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This week on the podcast, yet another extra special guest, Is There any Other Kind? Sanana Sinha is the global head of Private Capital Advisory Group for Raymond James. The Raymond James platform manages one point six trillion dollars in total assets and advises on a whole lot more. Sanana had stood up her own private capital group, Siebel Capital, which was acquired by Raymond James, and she's been there for the past three and a half years. She works as an advisor for a number of LPs and gps
and pretty much everybody in between. If you're at all interested in the growth in private equity, in private capital and how this sector of the investment world is changing and where it might go, I think you'll find this to be a fascinating conversation. Sanana has a unique perch in the world of not only venture and an angel investing, but most especially private equity and private capital. I found this conversation to be fascinating, and I think you will also.
With no further ado, my conversation with Raymond James Sanana Sinha. Sanana Sinha, Welcome to Bloomberg.
Thank you very much for having me very well.
Thank you so much for coming. So I was delving through your background, and I had a first ask BS in Management science and a master's in engineering and in chemical engineering from Stanford where you were a Mayfield Fellow, and then an NBA from Harvard. What was the original career plan.
Well, the original career plan very much was to go into the biotech industry, which is what I did after I graduated from Stanford. Hence the masters and chemical engineering, which was an unusual masterress to get after doing the undergraduate in industrial engineering which was then relabeled as Management Sciences and Engineering at Stanford, but it allowed me to
go into the healthcare vertical. Straight out of Stanford, I worked for two small and medium sized businesses owned by the same investor group and cut my teeth on those and then realized as a result of that experience, firsually was phenomenal experience. I was working directly with the CEO and president of both companies, but I realized that the biotech vertical was not my playing field for the long term.
Hence the NBA at Harvard to find another career path, and that led me into asset management.
So the really interesting thing I for reasons between Stanford and the fact that you're here via San Francisco. I just assumed you were living out there, but you're not. You're London based. Tell me how did you end up picking Stanford? How did you end up in California?
You know, I grew up all over the world. They call people like me third culture kids. They were born in one place. So born in India, grew up in many other places and then land up in another place altogether.
Well, when you say many other places, what I often hear is, you know, India to London, to Boston, New York, California. You seem to have traveled a little where else. Tell me where you grew up.
So, my dad was a diplomat for the World Bank. I grew up in Nigeria, in Legos, in Harari, Zimbabwe, and then in Hanoi, Vietnam. I applied to universities from colleges in the US and also in the UK. From Hanoi, there were no places to take the SAT in Vietnam
back then, so we flew to Bangkok. My dad flew me to BANKOK to take my SAT ones, and then we flew back a few weeks later to take the SAT twos, and I flew back again to do interviews, and I was blessed enough to get into a number of great US IVY leagues, but ended up choosing Stanford because even then Berry I knew I was an entrepreneur at heart. I wanted to build businesses, scale businesses, and
help other people scale their businesses. And Stanford had that rag magic between entrepreneurship and technology and the nexus of starting to grow things, which is what I wanted to learn most.
We always pay attention to regions where there is a pool of capital, a world class educational institution, and a private sector that can combine all three. There's no doubt Silicon Valley and Stanford is one of the leading places. So if that's what you wanted to do, you certainly picked. Well, how did you end up back in London as where you wanted to live?
Yes, So I had the most incredible experience at Stanford. Ended up working in the Bay Area straight after that, still very close ties to Stanford, was still teaching a class there over even after graduation and working with a bunch of professors out there at the time. When it came to picking where I wanted to do my MBA again, I had the choice between the Stanford of the East as I call Harvard Business School, but also to go back to Stanford, and I knew that if I didn't leave,
then I may never leave the Barrier. It's such a special place and such a special bastion, an ecosystem of entrepreneurship and technology and growth and ideas. Made the decision to leave just to try something new at that point, went to Harvard for my MBA, and then had made the choice at that point to switch out of biotech and interviewed with a whole bunch of firms and ended up getting into the hedge fund world, doing capital raising for two large hedge funds, and one of them, Brevan Howard,
would was headquartered in London. So moved over to London back in two thousand and nine, and the rest is history. Have been a resident of London. My family would argue with you Berry and argue with anybody who asked them that I live on a plane, because I managed a global business over seven offices, six of which happened to be in the US. So I'm Stateside a lot and also traveled the rest of Europe, but home very much is London to so.
I want to rewind a little bit. I don't want to skip that middle experience. So you were at a couple of hedge funds. You were Bridgewater, which is headquartered in Greenwich, Connecticut, and you were at Brevin Howard, which was which is still headquartered in London. In either of those cases, you weren't working as an investor, right you were a research and analyst capital raiser. How did those experiences at Bridgewater and Brevien Howard affect how you look
at the world of investing? Clearly two superstar funds that have put together a really impressive long term track record.
Absolutely when it comes to any asset management business, very two things important. Make smart investment decisions and have investors to back you to do them right. And so I knew I had to master in one of those those streams, and the stream I picked was I do the capital raising too. That enables the asset management industry engine to turn.
And both Bridgewater and Brevin Howard were incredible training grounds to teach you just how to do that, but secondly, how to cover investors systematically, and how to think about the world in a holistic way and what levers drive what others. Both for macro hedge funds as you know, and understanding how macro markets work, how they interplay with each other is incredibly important. I use that day to day when I speak to my private equity clients today.
I use it all the time when it comes to understanding how markets are going to affect different types of investors. How does the oil price impact my sovereign wealth fund investors, How does what's happening with rates impact endowments and pension plans. All of it is incredibly interlinked. And it's that interlinkage that macro thinking really teaches.
You, huh, really intriguing. So it's kind of interesting that you're in private equity. You spend time in the world of hedge funds, but you also made a number of venture investments going back to the early twenty tens. Tell us a little bit about how you sort of got involved in seed and angel investing, very early stage venture investing.
