Mining Private Equity Unmasked (Fraser Perry)

If it can be built and ramped up, yeah, everyone can get paid. It's great. You have, you know, CapEx blowout management team can't deliver, you don't get the commodity price tailwinds you were expecting and all blow up pretty quickly. Fraser welcome mate, how are you? Hi, guys. I'm good. Thanks. Fraser Perry JD is our guest joining us on Mike today. Fraser is well to start off with you, just a great bloke. I've talked to you. You give us so much energy.

Like some of the books on his bookshelf were kindly donated to you. But that's not your biggest credential. You've come out of just a career in private equity, a mining engineer. These days you're working in corporate development at A, at a growing miner, ASX miner. What we're going to talk about today is the role that private equity plays in the mining sector, financing mines into development. The, the ways of private equity or that pool of capital is

changing over time. The, the challenges that the, the model has and the opportunities that presents the, the, the incentives along that we're going to kind of open the curtain on what's been a bit of a mysterious pool of capital to ask to our listeners. And we're delighted to have your your expertise kind of peeling back the curtain on some of these big topics. Fantastic.

Yeah, pleasure to be here, guys. Private equity was a black box to me Yeah, before I, I joined my last role, which was at RCF Resource Capital funds. I remember, you know, working as a mining engineer, applying for this job with RCF, I'd seen on LinkedIn and thinking what is private equity?

Trying to Google what they, what they even do, what the structure is. So thankfully, you've learned a huge amount of how it operates and how mining private equity funds are set up. But yeah, there is very little information you can sort of glean, you know, publicly. So happy to share what I can from my experience on the inside. It's a big. It's a big player in, in our market and it's an even bigger player in, in global investment markets.

It gets huge capital allocations from endowments specifically in the US. But I'm super keen to unpack it because we obviously speak with heaps of investors on this show, but we never speak with private equity investors because they're a bit coy, they're a bit shy, they're. Not allowed to because the money comes from US pension funds and they're bound by all these SEC restriction restrictions and so. RCF no different. RCF no different.

Yeah, we never, we, I don't think we've ever had a private equity group that has said, yes, you can voice my comments. Yeah, it just doesn't happen. I think you spot on, but we need to pull back the curtain because they are still very present in our space. We have spoken so much about like recent deals, you know, Quintero's one that comes to mind, great bit of action then going at it for, for New World.

So we're, we're really excited to, to peel back the, the curtain, understand what you learnt on the way, how your thoughts after the fact change from what you thought you were, you were jumping into. And I think for a lot of punters out there, just understand the the role that they play, the return expectations that people have and what the industry is going to look like in in five years, in 10 years and beyond

that. You know, and in a, like a, a theoretical sense, like the model should should work well because you're marrying patient capital with a, with a, with a cyclical kind of uplift, like there's a cyclical nature to commodities businesses. So like in theory, there's a lot of merit to this, this, this model. The actual empirical data of returns from private equity asset class in mining, however, has been on balance pretty, pretty, pretty below average. Would you agree with that?

Yeah, look, pretty mixed history and perhaps we'll get to that. You know, performers as we, you know, the conversation evolves. Perhaps a good spot to start is probably the structure. So, you know, you've had lots of great guests come in, you know, fund managers, managers, you know, long, long only or long short public equity funds, private equity funds set up

quite different differently. You know those funds, you know, closed end funds, yeah, they have typically a 10 year lifespan where the fund manager goes out to, you know, prospective investors who are the limited partners. Yeah, they ask for capital commitments and that is effectively raising the fund. Once the funds raise, they have, you know, a short amount of time to deploy.

It's typically, you know, first five years of that 10 year fund and then they have to distribute the capital back to the investors on the back half of the fund there as well. The investors in the fund will pay, you know, fees for that privilege to be part of that fund. So there's a management fee, you know, paid, you know, to the fund manager. And there's also a performance fee. You know, if the fund can perform above a hurdle rate, you know, they'll pay a performance

fee to the fund manager as well. So it's this fixed time frame that probably creates most of the constraints and where it's, you know, most different to, to other funds that, you know, can go in and out of things all the time, can recycle capital all the time. If you have a private equity fund, you know, they're typically, you know, 5 to 10 very concentrated investments in that fund, you know, within 10 years of the life of that fund. You know, finding opportunities

can take a few years. Executing on the deals can take a few years. You know, seeing the value creation and those investments you know grow and mature, it can take more than a few years and then finding an exit and getting liquidity can take a few years too. So it's really hard to get everything done timing wise, you know in that 10 year period and especially so in mining in commodity markets which are really volatile.

