Trends Watch: New Fund GPs Dealing with Old LP Excuses
September 24, 2020
By Elana Margulies-Snyderman
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Warren Lahoud, Managing Partner, Famous Capital.
What is your outlook for VC?
There was a slight “hand brake” applied to the allocation of capital as a result of the pandemic. When there is loss, pandemonium and uncertainty in the markets and business world, some allocators and managers see carnage and seek refuge while others see opportunity. There are certain basic prerequisite fundamentals and principals in investing that, if followed correctly, can be a cushion on a hard floor.
My outlook toward VC and private markets, like my outlook toward the U.S., is positive. I believe our most prosperous times lie ahead of us. The private markets raised more than the public markets for the first time in 2017 and we are likely to see this trend continue. However, as with everything, there has to be a degree of equilibrium. Both the public and private markets need each other for various reasons. At the moment and for the foreseeable future, private markets will be catching up and growing, hence my positive outlook. The deregulation of private capital is certainly going to drive the shift.
Where do you see the greatest opportunities and why?
From a GP point of view, I see great opportunity in identity management and its protection, data security, FinTech, digital technology and high-tech, which is why we are focused around these industries. The world and our identity -- through various platforms, efficiency requirements, instant gratification and government control -- is becoming more public, yet we need to protect our privacy as well as the use and transfer of our personal data. Impact investing in underprivileged communities and countries, coupled with investing in developed markets, allows for both uplifting change and investment opportunity.
In these times and from an LP point of view, there is opportunity to work with new managers, pass on recent and past experiences and create trusted sustainable future money managers. As Horace, the Roman poet of the first century BCE, wrote in his work Ars Poetica, “Many shall be restored that are now fallen, and many shall fall that are now in honor.”
Where do you see the greatest challenges and why?
With reference to the title, “New Fund GPs Dealing with Old LP Excuses,” one of the greatest challenges to new funds is overcoming LP/allocator excuses. Certain institutions and family offices won’t even look at you because you are a new fund. Even with significant past experience and a track record, recruiting capital from allocators that tell you that “the bar for new relationships is very high” and there is a “challenging diligence environment” is a challenge. Although I am in agreement that “bars” should be high and due diligence reviews should be thorough, it leads me to state that these are bureaucratic risk mitigating hurdles and we shouldn’t allow them to overshadow good opportunities.
What keeps you up at night?
Today’s good businesses may not be tomorrow’s and so in our current times where changes occur with exceptional speed, I lay awake contemplating possible future opportunities with ways to best mitigate challenges and changes. Sustainable, intelligent investing is key to future success in an alternative asset world.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.