You know, we all have to decide what our gifts are to offer in the world. What of the gifts I have to offer is how do you help businesses growth, hack and get to the next level of scale. I did that with two businesses early on in the early twenty tens, as you say, I bought a business called Barkres fitness boutique in the UK doing something new for women by women. Grew that over a course of six or seven years, very successful business, and sold that to
a private equity back Strategic. Did that again with a business called Mindful Chef, a healthy recipe box business that grew like gangbusters, especially over the COVID years, and sold that to n Eslay as well. And now I'm chairperson of the board of a publicly listed company called SFC Energy.
They do clean energy fuel cells and being able to steer entrepreneurs and enable them to realize their vision and think tactically as well as strategically as to how to get there to help them do that, That's very much something that helps me come alive every single day.
So let's expand on that. Most people, I would imagine think of angel investing very different than private equity investing. One is you're betting on a team, You're betting on a founder and some innovative new idea where there may not even be a market for that sort of thing. Yet as opposed to taking existing company and management team and product and saying here's how to level up, here's how to make this more productive, efficient and really reach
your potential. What's the overlap or what skills you bring from one to the other.
Well, I think the most important skill I bring is the fact that I've started my own business, grown it from scratch, and sold it to a fortune three hundred. So I've seen all legs of this journey.
So not just an investor, but an operator.
An operator, and a grower of her own business. So that's the first thing. The second thing is you are absolutely right buried. The muscle it takes to grow from zero to ten a revenue or zero to ten of ibadah is very different from the journey that takes ten from ten to one hundred and one hundred to a billion. These are different muscles, and these are different levers in the business but also levers in mindset. I've done zero
to ten quite a few times. So in my angel investing businesses, it was very much that hey, how do we get from zero to ten of ibadah? That takes a certain amount of nimbleness, hunger, agility, scrappiness, and I love that. Having done that myself, I know what that feels like. I can relate to the entrepreneurs. I can help them duck and weave through whatever's coming at them.
I'm sensing the word pivot coming.
I'm not going to use it because you used it already, but you've got to be able to figure out what I call the incomings. If life is throwing a lot at you, the market throws a lot at you, and what are you going to ignore and deflect? And what are you going to say? Okay, that's the signal from this noise. That's where I double click. That takes a pattern recognition that I have. Now that said, over the last few years, once I've sold my business to Raymond James,
I'm doing that second leg of the journey. How do you something that's established, growing, proven, and really scale it. And that's the same thing I'm doing with the public board seat at SFC, helping that management team and that board take an existing business of his business is doing, you know, close to one hundred and fifteen million dollars of revenue, you know, very profitable, growing organically thirty percent year and year. How do you take that and scale
that to the next level? How do you make that a billion dollar business? So now I'm trying my hand at that second leg of the journey, but that first leg of zero to ten that I've done a few times over, and I think I've got real value to add to entrepreneurs there.
So let me roll even further back. You launch Seable Capital in twenty eleven. What made you decide I'm going to throw out a whole new company that's focused on was it venture or private equity?
At the beginning, it was focused both on private equity and hedge funds, But within a year and a half I retired all our hedge fund business because I could see the capital inflows going into the private markets opportunity. That was the right call to make. As you think about the last decade, the influence into private equity have been phenomenal, and we've been a great beneficiary of that,
of that flaw and that movement. But in the early days, what enabled me to start, or what gave me the conviction to start, was really the belief that build it and they will come, and if they don't come, at least you're enjoying the journey for yourself. I knew I loved capital raising. I knew I could do that effectively, and I could do that for a handful of clients. And my goal very much was, let me give this a shot, and if it doesn't work, I'll go out
and get the job again. I was in my early thirties. I didn't have a mortgage, I didn't have kids, I had very few liabilities. It was a risk, it was a calculated one, and I'm very glad I took it because it worked out beautifully. But it's not for the feint of heart, that's for sure. Being an entrepreneur isn't anyway. But being an entrepreneur in an industry like financial services, where there's these old and very incumbent eight hundred pound gorillas are all around you is certainly.
Not, to say the very least. You went to Stanford. You were an adjunct professor, visiting guest professor.
I was a guest lecturer with engineering.
Yes, but you're also on the advisory board for the Stanford Institute of Economic Policy and Research. Tell us a little bit about what you do there and how that ties into your day job.
As you know, I love macro and I love thinking about how policy and macro movements around markets around the world really impact what's happening in the ground reality for
businesses that are run all over the world. The SEEPER, as it's called, the Stanford Institute for Economic Policy and Research, is an incredible congregation of leading economists, Nobel laureates, policy advisors from all walks of life across Stanford around the world who joined the Institute to look at the big problems facing the world today and think about how do
you solve them, how do you come at them. It could be from looking at how social security reform, or look at homelessness in California, or thinking about the age issue in Japan. They could look at any number of issues globally and parse it using the world's leading experts and actually research how to come out at the other side of it. Some of the most powerful research that I've encountered at sipor being on that board, I'll give
you one that really astounded me. One of the researchers there, Nick Bloom, has done some of the most definitive research on flexible working and how it impacts productivity, retention, and how it's very much here to stay or should be very much flies in the face of how some Wall Street banks think about the return to work. Fascinating empirical
evidence there that he's collected. Another piece of research there that I'll quickly mention is work on labor force participation by women dipping in the summer months as kids come out to school. Interesting on how.
It's very seasonal, very seasonal.
What do we do about that that costs the US United States GDP growth in the summer months. Fascinating the interlinkages between women, our education policy, labor force productivity, and again ultimately the growth of the economy.
So early in the twenty tens, you were doing some angel investing. Tell us what you were looking for, either in sectors or technologies. What attracted you to the angel space.