You know to get one, you know, to come in at the bottom of the cycle and then get your timing right to exit at the top of that cycle and time it perfectly in that 10 year period is really hard. Yeah, I I couldn't agree more. Private equity used to be called leveraged buyouts and it sort of

evolved and and changed names. But the concept came from having a small bit of equity, borrowing a lot of money, taking a company private, optimizing how it kind of runs, operates, you know, think of an industrial type business and then sell it back out, IPO it. But the the model has changed massively. And when we look at private equity companies in the mining space, they don't all have the

same strategy. Can you share a bit of detail on on what you've kind of picked up on the on the various types of strategies that these PE groups have? Look, fundamentally, what are these private equity funds trying to do? Well, like everyone on on the buy side, they're trying to make money. The target returns for these funds are typically that, you know, two to three times multiple on invested capital.

Private equity likes to talk talk in multiples, you know, less so IRR that you know, public equity markets talk about. And that's probably because you know, it's typically in private markets, it's a long period of time. The investors that that come into private equity allocate into this asset class are thinking of it slightly different to, you know, people that are trading on a lot more regular basis. So. But it invests the time frame.

That that, that is measured from the time that the the capital is deployed. So let's say you a fund they raise a billion dollars, right and they've got five years to deploy that billion dollars and they're incrementally doing that with different opportunities that come up. Each one of those, like the multiple invested capital, is

sort of measured from the point in time of which. There's lots of ways to cut it, right, Lots of ways to cut it. So in private equity, you typically hear, you know, funds or, or managers, Yeah, the fund managers, core managers, the GPS, you know, talk about things in terms of gross and net. So, yeah, the gross multiple is the multiple from the day you make a capital call to your LP's.

So you've found this great deal, you've got a term sheet that's ready to go. You'll make a capital call to your LP's so that you can fund the deal. The day that capital comes in, that capital starts accruing A preferred return that the fund manager is going to have to be at the end, and that's the day these multiples start ticking is. That the same day they start also earning a fee. That's right. So the fund manager deployed funds can start clipping a fee

there to manage that AUM there. So as time goes by, eventually get towards the exit again, you sell the business, you're waiting for the capital to come in. The capital finally comes back into the fund. The fund can perhaps recycle a little bit or it can distribute it back to the LP. The day it comes back in, you crystallize that investment and you can see what the gross multiple is there. The net multiple takes out all the fees there that the fund manager clips.

So you know that management fee that was, you know, taken along the way, perhaps its diligence costs and things like that. So you'll see a spread between the gross multiple and the net multiple. What's the typical spread between the two? Depends how far you are along in in the fund life, you know how far that preferred returns accrued. But yeah, probably like 20% difference. And just quickly for people listening, you've got the GPS who are the ones that manage the

money, they invest the capital. The general partner. The fund manager. And then the LP's are the ones that give their money to the fund, most often the endowments. Yep. The commit, the commitment. Yep. So the limit partner makes this commitment. And you know, limited partners, yeah, we'll get to that. That's changing who they are.

But typically your pension funds, endowment funds, et cetera, those, those sorts of groups that, you know, within their portfolio, they're allocating to real assets. You know, sometimes there's a specific bucket for, you know, alternative alternative assets and you know, there's a private equity bucket. But typically for mining PE funds, they're sitting in the real assets bucket.

You know, where there's, you know, there might be investments in, in, you know, other PE funds that do infrastructure or just, you know, direct investment into some infrastructure projects as

well and things like that. For those LP's, those like endowment funds, is the actual model, like private equity model just a very familiar model and they have like a, you know, a kind of a regimented understanding of like the private equity model and then they're just porting that over to to mining sort of expecting similar. Yeah, remember, I mean, PE has been around generous PEA for a long time, you know, multiple decades. Mining PE is probably a newer thing.

You know, there's in, in ballpark numbers, sort of, you know, 15,000 or so, you know, PE funds that you know, aren't fully closed, you know, they're still still out there, right? I would say, you know, mining's probably 40-50 of those. And how do you call it mining? Some do, you know, oil and gas and a little bit of mining. Some are generalist with like 1 mining investment in the whole portfolio.

