In this episode of ION Influencers Fireside Chats, Giovanni Amodeo sat down with Alex Abell, Managing Partner at RCP Advisors, to explore the intricacies of small-mid market investing in the US. Alex provided valuable insights from his extensive career in private capital investing.

Key topics discussed:

Alex Abell’s Background: With over 23 years in private capital, Alex started at Hewlett Packard’s pension fund before working with Quellos Group, later acquired by BlackRock. He eventually founded Atlas Diligence before joining RCP Advisors, where he now serves as Managing Partner, focusing on small-market private equity investments.

Small-Mid Market Opportunities: Alex emphasized the inefficiencies in the small-mid market, where there are more companies than capital chasing them. He explained how smaller private equity funds target undervalued companies, which can later be sold to larger investors for higher returns.

Capital Allocation and Strategy: Alex highlighted the growth-focused, low-leverage strategy in small-market private equity, as opposed to larger market players who use more debt and buy at higher EBITDA multiples. The conversation also touched on how fund managers in this sector benefit from a less competitive, but still efficient, market environment.

Investment Choices Beyond RCP: When asked where he would invest $1,000 for his child’s college fund, Alex suggested a mix of venture capital, real estate for steady yield, and private debt for risk-adjusted returns.

This fireside chat offered a deep dive into the niche world of small-mid market private equity, shedding light on how strategic investments in this area can generate significant long-term value.

Key timestamps:

00:09 Introduction to the Fireside Chats and Guests
00:37 Alex Abell Background and Career Path
02:09 Diverse Perspectives on Investment Strategies
03:36 Focus on Small Mid Market Investing
04:08 Concerns about Market Saturation in Mid Market Investing
05:37 Differences in Fund Management and Behavior by Size
08:04 Limited Partners’ Influence and Decision Making
09:51 Evaluating General Partners’ Commitment and Motivation
11:55 The Role of Limited Partners as Sounding Boards
14:44 Capital and Experience as Key Factors
15:14 Interaction and Influence Among Limited Partners
16:01 Communication Dynamics in Advisory Boards
16:45 Collaboration vs Competition Among Limited Partners
17:06 Rights and Responsibilities of Limited Partners
17:41 The Competitive Landscape for Fundraising
18:20 Challenges in Accessing Top Managers
18:55 The Decision-Making Process for Fund Investments
19:26 Building Relationships with Fund Managers
19:57 Adding Value Beyond Capital
20:27 Tracking Fund Managers and Their Performance
21:09 Maintaining Relationships with Less Experienced Managers
21:59 Importance of Timely Updates and Communication
22:26 Being Proactive in Fund Tracking
22:49 Evaluating Managers’ Growth and Performance
23:41 Market Trends Affecting Fund Sizes
24:08 Access to Top Managers in Private Equity
24:37 Differences in Manager Performance Profiles
25:13 Concerns Over Fund Financing Practices
25:46 Risks Associated with Continuation Vehicles
26:20 Challenges in Valuation and Alignment
27:12 NAV Loans: Benefits and Risks
27:44 Concerns Over Cross-Collateralization
28:08 Risks Associated with Cross-Collateralization
28:36 Growth of Private Equity Managers
29:16 Market Imbalance in Private Equity
30:05 Changes in Market Efficiency Over Time
30:56 Investment Strategies in Different Market Levels
31:24 Leverage and Valuation in Private Equity
31:51 The Proliferation of Private Equity Managers
32:31 Hypothetical Investment Scenario
32:58 Exploring Venture Capital Opportunities
33:22 Real Estate Investment Considerations
33:56 Long-Term Capital Appreciation Strategies