What attracted me to that angel space was that I was building my business and had skills in learnings I wanted to share. But more importantly, when I looked for businesses and entrepreneurs to back, it came down to two very important criteria. The first is people, people people. I learned that during my Mayfield Fellows Program journey at Stanford where that was drilled into us. It starts with the people.
It ends with the people. And secondly, the companies and the products they were building had to do good and do well right that they had to have a positive impact on the community that they operated in. So if you think about the recipe food business that was all about healthy eating, the fitness business was all about an
exercise program that's efficiently designed for women's bodies. You think about the clean energy business that I am now a chair on the board of that is all about clean energy fuel sell alternatives to diesel generators and to polluting generator types. So that's kind of the thematic that I lean into the most really interesting.
So you very easily could have either set this up as a VC fund or affiliated yourself with a venture group. What are the advantages to being an individual making single decision investments into a startup?
I think the biggest advantage is that there's full alignment because you're not operating with OPM other people's money. It is your money, it's your skin in the game. The alignment of interest is one thing that you learn in private equity and all private markets investing that it's all about alignment of interest. You can't exit these things unless you grow value and you're in sync with the founders
and with the management teams because they're private businesses. So you've got to figure out if you have that match an alignment of both economic interest but also vision and execution forte into the next three to five year journey. That's the minimum amount of amount of time you'll be together for. So that's why I think doing it as an individual always gave me much more reward and also quite frankly, economic success than doing it as a fund investor.
The other thing I'd add is that I found very early on that professionally speaking, in terms of my day job, Berry, what was I really good at. I was really good at the capital markets function. I was really good at the capital raising, liquidity organization started side of the business, and that's what Sibil Capital did. So I knew that was going to be my day to day jam and on the board of some of these companies I would be able to go and add the value of how to grow their business.
So let's talk a little bit about your day job. You set up Seeble Capital in London, right, that's where you found it. So before we get into the advisory services you provide, I'm a big angli phile. I love London, but there's such a difference between how they operate the economy and especially the financial sector. Let's talk a little bit about that. What's it like being Is it even by coastal your ny you know you're nylon producer, Jilan.
That's right. How different is the UK finance from the US? And start the startup mentality? It seems that failure is not a dirty word in the US. I don't get that same vibe from Europe. Tell us a little bit about the differences.
You're absolutely right, operating in the UK and in Europe at large and the US are fundamentally different. Having been at Stanford worked in the Bay Area, I then went to Harvard and worked in the Boston ecosystem. Came out of New York. London was a bit of an adjustment, I will tell you that because the startup ecosystem, especially in the early twenty tens, there was nowhere near what it was in San Francisco and the area.
And I mean that's a well established mature, if you could say, mature startup cragian, but it is in the same with Boston and New York one.
Hundred percent and so starting SABIL Capital in London ended up being both a blessing and a curse. Why was it blessing? It was a blessing because there was not that many startups there period. There was not that many new entrepreneurs starting financial services companies, and so it made us very unique and able to differentiate ourselves in the UK and European market very quickly. There were not that many new entrants, and we use that to our advantage
and often still do. Although the market has definitely come a long way, there are still divergences and how uneasey of doing business. But it became very clear to me Bery very quickly on we would have to diversify our business to be US focused, and so we opened our first office in New York few years after we started, and we've been heavily focused on the US private equity clients and US institutional investors. Have done so from day one, knowing that actually the US market is much deeper and
much larger than UK or Europe could ever be. But also the speed of doing business varies quite dramatically.
So we've talked about the startup and angel world, let's talk about the advisory work you do for private equity, both in London and the US. I keep coming back to there seems to be such a difference between how companies operate there and how companies operate here. Every now and then a European company comes to the US and succeeds, but more often than not they have a hard time adjusting. And I imagine the same as true vice versa when a US company goes to the UK, at least outside
of finance. Finance seems to have found a foothold in Europe from the US. Why the big cultural difference is what is it about the psychology there and here that creates such a different business and investing environment.
I think that it depends on what type of investing you do. At its heart, private equity is about builo sell high right. It's a long only strategy in the private markets. So you got to buy a business and you've got to know that you have to add value and make it larger, better, stronger, and then sell it on. So number of the clients we have are pure play regional focused. So we have a German private Egrey client, we have a Benelux private Aqua client, we have a
NORDICX private equity client. We've got UK clients and they are experts in understanding what needs to happen to grow their businesses and their companies that they're buying and selling in their target market. They know the customer base, they know how to impact the value drivers i e. On the talent acquisition side, on the add on Bolton strategy side. They know how to do that in their regional markets incredibly well.
And I just want to interrupt and say, is it that different from Germany to the Netherlands, to Sweden to the UK? Like completely Like in the United States, New York is in Florida, Florida's in Texas. Texas is in California. But you could hop from one place to another, and it's not so different that you can adjust to the regional We more or less speak kind of the same language throughout the country. Maybe there are some dialects and differences,
but you know the general gestalt of California, New York, Texas. Yeah, the politics may be different, but the business seems to be the same. That's not true when you're a visit.
It depends on the size of businesses you're buying. Right, If you're buying businesses that are up to say ten or twenty million dollars or euros of EBIDAB, then it really matters that you're a regional champion, right that you understand how a German business can scale in that end of the market versus how a Nordic business will scale.
So they're having regional footholds and expertise really matters. But when you're doing larger businesses and we have clients that are pan regional, that are your P and PAN European buyout players, or there are global buyout players that do global deals US and Europe, but they do them for larger businesses, and larger businesses often tend to have global customers because by definition, you've got to make sure you've diversified your revenue out So it depends on what scale
of business you're doing. But even if you are the largest private equity funds out there, they will have local offices if they know they need to operate in the Italian market, they'll have presence in Milan, or they'll have Italian experts in house that know how to operate and buy businesses in Milan, or they'll have sector experts if because a software business in Italy is going to be
very similar to software business in Texas. It might the operating environment might change, but the characteristics of business and how you drive value in that business will often be very similar. So you've got to make sure you're either a sector or a regional expert, and that often depends on the size of business you buy.
