly line items that show up on my credit card bill with a family of four, it really drives me crazy. And as you know, trying to unwind those things, trying to cancel those subscriptions can be a lot of work, especially maybe not worth $2.99 a month to cancel, which is the beauty of the business model.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe I'm stuck in a mental rut here. I think it relates to the question you just asked me. I like to exercise. In fact, I think I would say that getting some exercise outdoors is really important. So I find personally I need some exercise. I think it helps with mental health. It helps with physical health. It probably helps with behavior. My wife tells me I'm a better husband after I've worked out and I think that's probably a biochemical reality. So some form of movement, especially if it can be outdoors, I think that's something that everybody would benefit from.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that's an easy one because I already answered it. I like to ski, I like to snowboard, I had Nordic ski here, I hunt, I fish, I bike, I guess the common denominator there is that they're all outdoors. I really do like to do things outdoors. I lived in New York City longer than I've lived here in Juneau, so you can kind of make it work in Central Park, but here it really embraces you, and that's been fun.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“To deliver those resources, which really just translate into money and focus a larger team, a well-paid team, if we can't deliver those resources, then we won't win. And I'm not really interested in sticking around if we don't have the tools to win. I know we had it eight years ago. I hope we can prevail over time. So we'll either make some changes, or I guess the risk is that the team sort of dissipates. And I guess I would expect smart investors to go where they can achieve what they're trying to achieve. What I'm trying to achieve is great returns. So we don't need a lot of tools to do that.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Been a great experience working here, and the reasons that I joined still apply. It's still a tremendous platform for long-term investing. And I was sure then that we had the tools, that environment, characteristics of the permanent fund, and my background and the rest of the investment team. That was enough to win, to outperform. I was sure that that was the case, and I think we've been able to demonstrate over the last eight years that that is the case. However, the structural disadvantages like compensation, like geography, those will ultimately prevail. And I'm not sure have been successful in convincing others that that's a real problem, because unless you're in the middle of it, kind of hard to appreciate that something that looks like it's working really well is actually broken because that broken element hasn't surfaced yet. It's like a broken jar in the back of a cabinet. You don't know it's a mess until you get back there. I would say that if we're able”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the argument that, well, let's market, or the argument that a structural disadvantage will hurt us in the long run, those aren't super compelling. And in the context in which politicians are making decisions, really kind of irrelevant. So our plan to have an office outside of Juno has been deferred or derailed, but COVID's changed all the rules, so who knows? I expect that we're going to have at least three people working remotely and permanently in the future, not quite the same as having an office in, say, 299 Park Avenue, which is a building we own, but I'm not allowed to occupy space there. It's not the same as having that permanent presence, but it would have value. And similarly, I think we've finally introduced an incentive comp plan that's worth something to the investment team and isn't offensive to the legislators. So I guess like a lot of political outcomes, it's a compromise, but hopefully it gets us to where we need to be.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“That means that our job is more fun. We don't have to be distracted by those things, but it also, I think, unquestionably leads to worse outcomes when political and policy objectives are trying to be met through investing. I think if you look at a lot of public pension plans, you see the damage that that causes. So we don't have that. That's a great thing. However, I'm reminded I work for the government a couple of times a week, and usually those reminders revolve around hiring. It might be that it takes 18 months to get approval for, because we have to go through a legislative budgeting and approval process to get approval for an extra FTE, or it might just be that's a lot to pay, this is an imaginary legislator who I'll probably have to talk to in real life sometime, they would say, why do you want to pay some bean counter from New York all this money the governor's working for 120 grand a year and he's the governor? And by the way, we've got a lot of state troopers and math teachers and others who deserve to get paid. Does somebody really need this?”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going back eight years ago, I would say there was a plan even before I got here to introduce an incentive comp variable comp program that's a little bit more market oriented and open some sort of office, have some kind of presence outside of Juno because it's especially important in these deal flow driven activities like co-investments and secondaries and it's still the plan to do those things. We still haven't succeeded in doing it because it turns out that those areas HR Let's call it well compensation issues and geography are two topics that the politicians that the legislature really cares about and it's important to say this because it's one of the great merits the great things about working at the permanent fund is that we don't have any political influence in our investment decision making.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we've got to find those people. A lot of them are fly fishermen or have some other reason for wanting to be out here and shrinking the pool. It either increases the challenge or decreases the quality of the group. I hope it's just increased the challenge.