So depending how you cut it, maybe there's a few hundred that would ultimately do an investment in natural resources. But mining PE is still such a very small part of the whole PE landscape. So for these asset managers, yes, it's a very familiar your business model and asset class for them. Yeah, mining PE is something that's probably more unusual. Can we talk about the, the, the

theory of making money in private equity in mining? Is it as simple as like I'm going to buy something at a discount to NAV and then like that, that asset is going to get developed over time and and I'll be able to sell it at A at a lower discount than have or, or is it about turnarounds? Is it, is it a bunch of above? Is it counter cyclical? Lots of different strategies so that you got that target return of you know two to three times, yeah, your money.

So get two to three times ideally, you know a net Moik multiple invested capital. How do you get a get a 2X? Well, couple of different ways to do it. The traditional private equity model likes to talk about deals in terms of, you know, growth value. Yeah, the growth model, which is typically in mining is building a project, you know, projects that sit in that development. Sage, you know, the Lausanne curve just like your logo here, things have a deep discount. You know, we're in that

development phase. And then as they de risk taken through construction, successful ramp up, after that we'll get a rewrite. You know, depends at which commodity, which point in time, which stage you're at. But generally, you know, development stage project, you know, with a study sitting at, you know, .5 NAV, build the thing successfully ramp it up. It should be close to a one times NAV. Now you know, that can change

all the time. But in principle, you know, that's how you get your 2X return, you know, provide some capital to a development stage project to allow it to be built. You know, oversee the construction and the ramp up and then and then sell it on the other side and then you get your 2X. That's your typical growth strategy and that's I would say a hard strategy to execute on. You know, there's lots of things that can go wrong through construction ramp up. We can get to that later, but

it's a pretty hard strategy. Other strategies, I think you could broadly turn them sort of value strategies. So that could be a turn around opportunity. Yeah, that could be an operating asset, you know that's in the 4th quartile and it's struggling and you know you need to change management and you need to change operating practices and you can turn it around and you know change, change the cash flow significantly there and then flip it that that can work.

There's a consolidation strategy where you know, there's M&A to do, you know, we've got perhaps stranded, you know, mining assets without a processing solution. Great example, there was sort of Genesis acquiring lean or assets from Saint Barbara. You know Genesis had Ulysses project at that time. Yes, St. Barbara had Gwalia process plan as well as Gwalia mine. Yeah, some very logical synergies there, you know, putting the ore in a mill, something as simple as that.

Or it can be more broader, you know, roll up strategy across a whole region where there's a lot of subscale deposits that collectively could run a hop and spoke strategy and get it to achieve critical scale, things like that. So that's the, you know, consolidation strategy there or roll up strategy that's called in generalist PA or bolt on. But you know, I've seen that work quite a few times.

And I guess there's also the the Special Situations, you know, that are quite nuanced and they're all situations specific. Those ones are probably harder to plan a fund around in terms of, you know, we're going to do so many of these types of deals they they come up. But yeah, all of the different fund managers will be thinking about this in a certain way. Some are thinking, yes, we're going to focus large, you know, a portfolio largely on building projects, provide that

construction financing. Some others, you know, just focusing on, you know, development stage assets, you know, de risking them, you know, with more technical work and then ultimately finding an exit there too. So lots of different ways to still get your two to 3X. So one of the other ones we've seen, Fraser, is what Tembo have

done a few times and that's minority stakes and that that's a real point of difference versus traditional PE. They're not buying the company outright. They're taking a, call it maybe a 20% stake in a, in a public company. What? What do you kind of think of this? Point come to mind, yeah. Orks point another one. This strikes me as a bit more of a a more recent revelation. Equity. Yeah. So how do you kind of connect those dots and think of them in

in the PE context? Sure. Yeah. And that and the strategies can can be right into the spectrum. So for example, yeah, some of those investments I'm familiar with that Tembo's made are probably more like a, you know, public long equity fund, right? Yeah, they're minority. They're enlisted vehicles. They're pretty liquid as well. They might not necessarily have a lot of, you know, influence and control in the investment as

well. The the challenge is for the fund manager when they're raising these, you know, funds, you know, their pitch to LP's is, you know, their value add. And typically that's going to have a degree of sort of influence and control in their investments. You know, they're not passive investors. They're, you know, active investors that want to be, you know, on the board inside the business and having a seat at the table on a lot operational strategic decisions.