So you've lived in Africa, You've lived in India, you've lived in Vietnam, been to Thailand and all over Asia. Have you thought of expanding to some of these other continents or is it just US and Europe.
We do cover Asian and Middle Eastern investors in my business prolifically and have done from almost the first day of inception. You cannot ignore the rest of the world. As you know, the sovereign wealth funds and the institutions in the Middle East are big movers in the market today, and that's today. I started covering Middle Eastern institutions when I first opened the doors of the business now fourteen years ago. And fourteen years ago people were like, I
don't know if I need to go over there. It's a huge investment of time and air my airfare and so forth. Well, now everyone's saying I wish I'd built those relationships long ago, because relationships die hard in those markets Asia and Middle East, and those relationships I've had and my team has had for a long time.
Huh. So let's talk a little bit about valuation in the public markets. Hard to say, fourth quarter twenty twenty four, US markets aren't at the very least fully priced, if not richly priced. When we look at the UK, when we look at Europe much much less expensive, we see a lot of companies trading at book value, not the same growth level that we see in the US. Does that valuation difference in the public markets extend to private markets as well?
So, firstly, let's comment on the public market side, that is characterized very much. That valuation gap is characterized by the depth of the markets. The US capital markets vibrant, incredibly dynamic, incredible fragmentation of investors, deep rich market where you can do business on the capital market size presseemously.
And I would add, plus all these giant mega tech companies that certainly have rich valuations in skew, whether it's a Nazaq one hundred or the S and P five hundred. Yes, you know, there's a handful of them. Overseas, Taiwan Semiconductor, asmathroography, you can name SAP, you can name like a handful, but most of the big ones are here, which certainly the valuation on the public side, what do you see on the private side.
On the private side, we see a similar valuation gap that and I'll just finish the public market side. The UK and the European capital markets just don't have the same depth, which is why you see the valuation, missed pricing.
So you think it's more than just the tech companies.
It's the structure, it's structural, there's not that many participants. It's also legal and regulatory. Right in the UK, there was a move away from holding UK assets by the UK pension plans that suck the liquidity out of the
UK markets, hence the valuation gap. So there's also regulatory angles that are at play there on the private markets, though I've got to agree with you entirely, there is evaluation arbitrage even in the private markets that the European buyout specialists are able to buy companies at better value in Europe and scale them into global businesses and sell them at global valuations or US market valuation. It comes
down to selling time. So some of the biggest best private equity household names that you know, whether it's a Blackstone or an Apax or a Clayton, Dubley and Rice have headquarters both sides of the pond because there's so much value to be harvested by buying smartly in Europe and an advantage quite honestly evaluation arbitrage that you can play all day long, and many of them do so very successfully.
So you're advising a lot of players in the private equity market. Is it general partners gps the funds that are essentially running Are they LPs and investors or do you advise across the whole space.
We sit in between the gps and their LPs when it comes to and we will raise everything from a small for us would be a two hundred and fifteen million dollar fund and our largest client to raise twenty seven billion in their flask fund, okay, and everybody in between. In the last year alone, we raised north of four billion of new capital commitments for our clients and are very prolific at ensuring that private equity general partners raise the capital they need to go off and buy businesses
and build the ecosystems around each of their businesses. So we sit right in between general partners and limited partners. Got a team of over sixty people or seven offices, raising capital for our clients but also intermediating in the liquidity side of the equation in private markets. As you know, in the public markets, the second resistance market is much larger than the primarysurance market. In private markets today it's flipped.
But that means explain what you mean by that, Why is that? How is that flipped?
Well, in private markets today there is a one point six trillion dollars new capital raising engine that hums along annually. That's how much capital is raised across private market funds in a twelve month rolling cycle.
And to just put a little flesh on that, go back to before you launched Sebral, private equity was a trillion dollars now ten twelve trillion, and it's projected to go up to twenty something trillion. Absolutely, so this has certainly been ramping up rapidly, and your timing was quite for two to say you get twenty eleven.
Yes, very lucky to have launched then, but you're absolutely right. But the secondaries market in private markets is only one hundred and forty hundred and fifty billion dollars in size, but growing rapidly. That market, when we first did our first secondaries transactions as a firm in twenty twelve, was only twenty billion, a drop in the bucket. Today it's one hundred and fifty billion, still small compared to the
size of the primary private equity market. But these investors want liquidity too, Berry, you could help something eight years, nine years, ten years, you want out? Who do you go to? You've got to call a market maker like ourselves who can make an advice on that position in the secondaries private equity market to get you liquidity. Can I get you a one fun fact?
Sure?
The average age of a private equity fund sixteen point two year.
Wow, that's crazy.
It says ten on the tin. It's ten with two one year extensions, so up to twelve. But the average vehicle is around for average is around for sixteen point two years. Hence the need for the secondary's market to provide liquidity for investors who want out.
So, just for the lay listener, I want to do a little definitional work here. So for when we talk about a ten year fund, you're putting money into a private equity fund. Over the course of that decade, they're making various investments. There's no guarantee in year eleven that all of those investments have found an exit, so there'll be a series of extensions, and even after those extensions, all right, the fund is arguably inactive, but we're trying
to find an exit for this. A secondary market is one way that can take place. It gets people who are in that liquid and hopefully at a discount. For the buyers who come in and say we'll take this at X price, We'll give them liquidly, and then it's year one for us, not year twelve. So there are different timelines. Is that fair explained?
