In the latest ION Influencers Fireside Chat, host Giovanni Amodeo sat down with David Schaefer, Founding Member of Munich Private Equity Partners (MPEP), to discuss the evolution of the private equity (PE) industry, the rise of alternative investments, and how fund-of-funds carve out their niche in an increasingly competitive market.

Key Topics Discussed

1. David Schaefer’s Career Journey

• Started in banking and insurance before entering private equity.

• Joined Munich Private Equity Partners in 2008, dedicating his career to PE fund investments.

2. Growth of the Private Equity Industry

• From ~3,000 asset managers 20 years ago to over 20,000 today.

• Alternative investments, especially PE, are now a crucial component of institutional portfolios.

• PE’s appeal: low correlation to public markets, reduced volatility, and access to unlisted “hidden champions.”

3. Why Investors Should Consider Alternatives

• PE acts as a portfolio performance booster through active ownership and long-term value creation.

• Provides exposure to non-listed companies, expanding beyond the limited pool of public markets.

• Offers diversification across private debt, infrastructure, real estate, and more.

4. Differentiation of Fund-of-Funds

• Shift from broad diversification to specialized, high-quality access.

• Value comes from selection skills, deep GP relationships, and strategic focus.

• MPEP focuses on one asset class and one product to ensure alignment and specialization.

5. Manager Selection & Red Flags

• Reviews 200+ fund opportunities annually, investing in 20–24.

• Due diligence goes beyond numbers: team culture, governance, and repeatability of strategy matter most.

• Red flags include: unclear performance patterns, unstable team dynamics, and lack of focus.

6. Spinouts, First-Time Funds & Proof of Concept

• MPEP prefers to invest from Fund III onwards to assess team stability and track record maturity.

• Building trust with managers can take 4–5 years before committing capital.

7. Market Trends: Regional vs. Sector Focus

• US funds often specialize by sector due to scale.

• European funds historically broader, but moving toward sector specialization and operational value creation.

• Increasing role of in-house operating teams to drive hands-on improvements.

8. Value Creation as a Process

• True value creation requires deal-by-deal analysis of past investments.

• Must assess whether managers can repeat success at larger fund sizes.

• People remain central—team motivation and succession planning are critical.

9. Role of AI and Technology in PE

• AI will enhance efficiency and depth of analysis but cannot replace human judgment on soft factors like motivation and culture.

10. Secondary Market Outlook

• Secondaries are a growing portfolio management tool for liquidity and diversification.

• Upside is often limited since much value creation has already occurred.

• MPEP remains primary-focused to capture the full value creation cycle.

Key timestamps:

00:07 Introduction to the Fireside Chat
01:14 Growth of the Private Equity Industry
02:31 Investor Perspectives on Alternative Assets
05:17 Understanding Fund of Funds
07:45 Manager Selection and Due Diligence
10:30 Evaluating Spin-Outs from Larger Firms
15:02 Market Trends in Private Equity
17:16 Sector Specialization in Fund Management
19:01 Assessing Value Creation Capabilities
20:12 Evaluating Fund Managers Over Time
21:48 Team Dynamics in Fund Management
23:20 Assessing New Investment Opportunities
25:24 Trends in Secondary Investments
27:05 Focus on Primary Investments