So yeah, there's, there's a huge spectrum. Perhaps we can sort of talk through the mandate of these funds and you'll get a sense for how you know they're different in terms of the strategies and and where they allocate to. What are the what are these? It's the mandates. Like just put the when when you go out and raise a fund, here's

the mandate. Or do the L, the L, the LP's themselves actually have like, you know, you've got to follow these certain criteria in order to raise the money in the 1st place? Like who dictates this mandate? The fund manager, when they're going to raise the fund, this is the mandate for that specific fund. Some managers might have multiple funds in the market, you know, different strategies like a private credit strategy

and a private equity strategy. So they'll, you know, be very explicit in these documents as to what they're going to go after. They can and can't do. Yeah. So capital position in the capital structure is a great one. Yeah. Is it going to be focused on debt and have security there? Is it going to be subordinated in the capital structure or is it going to be equity as well?

Or maybe, you know, there's going to be a portfolio approach where, yeah, 1/3 of, you know, the fund might be this and that the other. But that's probably the biggest point difference is, you know, where they are going to be in the capital structure. You know, groups like Orion, particularly in their, you know, mine finance fund, which is the traditional sort of, yeah, private equity fund.

Yeah, they're typically financing projects in the construction phase and it's typically debt at that point. Yes, there are some nice management teams that like and they'll go do an equity investment for part of that fund. But, you know, the fund is largely focused on on debt. And if they can get a royalty on the back end, happy days too. Yeah. And and look, they're still targeting similar returns,

right? There's debt style returns and equity style returns, but you know, these debt style returns are pretty close to equity style returns. You're still targeting a 2X, you know IRS that are in the, you know, double digits as well, right? Well. You know, in project finance like generally you're, you're taking equity like risk because if the mind doesn't work then. Yeah, it can. Be it can be a pretty bad case for the, for the, for the debt.

I'm saying lots of these, you know, very exotic structured term sheets for sort of preferred equity. And yeah, lots of bells and whistles on these term sheets, but effectively it's a binary outcome, right? You know, if it can be built and and ramped up, yeah, everyone can get paid, it's great. But you know, if you have, you know, CapEx blowout, management team can't deliver, you don't get the commodity price tailwinds you were expecting, Yeah, it can all blow up pretty quickly.

So I think it's a full sense of security depending on, you know, having this position in the cap structure. You know, there's, there's a lot of examples of, you know, projects have been financed by private equity that have been refinanced, you know, straight after construction or, or, or or even later as well. So yeah, capital structure is a big one. Jurisdiction I think is also a

good one to talk about. You know, you talked about Tembo and investments here in Australia with you know, Spartan Greatland and others. You know, they're, they're groups that will solely focus on, you know, Western mining friendly supportive jurisdictions like Australia, Canada, US. Cantera is a good example that exclusively focused on those places versus other groups that will have a bigger risk appetite to go in more difficult

jurisdictions. You know, to speak to some of the examples from RCF's portfolio in the PE fund, I mean, they're built, you know, the RG Gold project in Kazakhstan. They've been investors in Ozone, which is in Burkina Faso. So, you know, I mean, West Africa to, you know, Central Asia complete other ends of the spectrum as well. So, yeah, that's an important

point. And and as we get to sort of how pay is evolving, I do think, you know, the the jurisdictional focus is becoming quite important to some LP's. They're very focused on, you know, Western supply chains and being able to specifically allocate to that thematic as well. We've got to talk about that later because the interlock with government these days is a huge step forward that we've seen in some of these funds and what

they're doing going forward. But when we keep going with, with the mandate, we've kind of talked about the stage of the asset, but I think we really need to dive into this one. And I'm, I'm curious to hear what you think, Fraser, about

how this is evolving as well. Because taking that risk, as we kind of said for a project that is going to go into construction, that's a huge amount of risk like that is a a very large. Step to take. And that's why I think we've seen the likes of Quintera say, hey, we want to take this from .4 NAV to .6 NAV and and sell it. And keep it in development stage

pre FIA that's. The project, So what what are the other stages of assets you, you see and maybe if there's a few examples that come to mind that are that are being targeted out there. Yeah, sure.

Look there, there are other strategies that fit into this, you know, broad PE box of, you know, taking assets as far as sort of early stage expiration, where, again, you know, really like the exploration team, their their history and you know, the the package they've put together and you know, the targets they're showing. So, you know, RCF had a strategy called the RCF opportunities fund that, you know, did allocate to things as early as that and then more advanced.