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“It is a real challenge. The funny thing about working in Juno is that the merits of being here are subjective, which is to say not everybody will have the same point of view. And when I came out here, it wasn't only because it was a great, I think, kind of the optimal platform for building private markets program. It wasn't only because I'd worked on direct investments with Marcus before, and it wasn't only because I liked my colleagues. It was that being in Alaska is a great life experience. It was fun for me. I thought it was an adventure and will continue to be. Now I know from recruiting that that's a minority position. I had kind of imagined, I guess, that, I don't know, half the people in the world would agree with me and half the people would think that it was a little bit crazy. Turns out it's more like 80%. Maybe it's nine out of 10 that think it's a little bit crazy. So we're recruiting from, let's call it, to be honest, one out of 10, you know, 10% of the population thinks coming to Alaska is either neutral or positive.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“The last thing I want to ask you about is talent. You've mentioned being resource constrained, being in Juno, and I'm curious how you thought about managing and maintaining a team sufficiently talented that you can make these investments over time.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“is that we destroy the near-term returns. And in spite of what I said about duration, that J-curve is a real problem. And I think we were rightly worried that we might undermine the conviction that our board had in private markets if we showed up for the first eight quarters with negative numbers. So secondary trade, some small co-investments, I think that set things on the right track and we've continued on that”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“A direct investment that has no fees attached to it in an area in a strategy or category or sector of the economy in which we really believe that's a good trade for us. And so that's happened a few times. Our first secondary trade was executed for a completely different reason. We bought secondary assets, and that's because we were launching the program, and that's a great way. And it's the only secondary asset acquisition that we've done because of a view on pricing. But there made perfect sense because we were able to eliminate some of that kind of one asset risk that we'd otherwise have at the beginning of the life of the fund. That combined with some early co-investments, small because we wanted to prove that it worked, but a combination of small co-investments and the secondary purchase also allowed us to avoid a J-curve because part of the challenge, part of the risk of building a piling $12 billion portfolio on what was then a $45 billion fund.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“MOIC IRR versus cache on cache multiples. And I think they had some advantages we don't. Like, for example, they had access to some sources of leverage that we're not applying ourselves. So they could make a deal, make a collection of assets that didn't make perfect sense for us. They could make it work for them and presumably for their LPs. So we're making decisions like every investor along the way based on the marginal risk of the assets we're holding and the alternative sources for capital. Part of our thinking behind each of these secondary sales, for example, was that we have identified other areas, other ways to deploy capital that we think translate into more value for the permanent fund in the long run. In other words, an asset that we own through an expensive fund structure that we can replace with”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Say that we Aren't making any investments with a plan to exit in the near term. And that's a luxury that my colleagues on our credit desk, for example, don't have. They need to trade. It's their business. So we buy assets that we think we can hold forever. And it would only be if there's an unusual market distortion in our judgment that we would sell early and that action has to be considered in the context of that most important need to maintain a diversified portfolio and of course we're thinking about opportunity cost all the time. So on every trade there's somebody on both sides. When we've sold our secondary interests they've been to smart informed buyers. But smart informed buyers that have a different collection of incentives who in each of those cases for example had incentives to focus on IRR over”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“There is that trade off you mentioned earlier of it's not so bad if you're buying at a high multiple if you have a business that's going to go through it. And in this case, selling secondary interests and businesses because they're priced a little bit higher than you thought. How do you weigh those two and decide how to act?”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is kind of taking the opposite side of that leverage, the multiple concern, the multiple trade that we talked about. If you use that leverage, maybe it's a little less scary, and we're effectively using it by exiting in a way that allowed us to capture returns that are amplified by the banks.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“If I look at our existing portfolio, to start with our existing portfolio, there's clearly room for us to be more thoughtful and analytical about the data that we gather and don't manage very well. I said when I first started it was easy and that's true. I could track everything on my laptop. I would say that today the portfolio probably exceeds my personal ability to manage and monitor it and probably the capabilities of my laptop. So there is data there that's useful. We're not capturing, we're not applying the embedded value there. We can be more thoughtful about first occasion. There are a lot of things we can do with the existing portfolio. There are ways to monetize assets in ways that are obvious and some that are less common. We've sold assets in the secondary market three times in the last eight years because we thought there was at least a temporary premium attached to certain assets and in particular to a collection, to a portfolio of assets that could be aggressively levered.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“For example, because we thought housing prices had a lot of room to move upwards, and if we were wrong about that, that was okay. We own these houses. We could continue to rent them for a long period of time. At the other end of the risk continuum, we've leaned fairly aggressively into life sciences. That's a macro thematic judgment. We know that it increases the overall beta of our portfolio if it could be measured. But again, we think we're backing the right companies with the right long-term outlook, we can fight through or ignore the interim valuation changes.