Access: Banking on Innovation
"The end of easy money means the market is differentiating. But that can also bring innovation" - Graham Bippart
Hello reader,
Welcome to the 53rd edition of Access - our last newsletter was the February Jobseekers edition, featuring 114 opportunities for private capital professionals.
Over the past few weeks, we’ve written about the challenges and opportunities facing the private capital industry as it heads into 2024. Global disruptions have created a difficult landscape for businesses and investors alike, along with a general slowdown of private equity activity, leading to fewer deals, less money returned to investors, and a bottleneck in fundraising pipelines.
“For the alternatives business to work properly, there needs to be a flow of money back to [investors] for them to reinvest in the new generation of funds.”
- Anna Skoglund, Goldman Sachs
From the perspective of portfolio companies, growing revenue efficiently is harder than ever. There’s less money to throw at the problem, and more barriers to customer acquisition. This is particularly worrying if you’re under pressure to demonstrate returns, needing to raise another round of funding, or have plans to go public.
In short, it’s not enough to simply show resilience, organisations must adapt quickly enough to keep up with the pace of change - no mean feat in the current market conditions.
Some of the stories we’ve covered & shared include:
Interest Rates: Friend Or Foe?, by Cyril Demaria-Bengochea, head of private markets strategy at Julius Baer
The FT is Cautiously Optimistic about Private Markets in 2024
PwC’s 27th Annual Global CEO Survey, which found nearly 50% of CEOs believe their company will not be viable in ten years if it stays on its current path
OnlyCFO declaring 2024 the ‘Year of Focus & Revenue Reacceleration’
This week’s newsletter effectively wraps up this theme of market predictions and constrained resources, as we shift gears to look at some of the new funds, new tech, and new trends hitting private markets this year.
Finally, if you’re thinking about a career move, don’t forget to check our latest jobseekers edition at the link below. Our March jobs roundup will be hitting inboxes later this month, so if your company is hiring you can register the opportunity with us for free, and we’ll make sure it gets included in the listings.
Until next time -
Liz & Melissa
In case you missed it…
Our latest jobseeker edition featured over 100 career opportunities for private capital professionals. You can still browse the list below, or fill in our 20-second form to submit your company’s job opening for inclusion in the March edition.
FEATURING:
In Brief: The latest global private markets news, including:
Launch of Level20’s 2024 Mentoring Programme
Spotlight on Private Capital Investment in London
Obituary for Lord Jacob Rothschild
In Depth: Banking on Innovation
IN BRIEF
Below, you’ll find a selection of global news stories from people and companies in our private markets network.
Save The Date: Level 20 Mentoring Applications Open 20th March
Level 20 will shortly be launching applications for their mentoring programmes in DACH, France, the Netherlands, the Nordics, Spain, and UK.
To date, over 100 private capital firms have provided mentors, helping +1200 women to complete the mentoring programme since its inception in 2015.
The 12-month structured programme is set up to enable both mentees and mentors to realise maximum value:
Primarily aimed at women in deal-professional roles
Mentors and mentees are matched through a selective process; junior and mid-level women are paired with a more senior male or female mentor
Mentoring pairs meet every six to eight weeks, usually for a one-hour session
All participants agree to maintain confidentiality of discussions
Programme of training and support offered to both mentors and mentees
There will be virtual information sessions for prospective mentees and mentors to outline the application and matching processes, as well as an opportunity for Q&A.
[Learn more about Level20’s mentoring programme and register for updates]
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BVCA Roundtable Focuses on London Investment
The BVCA hosted a roundtable this week, led by CEO and former Cabinet Minister Michael Moore. Industry leaders from Atomico, Balderton, Blackstone, MMC Ventures, Mayfair Equity Partners, and more, were joined by The Mayor of London Sadiq Khan and Howard Dawber, Deputy Mayor of London for Business to share insights and perspectives on investing in London.
“Private capital, particularly in London, plays an important role in both facilitating the transition to a greener future and bridging investment gaps.”
- Howard Dawber, Deputy Mayor of London for Business
[Follow the BVCA on LinkedIn to hear about upcoming events]
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Jacob Rothschild, Financier and Philanthropist, 1936-2024
Lord Jacob Rothschild passed away earlier this week, aged 87.
Harriet Agnew, writing for the FT, described how ‘Rothschild was early to spot the potential of venture capital and was a day-one investor in Sequoia Capital, Benchmark Capital, biotechnology specialist Baker Brothers Advisors and Hillhouse Investment’s Asia-Pacific private equity fund.’
“He had a very active mind and great curiosity. He was a very good investor, open to diverse and little-known markets.”