You've then got, you know, strategies that focus on those development stage assets, you know, finding things that are pre study that that look promising that, you know, it's quite simple to do a study or take it from say a PFS study all the way to FID and do a lot of the heavy lifting there on, you

know, DFS feed work. Getting, you know, engineering companies engaged quite early and taking it through permitting, you know, removing a lot of the big overhangs that that follow with the development stage project. And, and one of the big things here, right, is the signalling that comes from future investment, because mining is such a capital hungry industry that if you take it from A to B, but then say you're no longer going to going to fund it, what is that kind of signal to the market?

So you're actually on the hook to to continue in in certain cases the the check writing. Yeah. Look, speaking from experience, I think that strategy on taking things through early stage development to FRD is a hard one. You're probably more reliant on, you know, commodity tailwinds in general, you know, hype around the commodity that that gives you liquidity and and drives

your returns there. You know, this is the real heavy lifting work that you'd typically see someone do it if it was a pathway to building it. Yes, it's so companies in that development stage and they can run an equity check, the PA fund can run an equity check early that they'll fund that de risking and get it to investment decision. And then they've got a seat at the table to be in, you know, prime position to provide financing to construct it as

well. So I think, you know, just using the development stage and the valuation is quite an attractive entry point to set yourself up for follow on funding as it goes through, you know, construction and then start to play a little bit higher across the capital structure. You know, bring in other Co investors as well. It's really a way of having somewhat, somewhat of exclusivity on, yeah, the project financing piece, which might be, you know, bigger, more meaningful for the PE fund

there. Yeah. And, and when these groups think about diversification across the fund, I'm really curious to hear your thoughts because you might get some that are targeting critical minerals or Western minerals, but the, the correlation between some of

these tends to be much higher. So what have you kind of learned from how the PE group spread their bets across different, you know, asset types against different commodities against different jurisdictions within a fund to make sure that they're not all betting on the same one thing?

Yeah, that, I mean portfolio allocation and particularly how, you know, you think about commodity strategy is, is absolutely critical, I think to having sort of, you know, a fairly diversified, you know, portfolio and, and something that can deliver through the cycle. Look, I haven't seen any specific, you know, language in, in, in mandates and and strategy, but I think everyone's thinking the same way. You know, commodities that are really volatile. Yeah, are are really hard to to

build, right? Yeah. If you know, if it takes, you know, quite a few years to, you know, finance a project, build it, ramp it up and you're in a volatile commodity like lithium, you know, you might miss your window to exit that and and you're in a 10 year fund, you might not have another window there as well.

So for really volatile commodities, you know, you think lithium, you know, tin and other things like that, perhaps, you know, having, you know, an equity strategy, you know, pretty like small minority stake in a listed vehicle might be a better way to play that because you can go in and out quite quickly. Yeah. Look, I mean, RCF made an investment in Pilgrim Minerals when it acquired Altura Lithium. It's operation there that was from memory seven 8% equity investment in a public company.

When lithium ran straight after that, in a very short amount of time, it was a pretty liquid investment that they could exit. If you were to be building a new project, say, yeah, in theory it was another lithium mine and he provided debt at the same time, you know, it would have just started to repay that debt just as lithium had created, you know, two years after that, and you'd probably be refinancing that or, you know, it could

potentially be bankrupt as well. So getting the strategy right for the commodity is really important. Yeah. We haven't touched on it all, but these returns are all generally driven by commodity price tailwinds. You've got to have some support

there from the commodity. And that a big piece is just, you know, having a strong view on the fundamentals of that commodity over, you know, the whole period, whether that's sort of, you know, three to five years that you're going to be in a better position there from the commodity wise. So if things like CapEx blow out, you know, management don't work, you know, if those things move against you, at least you've got something that might, might. So you get close to a 1X. Yeah.

And that's why I like I challenge the merit of a diversified commodity fund. Like in some respects, like you have a small number of commodities that you're bullish on in that window of time. Like you're that's right.

You're not going to like if it's, if you're only bullish on gold and copper and and call it and one other commodity in that like in the five years you have to deploy it like you don't want to making sure you've got diversity of everything because something it's a cyclical industry you're trying to ride. Yeah, and and you and, and that's your pitch, right, You know, Yeah, the fund manager in in this mining PE fund is a

specialist in this commodity. They've got, you know, a lot of deep insight in these commodities. So they're making very concentrated targeted investments for these commodities. Yeah, RCFS fund seven, yeah, fund in the P fund there. I mean that had three major gold investments. I think, you know, would have been close to half their portfolio would have been allocated to gold at one point. And you know, look where the gold price has gone.