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“I gave away the best and easy trick, which is pacing, but I promise you everybody will ignore me. What we're trying to do beyond those factors like pacing and diversification and careful diligence and selection, all those things together should eliminate a lot of risk. We're trying to build exposure in areas that we think are defensive or just fit the permanent funds, relative advantages and disadvantages well. And so to make that sound less abstract, What I mean is that we're identifying market opportunities that have characteristics that align well with what we're trying to do, longer duration, areas where you can be rewarded for patients, and hopefully areas where fundamental value of the underlying assets protects you from downturns that could either be by seeking low risk asset-backed strategies. We were fairly aggressive in single family rental.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“To increase our pacing in hot markets, to increase our pacing precisely when you shouldn't, if you can resist those temptations, if you can fight those structural incentives related to funding ratios and general deal velocity and enthusiasm, maybe the volume of the pitch from a marketing person at a private equity firm, all these structural things seem to compel investors to deploy too much capital at the wrong time. If we manage that pacing, we're doing a good job. So diversification, we manage the pacing, and then hopefully through selection, selection of great managers who are disciplined and patient, and selection of deals where we know we can be patient and hope to be disciplined, those factors together will protect us in a downturn. It won't keep us from mark to market losses, and it won't keep the economy from damaging our portfolio directly and indirectly, but we think it will”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really matter if you're holding it until it either grows into its value by increasing EBITDA or multiples are cyclical and we can weight some of those things out. Of course if we're investing through funds we have less control over that timing but the concepts still apply and on the margin since 25% of what we deploy and much more than 25% of what we own is our assets over which we have more control, more control over the timing of our exit that gives us some flexibility to play through those bad periods. So yes, leverage is ridiculous. Purchase price multiples are crazy. It's hard to justify a lot of what we see out there. We manage it through diversification. We manage it through sensible pacing. One of the easiest things to get right for LPs but still the thing that almost everybody seems to get wrong is being disciplined about pacing because there's so many structural mechanisms that push us as limited”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“It would be delusional to assume that there's just fundamentally less risk venture and growth than in, say, buyouts. There are different kinds of risks. And if we are lucky enough to back a better company or a better business model, let's say a promising SaaS company with 10 bidders, even if you pay a full price for that, let's say it differently, even if you overpay for that asset. If it's a really high quality business, you might take a beating on interim valuations, but in private markets, we don't care very much about those interim valuations. And one of the risks that we can take, and for that reason, I'd say it's a risk that at the permanent fund we're seeking, we embrace, is duration. So a high quality company that trades at 28 times EBITDA and then gets marked down to 15 times EBITDA, that will beat up a portfolio on an interim basis, but doesn't”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I hope I'm not alone in this. I have been thinking for many years and been wrong that there'd be some massive market that would bring purchase price and leverage multiples back down to normal. And every time you turn around and look, it's a little bit more, I would say, a little bit scarier, a little bit. The challenge is growing as those multiple scrub becomes harder and harder to earn returns. I saw yesterday that the cape ratio and the time that have been at the permanent fund roughly in about eight years has gone from about 19 to I don't know 32 33 something like that now and that can't be a long-term positive for return so we don't want to be the ones who are caught holding the bag with a huge leap with a giant levered portfolio and an economic downturn and we manage that risk largely through diversification but also by investing in companies that we think will ultimately be okay and growth capital and inventure for example while”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“And GPs, I think, is really promising. By the way, the line around the block for Tomobravo's co-investments was a source of competition among LPs. People aren't lining up around the block to co-invest alongside first time or second time funds. I hope they will be in the future when they're on fund with a bigger Roman numeral, but they need our capital. That's the way all co-investments were back in 2005, 2006. And before that and until fairly recently, co-investment capital solved a problem for a GP. And being there to solve a problem is something that you can get well paid for. Lining up to fight for a little piece of a co-investment, I don't think you should get paid as much for that, and I don't think that's the way the market rewards that behavior.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“The highest quality managers in a particular area, that's a finite group, and they're typically, well, again, definitionally, the stakes business is mature, established, and one would hope high quality managers. That's not an infinite universe. But looking forward in time, I don't think it's an overstatement, say that there's almost an infinite supply of future venture and private equity managers. And if you think that you can earn higher returns on capital that has higher value to the recipient, which I think is the point that I was making earlier, and I believe is the case today, if we're bringing capital to a manager that's having trouble raising money, we should earn attractive returns on that. The form of those returns has a component that's perfectly aligned with them, which is a share in their ownership. And that convergence of incentives and activity between LPs.