It? Very, very beautifully. The only new ones I'd add to that is that that liquidity can be asked for by both the limited partner so i e. The investor and the fund itself. And we get asked by pension plans, endowmas foundations, family offices saying hey, we've held this portfolio now for eight years, nine years, it's getting along in the tooth. Or actually my predecessor made these investments. I'm
the new CIO. Can you sell this stuff for me, I don't like it anymore, or I've actually realized the gains I thought I would realize much sooner than I expected. Can you sell this on for me? All reasons to seek liquidity on the limited partner site, and we do that all day every day. Actually, I've done one hundred and sixty three transactions in that space alone in the last decade. And we also organize a liquidity when the
general partner asks us. Sometimes a general partner will say, actually, can can you help organize liquidity for a company that needs to be sold out of the fund because the fund is reaching its end of life. The fund needs to sell some companies, but I general partner want to hold on to it longer, so pull it out of the fund and put it in its own fund. And that is called the continuation vehicle space. And that's something we do all day every day. As well.
We've been experiencing something here in the US that I find kind of fascinating, and I'm giving you a perch. I'm really curious as to what you see in the UK and Europe or the rest of the world. Over the past decade, there has been, for lack of a better word, a democratization of private equity and private debt. You used to need twenty or ten million dollars to participate in this. I think you can get into a number of places for a quarter million, one hundred thousand
dollars less, very less. So this has you know, when I look around at Blackstone and Carlisle and so many of the big pe firms in the US, they have set up parallel funds where you know, there's really practically no minimum. Is this trend something that's us focused? Are you seeing this in the UK and Europe? Tell us a little bit about private equity for everybody.
Absolutely, the entrance of private wealth into private markets, but private equity in particular has been the single biggest innovation and movement of capital from LP investors into private markets in the last five years. It's been happening. It's started off over the last decade, but it's really over the
last three to five years we've seen an acceleration. And here's the most important fact that as ultra high networth and high net worth individuals build out their portfolios, they're putting equities, they're putting bonds, and they're putting alternatives, and alternatives being led by private markets. The average investor in private wealth is under allocated to private equity by three to five x three to five hundred percent. That is
a huge number. And so the growth of private wealth as an investor in private markets has absolutely exploded over the last two years and will continue to do so in over the next decade or so. And it's a global phenomena. Of course, the US led the way, and certainly the forty Act regulation of allowing semi liquid evergreen products and individuals to invest on those was a huge game change when it came to private wealth's interest in alternatives.
We're seeing the same thing in Europe. We're seeing the same thing in Asia that individuals who have a certain net worth are saying, I want a bit of private equity in my portfolio, how do I go out to get it? And more and more sponsors are saying, well, I'm going to create solutions for you to access my funds and product and my alpha through accessible channels.
So in the US, when this really began to get popular in the twenty tens, one of the big drivers was zero interest rates, this ZIP policy where when bonds are yielding you know, two two and a half percent that side of the portfolio really wasn't producing anything, and people started looking around, Hey, where can I get better yield private debt? Private equity stepped into that and really
filled that gap, especially for institutional investors. So I look around the world and we had, you know, rates that were zero for a decade. How significant was that as a driver? And then what does it mean now that rates are you know, appreciably higher than they were in the twenty tens.
There's no doubt that rates being low helped investors seek yield and seek alpha in different markets, including in private markets. But also it helped private equity do deals right, leverage, biot requise leverage, and when rates were so low, they leverage when it was cheap and easily accessible, and they used it for that decade of boom that we had until rates started going up. Now that roads have gone up, but they are coming back down, we can always discuss
what neutral looks like. What we have is now investors seeking where do I invest that I can still find value in given how expensive the public markets are? Right you think about the forward pe of the public markets today, where do I still get relative value? Where I can buy at sensible multiples and sell at higher ones private markets.
So it's a diversification strategy. And secondly, it's an incredibly important way for investors to say that as I think about a balanced portfolio, I want to seek investments in folks who really know how to add value to businesses over a period of time, So they'll do that only in general partners who have a track record, and that track record is often anywhere between fifteen to twenty two to twenty three percent net IRRs, and that track record
really matters. So you have to be able to return money over the neutral rate, otherwise are not going to be viable. Even the best private credit funds will return high single digits or low teens type of returns, which is very much a good diversifier and an addition to private wealth portfolios.
And one of the things I noticed whenever I see a private debt or a private credit it used to be liboard. Now at SOFRA, it's not a fixed rate, it's a variable rate plus some markup beyond that. So kind of raises the question low interest rates first sent people exploring this aspect of private markets and private credit and debt. Do higher rates really have a negative impact, or you're still getting whatever the SOFA rate is plus five six seven percent.
Yes, for sure you're going to get a if you're comparing to SOFA, you're definitely going to get a return normalization which did happen when rates were in twenty two to twenty three, less deals got done because at higher rates private equity funds had a difficult time brawing. You know, the debt markets were shut, so deal value values came down. If you look at the M and A volumes that at most of the major investment banks, including at raymag Jes,
volumes came down. Now they're on their way back up. But your point is a salient one. How does it impact returns? You have to be able to show if you're doing private equity buyouts, you've got to be able to show that you can do fifteen points over for so far.
Right, fifteen that's a big number, ten.
To fifteen points. If you are a mid market private equity house, you are returning twenty percent net IRRs. That's kind of what you have to show fund on fund and that's interesting. That's why you're added to a portfolio if you're a private debt strategy. Obviously, not private debt will be more like low teens type of numbers. Somewhere
they're ten to thirteen percent net range. But even that is value add when you think about a debt strategy that you know, because even in public market debts, you're not able to find that type of yield. So as rates come down, as money gets pushed out of t bills, gets pushed out of money market accounts and starts to seek yields again, private markets become interesting to a lot of players.
Huh, really interesting. You mentioned the transaction numbers slid down and then came back up again. Does that impact the secondaries you've done? You guys have done over two hundred secondaries and fundraising transactions. That's a pretty big number for a relatively short period of time. How have you seen the volumes on secondaries affected by swinging interest rates?