That's been a fantastic bet for them in that regard. So you're allocating accordingly to how strong your views are on the commodities is critical. Some other funds, you know, do like to, you know, their returns are driven more by that rewrite through construction. So they'll be not agnostic to the commodity, but they'll happily do industrial minerals. And there's some examples there, Orion's, you know, funded, you know, construction for projects in salt and gypsum there,

mineral sands as well. So again, commodities where you probably see, you know, less huge tailwinds there. But you know, if the construction, you know, goes well on time, on budget, you ramp up, you can still get your return there from that rewrite. You don't necessarily have to have these, you know, phenomenal commodity price tailwinds as well. Trav, you know what private equity loves? They love an easy win.

They love being able to goose that IRR with a nice easy win, be it a producing asset or a development stage project. And I've got a little one that comes to mind. I'm curious if you're thinking the same thing when it comes to mining private equity? Easy win.

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there are so many different kind of incentives from the different parties involved here, but they're a huge driver of the way these PE funds act. So can you break down management fees, performance fees and then we can kind of get into to how these shape the behaviors? Sure. Well, look, most, most all PE funds will have a management fee. You know, that's to keep the lights on, pay staff. And it's probably no different to other, you know, managed, you know, public equity funds as

well. So you know that, that that's salaries, you know, typically 2%. We're starting to see that come down for some newer funds. You know, maybe it's 1 1/2 percent of, you know, assets under management. And that's, you know, those fees accrue on capital that you've called from the investors as well. Doesn't start day one stays, starts the time they start coming in. And if you distribute the capital back, you know, you're not accruing fees on that as well.

So that's, that's pretty par for the course. The real incentive in the private equity model is the performance fee. So that fund manager, you know, that is that is the huge leverage they have is, is getting the performance fee if the investment goes right. So you know, that is a performance fee. It's typically, you know, a large percent of you know, profits above a hurdle rate. 2 and 20 the prevailing. Model that's, that's typically what it's been, but again, it's,

you know, it can change. It's very, you know, it's confidential amongst all, all the different funds. But you know, you know, there is some pushback now. I think, you know, there's yeah, that's been a traditional model, but a lot of investors are starting to push back on that and, and funds are, you know, managers are starting to offer a slightly lower fees in some places as well. But yes, typically the performance fee is, you know, around 20% of, you know, profits above the hurdle rate.

So that what's the typical hurdle? Rate. Probably 7-8 percent, something like that. So the GP, the fund managed there, is really incentivized to do 2 things, get a great multiple and get it really quickly and distribute that capital, you know, quickly back, back to the LP there. Ultimately, the PE fund manager is in the game of distributing capital. They're raising capital with these funds and distributing it, you know, ideally as fast as you

can. Those that have been successful in raising lots of funds and having a lot of longevity in the industry, I think aren't necessarily focused on the perfect outcome, getting the highest multiple. It's all about providing liquidity. So you know, you might be leaving something on the table, but you know, finding an exit or, or taking the exit if it's on the table and there's liquidity there and, and providing distribution back to LP's is really important.

So time, time is everything and you really do have to, you know, work hard to get there. So that's what motivates the fund manager. You know, people who sit inside, you know the the fund manager who might have carry, that's generally, you know most senior people, you know there might be having carry. Is exposure to that 20% performance? That's right. Yeah. So the fund manager, you know, contributes to the fund and that's what aligns them.

So in the, in the 2 and 20 model, you know, they'll contribute 2% of the capital into that fund so that that's their skin in the game. Effectively, it's the leverage they'll get from the performance fee on the way back. If assuming, you know, there's some nuances to it, but assuming the fund has a 2X and, and, and it's all paying carry above this hurdle rate that, you know, 2% of capital that that came in, you know, is effectively A10 X for the carry holders there,

right? So huge leverage for them if it goes well. On the contrary, if it doesn't go well, you know, they've put capital into the fund and mine don't actually see a return on it as well. So that is, you know, the model's way of aligning, you know, the fund manager to the LP's in there and incentivizing them with this huge leverage, you know, to make it go well. Can I, can I peel into some parts of that model a little bit

too? So, so the 2% that is like the management fee and and that gets that gets triggered from the point that the the capital call happens. But that's 2% on funds deployed, not not mark to market of what whatever the portfolio is worth at that at any point in time because you can't mark to market in a liquid mine that didn't work. Cost based. Cost based? Cost based.