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sense to us for a number of reasons when we started doing this in 2013. And those reasons included the fact that it's a lot more fun to get paid fees. Coming to us from other LPs, I guess it's a little bit of a reimbursement on the fees that we're paying and it's a cash flow stream that's extraordinarily predictable. That stakes business looks pretty interesting. I would say that it institutionalized, it matured very quickly, maybe faster than I would have expected, and that has implications for pricing. And as with, I said that the line for co-investments goes around the block, it's a little bit like that in the stakes business. It's a shorter line, but it doesn't take very many parties in a competitive environment to drive up prices. So because of the pricing environment and because of the time intensity, we haven't invested a lot of time and energy and stakes recently. I view the seating business as a challenging but more sustainable opportunity. More sustainable only because kind of by definition, if your stakes strategy is oriented around backing”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“They've got several things in common conceptually I think both are interesting for a number of reasons but those reasons include the fact that there is a natural convention to think about hard distinction in the private equity universe, the private markets universe between GP and LP. But like most things in life, the reality is a little bit more complicated. And I think that oversimplification has a cost connected to it. I think it's important to recognize that there are occasionally not in every deal, but there are often opportunities where GP and LP together can create more value for the overall ecosystem. The argument for a bigger pie, and it becomes less an argument about how you divide it up and how to grow that pie. And I think the stakes business is one example of the blurring of that distinction between GP and LP, and it made”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“If we're engaged, or if there are liquidity considerations or conflicts to deal with, they're time consuming. And so that has been cumulative. When I said that the burden grows over time, that's especially true if we're inclined as we are to make investments that have a very long duration, then that compounding problem is just a little bit greater because you have fewer children going off to college, so more children in the house to cause problems.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question to ask. There are fewer of those happily today than there would be if this was an eight-year period ending in 2013 or something like that. So we've got the benefit of strong tailwinds, yet there are still headaches along the way, and that's how and when we've tested our resources, it's when those bottlenecks exist, if I'm plugging away on a Sunday afternoon, I know that we're probably inadequately resourced. And if it's every Sunday afternoon, something has gone wrong. But what I recognize and fear is that, and this is a fear every investor shares, but it's just particularly acute given the size, complexity of our portfolio, and the relatively small size of the team, I fear a downturn where the number of problem children grows truly, I'm not overstating this, we haven't had many of those so far, but even a well-functioning company, if we have a board,”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“It'll add incremental return or increased diversification on the margin, then we should pursue it. And whether we do it through a fund or a co-investment or a direct investment is a tactical question. The more important question, the more important underlying question is how attractive is the investment opportunity. So we'll invest the extra time and effort to do that. And we've also found that some of those off-run or less obvious opportunities are not only more attractive because they bring diversification and absolute returns to portfolio, but they're just less crowded so we can get more of it. And by the time they're crowded, the expected returns are probably lower anyway.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Interest because they're objectively attractive, but maybe they're not sized or structured in a way that works for every sponsor. Duration would be an example of something that might align well in our book, but not work for a sponsor. And there are fewer of these out there in the world than I'd like, but if you, as a thought experiment, if you consider a very attractive 20-year investment that has no interim liquidity and no distributions, that doesn't work for many private equity funds or many investors. But we're providing, as I said before, for all future generations of Alaskans, they're okay. They don't mind waiting 20 years because they're not born yet. And further, there can be some incremental diversification if we're doing something that other investors aren't. So that doesn't mean we have to fill every little bucket out there in the universe and every market. But if we see a big opportunity that complements our portfolio because”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“That sponsors are addressing but without adequate capital. And if we get behind them, we can share and the excess rents that can be earned there. So we think that we are paid well for that excess complexity. And I think the theory that supports that is this relates to this question of how much value are we bringing to the table. And then further, there can be areas of”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“The way that we have framed it intellectually going in is that We'll ultimately learn the highest returns on the most valuable capital we deploy. So to point to an example that's real and live today, there are many, many co-investors out there. I don't know LPs. I don't know many LPs who say they don't have an interest and an appetite for co-investments. And so if say Toma Bravo or Vista is syndicating a SaaS deal, then LPs will just sort of line up for a piece of that. There's a great managers and there are lots of great deals out there, but blended cumulatively, hard to earn, very high returns on what's essentially commodity capital. But if we can deliver co-investment capital to a corner of the market that's not getting that attention, that doesn't have the long lines around the corner, and the food fight for exposure, I think we can earn more attractive returns. And so a fundless sponsor will have deals that we can't access through certain sponsors. There are market opportunities.