So there was a dip in the secondaries of markets transacting volumes in twenty twenty three, in particular, as rates were high and investors didn't know what impact that had on valuation. If you remember first half of twenty twenty three, the world froze because you had fed raising interest rates and all other central banks you had Ukraine and Russia. You had Silicon Valley Bank and then you had Credit Swiss, so everybody was deer in headlines, going what on earth
is going on? Volumes came down that year in secondaries market as well as an M and A. Now those volumes have gone up this year. Twenty twenty four will be another high water mark for the secondary's market in terms of transacted volumes. And that's because as the private markets grow, the need for liquidity and a liquidity solution over the period of that ten to fifteen year old becomes all the more pertinent for both limited partners and
general partners. So now regardless of what the rates are doing, you have investors saying, you know what, every year or every two years, I'm going to sell in the secondaries market and move that cash into other more opportunistic situations, back into a program that will reield me a higher return because I've made what I needed to make out of this portfolio. That's become programmatic amongst many institutional investors.
So I love the word opportunistic. When in the public markets, when we get those dislocations and people use the word freeze. In public markets, we use the word panic because they have the liquidity to engage in bad behavior. It definitely creates opportunities. When you see in the private markets people polling back and freezing, do you end up seeing the same sort of Hey, this is a substantial discount. I want to participate in this.
You're absolutely right, Berry. It all comes down to the discount and other willing sellers sellers at the price. There's always a price. I'll give you one anecdote. One fund interest we sold traded at eight and a half cents on the dollar, eight and a half real There was a seller who said, get me any price I want out. I don't want to hold this anymore. Okay, this was I'm going back to twenty thirteen, twenty fourteen, But there was a buyer at eight and a half percent of
anav of net ascid value. Great, you have all the cushion in the world, and you look like a genius when you do your markups the next quarter.
Even in the worst of the financial crisis, bad mortgages pools of bad mortgages, right, they were selling for thirty five forty cents seemed like a huge deal. Ninety two and a half percent off ninety one and a half percent off. That's unbelievable.
That was in an Asian manager in twenty thirteen. But I will say the average discount these days, the best private equity fund managers do not trade at discounts. They close it close to their net asset values. They trade close to par. But the average discount when it comes to the average buyout fund is somewhere in the four to eight percent range for the average private equity buyout fund.
If you hold venture, especially if it's got a lot of fintech in it, these days, that's going at thirty to fifty percent discount because it's really hard to value that stuff. As you know, venture and growth is often valued that it's last rounds valuation. Well, if your last round was back in the boomyrrors and all you've done is try to tread water and maybe raise some debt,
you don't have a valid print. So we are seeing a lot more spread a bit asport is very wide in the venture and growth world right now when it comes to buyouts, especially mid market large cap buyout at or close to par in the nineties.
Huh. Really interesting. So you mentioned deal flow has ticked up. I'm assuming that'll continue into next year. What are some of the challenges and headwinds that are out there that could be something an investor in the space should be aware of.
I think the one that's most salient, that we track most closely bury is the fact that because the math broke at the investor level in n twenty to early twenty three, we're still playing catch up on that. What does that even mean. It means that the exit activity the M and A volumes, the ability to sell companies and return cash to institutional investors really slowed down from summer twenty two onwards, as we had inflation, as we had Ukraine, as we had some of the macro.
Challenges, plus a pretty public market at the same time.
And a very ugly public market. So at that point, institutional investors stopped seeing very much cash back from their private equity portfolios. They were still having to pay into those capital calls that were being made by their private equity clients because the contribution still kept coming in saying I want to do a new deal, I want to do an add on. Here's some management fees and expenses
you need to fund. But the cash back froze. Now we're starting to come out of that now, but that math is still nowhere near where it needs to be.
I e.
The private equity industry needs to return a lot more cash back to its investors. The capital markets need to open because some of the largest private equity funds you have out there need to list some of those businesses, and we haven't seen the IPO window open the US or Europe in the last year in a meaningful and sustainable way. We need all of that math to write in itself before institutional investors kind of come back to
their normal levels of allocating to private equity. Where institutions have pulled back, private wealth has stepped in. We had
that discussion, but the institutional investor has pulled back. The average pension plan, the average endownment, the average foundation, the average insurance company, if they used to do one hundred dollars per fund investment last time around, this go around, there are seventy five to eighty percent of that only, So for them to come back to the one hundred dollars, we need the private equity industry to sell companies and return cash back to them. It's getting better twenty f better.
Amberinet volumes that twenty twenty three was, but is it back to what it was in twenty one. No, sir, we're not back there yet. You know.
It kind of reminds me of what happened in the automobile market during the pandemic. When you're not making a lot of new cars, it means a few years later there are not a lot of used cars for sale. Sounds like it's the same situation where you have a twenty twenty two slow down twenty twenty five, where the exits am I oversimplifying that.
I picked a really interesting and analogy, and I like it because that is what is happening. And now we're at the point where a lot of companies that were bought in the twenty twenty one era need to be sold. And some of our clients have been prolific at returning that capital back. In fact, I've done a great job in twenty twenty four of exiting those businesses and returning cash back to investors. Others not so much. Others need
to pick up the speed on that. And as an industry, if you look at the entirety of the industry, let me give you some numbers. The average returns that investors get cash back that they used to distributions as a percentage of the total value held in private equities generally around twenty four percent. In twenty three, that number dip to only eleven percent. So far in twenty four we're back to about fourteen percent, but we're not back to twenty four.
So when we're not talking about returns, we're talking about.
Exit activity as a percentage of the net asset value.
So fourteen percent exit as opposed to almost a quarter a big difference.
Yes, historical average of twenty four percent. The institutional investor does not like that math. They like to have their cash back come back to normal levels because that's the cash back that then recycle into new investment.
