Jim Pittman, Executive VP and Global Head of Private Equity at BCI, joined Giovanni Amodeo for a fireside chat to discuss BCI’s private equity proposition and his outlook on the market. Here are the key takeaways from their conversation:

Background and BCI Overview:

• Jim Pittman has over 30 years of experience in finance and private equity, with a background in accounting and industry experience as a CFO and COO.
• BCI is a pension fund for unionized employees and government employees in British Columbia and Western Canada, with gross assets under management of $250 billion.

Private Equity Market Trends and Challenges:

• The proliferation of private equity funds (from 3,000 to 16,000) has led to a stuck capital situation, making it difficult for smaller managers to raise funds.
• Investors often opt for larger, well-known managers due to perceived safety and ease of allocation, making it challenging for newer managers to gain traction.
• The industry has become a fundraising machine, with many managers focusing on marketing and investor relations rather than deal-making and sourcing.

What Makes a Compelling Manager:

• Performance is key, with a focus on net returns (e.g., 25% net, 20% net, 15% net).
• Managers should have a clear investment strategy, a strong track record, and a compelling narrative for their fund.
• Investor relations teams are crucial in communicating a manager’s value proposition and building relationships with limited partners.

Red Flags for Managers:

• Managers who inflate their returns or mark their books aggressively may deter investors.
• Lack of transparency and inconsistent performance can raise concerns.
• Asset gathering without a clear strategy or focus can be a turn-off for investors.

Talent Acquisition and Retention:

• BCI looks for individuals with relevant experience, a strong network, and the ability to understand the dynamics of fund investing and deal-making.
• The firm attracts talent from the industry, often from managers looking for a more stable and long-term approach to investing.

Market Outlook and Trends:

• The secondary market will continue to grow, with a supply of around $100-150 billion.
• Continuation funds will become more popular as a way for managers to exit investments without selling at depressed prices.
• Consolidation in the industry is likely, with larger managers acquiring smaller ones to expand their strategies and AUM.
• Fee structures may change, with pressure on public companies to reduce management fees and focus on performance-based compensation.

Conclusion:

• The top tech companies and top private equity funds share some similarities, but the growth dynamics are different.
• The industry may see more concentration and consolidation, leading to concerns about too-big-to-fail scenarios.
• Overall, Jim Pittman’s insights provide a candid look at the private equity industry, highlighting the challenges and opportunities in the current market environment.

Key timestamps:

00:09: Introduction to ION Influencers’ Fireside Chats
00:46: Jim Pittman’s Background and Role within BCI
01:55: Overview of BCI as a Pension Fund
03:33: Expansion of BCI into Private Equity and Infrastructure
03:55: Observation of Trends in the Private Equity Market
06:20: Factors Influencing Investor Decisions in Private Equity
08:23: Selection Criteria for Private Equity Managers
10:14: Focus on Fundraising and Deal Making in Private Equity
12:54: Impact of Transition and Performance in Private Equity
13:33: Red Flags for Private Equity Managers
16:13: Challenges in Building a Global Private Equity Team
16:42: Understanding Fund Dynamics
17:05: Industry Connectivity and Market Trends
17:45: Attraction of Capital and Talent
18:22: Motivation and Risk Aversion
19:51: Verification and Networking
20:17: Trends in the Secondary Market
21:27: Role of Secondary Market in Asset Management
22:52: LPs and GP Stakes
23:29: Continuation Vehicles and Acquisitions
24:24: Anticipated Changes in the Industry
25:05: Fee Structure and Manager Compensation
25:41: Comparison with Top Tech Companies
26:44: Conclusion and Insights