- Howard Marks, co-founder of Oaktree Capital Management, and longtime friend
[Read Rothschild’s obituary in full on the FT]
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IN DEPTH
“In a world where the cost of capital is higher and the options for where to invest have changed, businesses will face complex choices.” - Jo Taylor, Ontario Teachers' Pension Plan
At the start of the year, we shared our roundup of predictions for 2024. According to industry experts, artificial intelligence is set to dominate innovation and investment throughout the next decade, with the global market projected to reach $225 billion by 2027.
A recent report from McKinsey suggests that the banking sector could be one of the major beneficiaries of the shift, with the potential to realise serious value. The chart below outlines the projected split by specialism and type of AI, estimating that generative AI alone could deliver $200bn - $340bn.
It’s no secret that AI comes with a range of challenges that still need to be addressed, from legal issues (hello NYT…), to trust concerns, and the broader worries about job losses as a result of implementing AI tools. Despite this, significant investments from major players like Microsoft, Amazon, Nvidia, and Google, AKA Mang, indicate a continued bullish outlook on the AI sector, driving substantial growth in tech stocks. In fact, as we reported in edition 050, the 'Magnificent 7' recently reached a market cap equal to Canada, UK, and Japan combined… heck.
Love it or loathe it, artificial intelligence represents a significant potential opportunity for companies and investors alike. Tools like ChatGPT have also made AI accessible to the masses, (although last week many users reported that ChatGPT was hallucinating in Spanglish).
If you’re considering a job change this year, it’s worth knowing that ChatGPT can generate commonly used interview questions for a specific role or industry, helping you with critical interview preparation.
Even better, try asking it to run a mock interview process. There are some excellent suggestions for prompts in this article from The Muse, with advice from Pete Huang, cofounder of AI newsletter The Neuron.
Recently, we asked our readers and followers about their workplace experiences of AI - responses to our poll question, ‘Do you use AI tools in the workplace?’ are below:
Yes: 61%
Working towards it: 28%
No plans yet: 11%
Among those who reported AI tools being used in the workplace, ChatGPT was named by nearly half of those. It is particularly popular with recent graduates, perhaps pointing to the prevalence of AI tools being utilised by students (with, or without their university’s approval).
It’s clear from your responses that the way we think and interact with AI has transformed over the last few years. Not only are we better educated about available tools and how to use them, but so many systems are based on AI technology that there’s a decent chance that we encounter AI at work without realising it.
AI isn’t the only innovation with the potential to act as a catalyst for change.
Reporting on the 13th annual Fund Finance Symposium in Miami, PEI’s Graham Bippart writes how the ‘end of easy money means the market is differentiating. But that can also bring innovation’.
There was some ‘heated feedback’ to Bippart’s piece quoting ILPA’s Neal Prunier as saying the ‘vast majority’ of LPs don’t support using NAV loans, with one person asking if Graham & his colleagues were attempting to ‘destroy the fund finance market’.
As Bippart points out in a series of LinkedIn posts, whether you agree with Prunier’s view or not, ILPA will help shape the future of the NAV market, with guidance on NAV facilities due for release later this year. The fund finance industry must be prepared to respond to concerns, particularly given that even LPs who are in favour of NAV loans may struggle to sell the idea to end-investors.
Continuing on the theme of innovation, change, and challenge, Preqin just published an interview with Olivier Renault, Head of Risk Sharing at Pemberton Asset Management, talking about his ‘pioneering fundraising for the €19.3bn AUM firm’s first ever Significant Risk Transfer vehicle.’
“The narrative for direct lending and SRT is the same. Banks are struggling with risk capacity and regulatory capital capacity. They want to continue lending to specific types of borrowers, mostly because they get ancillary revenues in M&A transactions, cash management, derivatives – investment-grade, large corporates are a good example. The bank really doesn’t want to exit. So, it makes sense for a credit specialist to come in and help the bank to continue to lend from its balance sheet.”
- Olivier Renault, head of risk sharing strategy at Pemberton Asset Management
Off the back of increased investor demand for private credit, Renault shares more on the firm’s strategy, approach, and risk/return profile.
[What's the appeal of risk-sharing strategies?]
And finally… (Belated) Happy Leap Day!
Gergely Orosz shared a great piece yesterday about how 29 February is causing problems in software systems across the globe.
In Sweden, card payments went down at a leading supermarket chain
In Colombia, airline tickets were been printed incorrectly by the nation’s largest airline
Payment terminals at gas stations stopped working in New Zealand, and
A smartwatch released this year couldn’t display yesterday’s date.
[Read in full on The Pragmatic Engineer]
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