GCM Grosvenor was proud to host the 16th annual Consortium June 12-13 in New York City. We are thrilled to facilitate an event that helps drive a more inclusive industry. The fact that Consortium continues to welcome the top diverse and women manager talent in the industry shows the commitment of so many today, and is a strong indicator for the future.
The following snapshot of Consortium strives to capture the content and spirit of the panels, roundtable discussions, and one-on-one meetings experienced by those in attendance.
Renae Griffin, Executive Director at GCM Grosvenor, kicked off Consortium by recognizing it as the premier industry event dedicated to raising the visibility of diverse and women managers. She acknowledged Consortium’s influence and potential to move the needle, with the ultimate goal of attracting new capital to the diverse manager space.
Francis Idehen, GCM Grosvenor’s Chief Operating Officer, put Renae’s comments into action by announcing the firm’s plans to invest more than $2 billion on behalf of its clients with diverse managers over the next three years. He pointed to the opportunity set, talent, and track records of the diverse manager community as the drivers of this investment.
Antonio Gracias, Founder, Chief Executive Officer, and Chief Investment Officer, Valor Equity Partners
In a one-on-one discussion with GCM Grosvenor President Jon Levin, Antonio Gracias talked about his journey from being raised in an immigrant family, to becoming an emerging manager, to running a firm that manages over $3 billion today. He shared stories about his early days as a trader and discussed how he started his firm while investing during the tech boom. Antonio also highlighted how he was able to successfully combine his passion for investing with operations and structuring.
Antonio stressed four core values necessary to starting an investment management business – humility, integrity, excellence, and responsibility – and added that a successful manager must constantly be adapting to challenges. To navigate these challenges, Antonio feels it’s critical that a manager takes a humble approach to leadership and be principled about finding new and diverse talent. He stated that “managers should explore new backgrounds, paths, and patterns,” and should veer away from what he calls “low-friction environments.” He added that people instinctively like patterns, but sometimes can stick to them too much and thus not give talented individuals the flexibility to adapt.
During a moderated panel, three highly influential trustees engaged in a spirited debate on some topics, while voicing consensus on others. A few of the highlights:
Q: Do you think investors should have a diverse team to successfully implement a diverse manager program?
John and Jarvis agreed that this demonstrates a clear alignment of stakeholders’ interests, but Paula remarked that “having someone of color on the team won’t necessarily reflect diversity in the portfolio.” She indicated there may be cases where, for example, a more junior associate may not speak up, and his or her diverse viewpoints may not be captured. Though she did say that in a perfect world, the team would be representative of its investments. All agreed that fostering an environment where diverse views could be voiced was of critical importance.
Q: What are the dynamics of an investment board, the company’s leadership, and its staff when it comes to achieving diversity in investing?
Jarvis stated that when there is full buy-in from the board, management, and investment staff, who see that diverse investing is accretive, it’s a good mix. John added that while a chairman must believe in the initiative, it’s “extraordinarily helpful” when the staff are believers too. But to get there, the panel agreed, organizations must have the courage to ask themselves if something’s missing and, if so, take action. It’s this type of conviction that leads to outcomes.
Q: How are you using data to influence decision making?
Paula remarked that the data confirms one of the key tenets of diverse investing – when diversity of thought and experience is brought to the table, the results will follow. She added that since data is now on everyone’s mind, “there isn’t enough data” isn’t an excuse anymore. Jarvis commented that the empirical evidence has been built, stating that “diverse managers contribute to the bottom line, and investing with them is a business imperative.”
Two seasoned GPs and an experienced LP shared experiences with an audience of managers, many of whom are on their first or second fund. The conversation centered on three “lessons learned.”