They see other opportunities. So I asked you the negative question, what are the challenges? Let me flip it. What are the tailwinds? What are some of the positive things you see coming forward for the private markets.
I think that as you see the increase in regulation around public market listings, more and more companies around the world, US, in Europe and beyond want to remain private because they see the benefits of being under private equity ownership, the value add the access to resources, the ability to have capital at hand, to grow faster is a very valuable playbook. So I expect that the private equity industry will continue to grow at the very rapid expansion rate that they've enjoyed.
The other point I'll say is that this is a really interesting return driving environment for private equity. Valuations in the private markets remain very sensible, and there's a great arbitrage between US and Europe. The Europe divergence, as they're calling it these days, is real. So when it comes to saying, hey, I'm going to globalize my company's revenue chain, how do you do that? That's an interesting playbook, especially in the political environment we're in, and private equity is
very well positioned to figure that out. The third thing we've already touched on, which is private wealth is a game change for private markets. Is a game change in terms of the capital inflows that's coming in, and we're still at the early innings of that. It would change private equity for good, and I think it's very exciting to see that gather pace and to be at the forefront of that at Raymond James, which is one of the largest wire platforms global private wealth platforms in the world.
So let's talk a little bit about your time at Raymond James. First, you stand up your own firm see bowl, and now you're at a fortune five hundred bank and advisory firm. That's got to be a culture shock. Tell us a little bit about what that transition was like.
On paper, it is a culture shock, but during diligence, Raymond James approached me within within offer to acquire the business, and we spend months getting to know each other to ensure that the culture fit would work. Because if that didn't work, the key ASCID you were buying, which is
talent and financial services, was going to walk. And so my boss, now who is the person who acquired Sabiel Jimbo, and I spent a lot of time getting to know each other and ensuring that him and I could work together well and effectively, and that the cultural alignment and entrepreneurial DNA would stay intact when they acquired the firm. Now I've been part of Raymond James three and a half years. I can safely say that the honeymoon's over, but also say that the culture fit has been a
real hit. Raymond James has a very affable community oriented a very low ego type of culture as in general, and I've found the same thing in the capital markets business and it's been actually one of my upside surprises of joining Raymond James on the culture side. You wouldn't know it if you looked at the paper announcement that a Fortune three hundred was buying a small boutique and you.
Go from small boutique to a trillion dollar platform. How has that changed how you operate, not just globally, but the sort of companies you advise, the sort of funds that you're working with. What has been the upside for you being on this billion plus dollar platform.
There'd be two things that point to The first is, almost overnight, the largest private equity funds in the world started hiring us, same team, same people, same services. All that change was the logo of the boutique got replaced with the logo of a Fortune three.
Hundred plus Fortune three hundred is a giant. You know that there's thousands and thousands of banks and funds, only a couple hundred companies attain that haft size. And no, it's not just the boutique, it's everything around it. You can tap into a giant network of experts.
And one of my clients said, listen, no one gets fired for hiring a fortune three hundred. Now you are part of one, and it changed our game overnight. Overnight we started assigning ten twenty thirty billion dollar funds and that was incredibly exciting. So do what we love to do, but to do it for some of the biggest players
in the markets is very exciting. The second one is that we were able to figure out and a veil of and offer the synergy with our private wealth partners at Raymond James very quickly, and for that, I'll always be thankful to the leadership of the firm because they saw the opportunity and they made that happen, and that's been a huge value add to our clients.
I can I can imagine, all right, So I only have you for a handful of minutes left Before I get to my favorite questions that I ask all my guests, I have a couple of curve balls I have to throw you, starting with you're a certified somalier from the Court of Master Somaliers. Tell us a little bit about your enthusiasm for wine and what led you into that.
So I started teaching a wine class at Stanford for one yearit of credit. In my junior year, I was part of living in the French House there where I was member of the staff, and I had to teach a class that had something to do with France. I said, France and wine.
That makes sense even though you were less than an hour from Napa Valley.
And guess who my teachers were. I would get guest speakers and wine makers from Napa and Sonoma to come and my pitch to them was, hey, you get to teach, You get to talk to and teach wine to an impressionable young audience that can go on and become loyal customers. That they loved it. They would come down and do a talk on wine, and we do a small wine tas, maybe.
Bring some a couple of bottles shirted.
It was voted Stanford's most popular class. It would often shut down the Stanford systems during sign up day, and even after I graduated from Stanford, I kept teaching that wine class for close to three years. After graduation. When I went to Harvard for my MBA Harvard College, one of the houses their residential houses there, asked me to come teach a wine seminar for them. Which I did, which was again a roaring success. And then I moved to London. And when I moved to London, I said, well,
I'm not teaching anything here. I guess I'm going to lose all this wine knowledge. Let me put it to the test. And I decided to take the Court of Masters Sommelier's test. It was a three day test. I don't think I've crammed that hard for anything in my life. It was I had a blind tasting of ten wines. It had a service test, had theory papers. It was incredibly intense, but lo and behold, I ended up passing,
and here we are. It's a lifetime qualification. I still have it with pride and honor, although I don't use it as much anymore now being a mom of three.
So I was going to ask your London base. It's a short train ride to France, to Germany to Italy. There are some great wines in that area. How often do you get to go to local wineries and sample the wares.
I love tasting wine, and so I have joined a wine club in London, which I love. I used to take part in blind wine tasting competitions less so now so any opportunity I can to enjoy and experiment and try new wines. I do so, you absolutely right. Europe is a bastion of wine making, and so if I go to board meetings in Germany, or if I head off for a weekend in Spain, it's all about diving
deep into the local wine. I recently went for dinner with about ten twelve friends to a lovely restaurant in near Barcelona and Spain, and there was a wine tasting core of repairing there for all Spanish wines, and we did that together and learn more about Spanish wines than we ever thought we would know. That's the kind of thing that I do now as a passionate hobby.