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“More you talk about complexity and looking at the balance sheet, which is public and the number of line items on it, the more I scratch my head and say, wait, why are you doing all this extra activity? Because there is such a large sum of capital to work. And as you mentioned, a small team of resources. Where do you see the value that accretes across the fund, both in knowledge and return from these one-off activities?”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rarely, because we've got limited resources and because the list of areas where we can really claim expertise is short by definition, you can't be an expert in a lot of areas. At the other end of the continuum, we have been involved from the founding and we've been the largest investor in several of these businesses like American Homes to Rent and Genotherapeutics and Denali Therapeutics. I guess it would be fair to say that those deals would have happened without us, but they would have taken another form and some investor needed to step up, write a big check and impose on themselves the need to contribute value, but not require control. So LPs have the advantage maybe of being a little bit more humble than some investors out there, and that has value in some of these deals.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Example. Sometimes we'll have a defined target opportunity for acquisitions for the business and the management team and the sponsor don't need approval for deals that fall within that have these defined characteristics if it's outside.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is interesting, and one of the reasons it's hard to generalize that USLBM deal, we were entirely passive. If I added some value there, it was that we agreed offer to underwrite a larger check than we intended to keep. In other words, we sort of facilitated Co-Invest for other investors. We're not the only one out there who does that, but it is an example. It's one way that MelP can bring value to an equation and to a sponsor. But aside from that, we were completely passive. We got quarterly performance updates. If we didn't have those, I'm not sure it would have changed the outcome in any way. So maybe that's a more charitable act by the sponsor. Kelso has a tendency to work closely with their LPs, and it happens. It happens very naturally. But this is a passive co-investment. We have other investments where we have one or two board seats, or we have an observer seat, or there are difficult decisions to make along the way related to add-ons.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of regular meetings. And in those meetings, our small team, each contributed what they could. And everybody was involved in that decision-making process. I think that is not unique to the permanent fund, but it's turned out to be really powerful to really compel everybody to come up with an answer, not just to contribute to the thought process, but to answer the question, would you put your money in this? And when the answers are yes and they're resounding and there's data behind it, it seems to lead to good outcomes. So USOBM was sold to Bain. It already looks like it's going to be a great investment for Bain too, which creates a warm feeling in my belly because you want to see everybody win. And for the company and for the management team, I think exceeded expectations in all respects.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Here in the implications for growth and so on, I think it's possible that we would have been able to do that work on our own. We've got a few degrees in economics literally around the office, but the independence and the expertise are hugely valuable. On that same deal, though, we also used an independent private equity consultant to look at some of the fund related considerations, private equity consultant that was looking carefully at Kelso's history in building products. Kelso's history with this particular management team, and then a lot of independent work on the management team. And then, of course, throw in that mix an independent security firm, a background check on key managers. That's also part of the process. And maybe I left out the most important element, which is that the internal discussion that took place occurred over many weeks, but through a series of...”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Looking back at this last quarter in our direct investment portfolio, we had two complete realizations and then a bunch of partial exits. One of the full realizations was a company that Kelso bought and controlled called USLBM. It was just sold to Bane. It was a consolidation play on the housing recovery. We invested four-ish years ago. I had the benefit, I suppose, of having worked on some housing product manufacturing businesses with Kelso in the past, and those had turned out well. It obviously helped create some momentum. But there were some obvious macro considerations that really needed, I think, more than just horsepower, a lot of invested brain power. So we hired an economic consultant to help us understand some of the risks in the housing market and in the submarkets that were running.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“More than one consultant often will have two or three in industry expert banker and sometimes a private equity sort of fund consultant like a pathway or a stepstone and they're hugely helpful to us. Mercer also helps us a lot and we have this whole cloud configuration of experts that we try to deploy in an efficient way.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so practically, to get away from high-minded philosophy to the nuts and bolts, because we're human resource constrained, because we're making these tough decisions about how to allocate not only our dollars, but our people, I try to leverage that scarce resource by hiring consultants and advisors. And it is not the most efficient way to do business, but it's the best and only way that we can. We hire different consultants on every transaction. I do this looking at funds too, and very often we'll learn things that we wouldn't otherwise uncover. But it's fair to say that for a larger than average co-investment, we typically have.”
2021-05-03 · Capital Allocators · Innovation in Private Markets 1: Steve Moseley – The Space in Between GPs and LPs at Alaska Permanent Fund (Capital Allocators, EP.192) · IDENTIFIED FROM THE TRANSCRIPT · source