Lesson 1: Be prepared to be surprised by your initial investors
Adele: “I was surprised that the many LPs we thought would participate in the first close didn’t, while those we were told not to ‘waste time on’ did.” The panel recommended:
+Keep a steady hand; don’t get flustered
+Have a broad list
+Be creative about where you find partnerships
+Be realistic about who will be there when fundraising
Lesson 2: Use your time with prospective investors wisely
Bill: “Meeting time is a finite resource and it’s important to leave space for questions and other interactions with LPs. You don’t always need to cover the entire story.” The panel recommended:
+Have a tight message and share it efficiently
+Know your audience and understand their expectations
+Practice, and get coaching if you can
+Know your materials, but be prepared to go off-script
Lesson 3: Everything will cost twice as much and take twice as long as expected
Sonny: “This saying is true. An emerging manager needs to expect the worst, and exercise patience. I had ‘150%’ of my personal wealth pledged to the fund.” The panel recommended:
+Be prepared to demonstrate to LPs your commitment
+Establish a network of other managers to gain insights
+Hire those with the same intense drive as you…but be sure they’re a good culture fit
+Have a budget
In a candid LP-only session, LPs of different sizes and types discussed the goals, evolution, and strategies of their diverse manager programs. The key question: “What are we going to do next?”
To continue to grow the space, there is a need to find the next generation of managers. The panelists discussed dedicating resources to sourcing and investing with diverse managers across alternative asset classes. Someone whose sole focus is on the diverse manager portion of the portfolio, and who is held to the same standard as the core portfolio. Having a champion of the strategy on staff is vital to success.
Panelists also discussed breaking into new networks to find new talent. A new network may be in another region, a new asset class, or in a different part of the market. They suggested working with partners that can help execute in the diverse manager space, especially for smaller plans. Or if “outsourcing” a diverse investment strategy is not an option, everyone on the team needs to make it part of their day-to-day.
From an investment and fiduciary perspective, the panel challenged the notion that heterogeneous teams make the best decisions, stating that data, surveys, and studies support the risk-return profiles of diverse investing. They also stressed the importance of responding to changing markets by exploring co-investments and seeding with diverse managers.
After the panel discussion, LPs broke into facilitated small group discussions that focused on the essential elements of implementing a diverse manager program. LPs engaged with one another on topics such as implementation models for different sized plans, asset allocation strategies, working with consultants, and other practical subjects.
Two prominent women in the industry, Cheryl Alston and Tammy Jones, engaged in an empowering discussion that focused on learning and adapting.
Cheryl discussed how she saw first-hand how a board, in setting up its emerging manager program, was held back by simply trying to define what an emerging manager is. In learning from this experience, she stressed that boards, CEOs, and investment staff should instead define their programs by the main goal – to grow the best new managers.
Cheryl was asked what advice she’d give to an emerging GP; she responded: We hate saying no, but sometimes we have to. But we are always impressed by the GP who takes the rejection as a learning opportunity and grows from it. Tammy responded by saying that a quick “no,” and the reason behind it, is much preferred over an extended one – a good GP wants to know what it takes to get the next investment.
Tammy reflected on when she launched her first fund, recalling how the process was (and still is) a marathon. She recalled how important it was to be constantly learning along the way. Tammy stressed that a prospective GP should “know what they don’t know,” and then seek help in getting the answers. Her mantra: learn, earn, and return.
The hallmark session of Consortium: managers, consultants, and institutional investors to share information on their investment programs, areas of focus, considerations, and processes. This year attendees participated in more than 200 one-on-one meetings.
Hedge Funds topics:
+Niche strategies in which small and emerging managers may have an advantage
+Evolution toward more technology and data in hedge fund investing
+Portfolio construction in anticipation of regime changes
Private Equity topics:
+Challenges in the current fundraising environment
+The impact of current regulatory and investing environments on portfolio construction
+Approaches to deploying capital during a time of high purchase multiples and high leverage
+Current investment themes such as environmental, social, and governance considerations
+Sector-specific discussions, including a focus on energy
+Topical infrastructure projects, like the impact of major renovations at New York’s LaGuardia airport
Real Estate topics:
+Effective ways investors can partner with operators (aside from
capital)…and vice versa
+Defining success of a real estate investment partnership
+How growth may (or may not) make sense for a partnership