Huh. Really really interesting? All right, So all have you for a few more minutes. Let's jump to our favorite questions. Tell us what's keeping you entertained these days? What are you either watching or listening to? What are you streaming.
Watching? I have to say I tend to watch in limited doses these days, given life and travel and children. But I love The Diplomat on Netflix. Fascinating again geopolitics. I'm absolutely interested in the new spy thriller that Paramount has out called The Agency. I've watched a couple of episodes. It's trending well so far. I love listening to a number of podcasts. My go to list will be Andrew Humeman Love. He's a Stanford professor wright the healthcare Yes,
he loves that. He talks about health wellness protocols. Super fascinating. I try to dive into his stuff as much as I possibly can. They're long, though, so sometimes it takes a few iterations. I'll often listen to the news via podcasts, whether it's Bloomberg, CNBC. That's often part of my regular rota, and more than any of the others. I am a huge believer in preventative mental health. I meditate every day, go to an annual meditation course, so I'm often listening
to talks around meditation, around mental health. How do you deepen your meditation practice. That's a huge part of my repository as well.
And while we're on streaming entertainment, if you like the Diplomat and The Agency, let me suggest the Lioness oh on Parami about intelligence agencies and how they infiltrate terrorist groups. Really fascinating, very cool. I just finished the first season and I'm looking you need a break because it's like very tense and wow, we're about to start the second So tell us about your mentors who helped shape your career.
I am lucky enough to have been picked up by a wonderful professor Stanford called Professor Tom Cosnick. Tom took me on at the tenor age of nineteen or twenty, and he took me under his wing, made me a research fellow. He's the one that enabled me to guest lecture at Stanford. I wrote case studies that are still used in the teaching curriculum there under him, and he's been a tremendous mentor and supporter very early on and forever.
Thing to him for his coaching and mentorship over the years. Similarly, is a wonderful professor at Standford called Professor Tina Selig. She gave me one of the best piece of advice I think any young career professional, but certainly a woman, could have received. She said to me, you can have it all, just not at once. And that has stuck with me forever since. And it's been true in many walks of life, as I've had my children, as I've grown my businesses, as I do what I do on
a daily basis. So those are the two that stand out both at Stanford. Both influential in the way they mentored me, but also what they imparted in me.
Really interesting. Let's talk about books. What are some of your favorites and what are you reading right now?
I love the book The Big Leap by Gray Hendrix. Everyone should pick it up. It's a quick read. It talks about upper limits, how we set upper limits unconsciously in our lives. He starts off with this great research about how most lottery winners after five years, most of them end up being broke, really unhappy.
Broke, divorce, suicide. It's terrible.
It's terrible. Why we've just been coming to all these riches. The mind has a reset point that brings you down into what you're used to feeling and the kind of mental space you're used to inhabiting. How do you break out of that and increase your upper limits so you can continue to scale in your life and in your career, in your personal life and so on. Fascinating quick read. Big Leap by Gay Hendrix Highly recommended. I'm reading a book right now. I'm only about thirty pages into it.
Called the Mind Matters. Back to my thematic about mental and understanding how the mind works and mental health. Mind Matters is by a professor who talks about how the mind can often visualize things into reality. So you hear this phrase called manifestation a lot. This is a neuroscientist studying what that means in terms of how the brain fires to try to make things into reality for us. Fascinating thirty five pages or so. So far so early innings, but it's gone.
Well, really interesting. And our final two questions, what sort of advice would you give to a recent college grad interested in a career in private markets or finance.
My number one piece of advice to anybody entering finance is play the long game. Too many young people, I'm sure that you come across, Berry, that I come across, are all about the short term hits and the short term wins. If it doesn't work out, they move on and they try to make it work somewhere else, and they move on again. A rolling stone gathers no moss, and especially in finance, it's a world that ends up
being one, maybe two degrees of separation. It's a world in which relationships still really, really matter, and you have to cultivate them. Thinking about a ten to twenty year career in mind, not what can this person do for me today, or this week, or this month or immediately. And that is I think one of the most profound pieces of advice I leaned into early in my career.
Looking at every human being as a long term investment of time and energy, not looking for quick paybacks, same with investment investing in private equity, but certainly true when it comes to people.
Really interesting and our final question, what do you know about the world of private equity today? You wish you knew twenty plus years ago when you were first starting out.
What I know now that I wish I knew back then is that the market will change and adapt even faster and more furiously than you ever thought possible. Did we see the trillions of dollars in the private equity primary market?
No?
Did I see the secondary's market growing to one hundred and fifty billion on its way to a trillion dollars itself, No, So the growth will far outpace your wildest dreams, both in your own industry but also in the finance world around you. Think about twenty years ago, had you and I ever envisioned the mag seven and the trends we're seeing in technology and how markets would be at the levels they are today, not even in our wildest dreams. So as I think about the next twenty years, I keep that in.
Mind really really interesting. Thank you, Sanana for being so generous with your time we have been speaking with. Sanna Sinhachi is the global head of the Private Capital Advisory Group for Raymond James. If you enjoy this conversation, well, be sure and check out any of the previous five hundred and forty we've done over the past ten and a half years. You can find those at iTunes, Spotify,
Bloomberg YouTube, wherever you find your favorite podcasts. And be sure and check out my new podcast At the Money, short ten minute conversations with experts about topics affecting your money, earning it, spending it, and most importantly, investing it At the Money, in the Masters in Business, feed or wherever you find your favorite podcasts. I would be remiss if I did not thank the Cracked team who helps us put these conversations together each week. John Wasserman is my
audio engineer. Anna Luke is my producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts here at Bloomberg. I'm Barry Ritolts. You've been listening to Masters in Business on Bloomberg Radio.