Cool. And so, you know, are, are there some cases where like a, a fund might might have existed or whatnot and there's a few things in the portfolio that went pear shaped, but but because and so there's no chance of getting any carry, but there's but there's no real incentive to not exit the portfolio. Because it's. Still still kind of 2% being paid on a, on a much higher, you know, number than than and just get like a zombie fund that's out there. Yeah, whether it's intention or

not a different question. But you know, finding liquidity for, yeah, private companies and some of the niche commodities in far-flung places can be difficult, right. So, you know, you can't necessarily just, you know, go to market and sell these and find an exit whenever you want. You might have a very small window and you might have to do a lot of work to get there. So they inevitably sit there.

And yes, there is a management fee being like a crude on on these on these investments that sit inside the funds. So again, makes it really hard for the fund manager to try and catch up on that. Yeah, there is, you know. That's that's one of the interesting incentive like things I can see about the model. Another interesting incentive. I've got two more of these. Another interesting incentive thing I can see is like. It's an issue. I agree. It's, you know, it could be abused.

Or just something to be aware of. There's another one is like the the motivation to deploy very quickly. Like if you're, you know, like, because you're like, I think like I think of the, the Quintero example as a, as a great one. What what amazing motivation there is to deploy dry dry powder as a as a freshly raised PE fund because you start.

Yeah, big management fees mean you can, you know, build out your own team, you can assess more opportunities, you know, you build out the platform and the capabilities of the fund manager itself. Because you often see the next raise within a couple years as well. And the faster you deploy and if nothing went pear shaped, then you can you can raise another fund before you have something in the portfolio that went pear shaped, if you know what I mean as well. So like.

Cantera's Fund 2 was less than two years after Fund one. Yeah, that, that's right. I mean, if you can get momentum, I think as a fund manager, that's a great way to set up, you know, it's a sustainable business. Or give yourself a lot of runway, you know, to to stay in the game, right? Yeah, because there's going to be a lot of bumps along the way. And the last, the last kind of incentive thing that I, I wanted to raise was, so you've got five

years to deploy right now. When that five years typically is is approaching and you actually haven't fully deployed the fund, then like have you heard stories of, do you ever observe like PE groups like that that may have actually, they may have just like, you know, there might have been some asset that was financeable, but it'd been kicked around a very long time and then because because the the the window was closing, you know. I can't think of any examples.

I can think of some other examples or funds that know of where you know it wasn't fully deployed. Yeah, which is not an issue at all. It, it just means when you go to market to raise your next fund, they'll say, yeah, how much did you deploy from your last one? You say, well, we only deployed 80%, so it makes it hard to raise a bigger fund. It's all about, yeah, can you fully deploy capital for this particular strategy? As a function of the the opportunities that are out there

as well. Yeah, time in the market, that's right. And you risk appetite. So yes, there's incentives from the fund manager to to, to fully deploy the fund regardless of, you know, the quality of investments there. But, you know, you want them to be incentivized by that performance fee. And then coming back to incentives, generally, I think if they're, you know, first time fund manager, you know, they're there to make it, you know, they're personally incentivized.

You know, it's not like, you know, they're made per SE and somewhat of a, you know, a lifestyle. Yeah, those are the ones, if I was investing in a pay fund, that's what I would be looking for, you know, someone who's personally, you know, got the most to gain than anyone else, right. And it, it's an important thing, you know, LP's coming to funds do a lot of diligence on the

fund manager themselves. You know, even before there might be a portfolio of, you know, pipeline investments that they can show, a lot of it's focused on track record and you know, the capabilities of, you know, the key people in in the fund. I think there's a good reason why Buffett set no management fee and a higher performance fee because he was pretty aware of these things back in the day. There's one more incentive I do want to talk about though, and

that is of the endowments. So we spoke about them allocating a small slither of the, the massive amounts of money that they have and could be super funds here in Australia. But we, we like to think of the, the universities and other endowments in, in the States.

And I'd love you just to share a bit more color on how they might think about allocating to, to mining it being maybe a slither of an allocation that goes towards private assets and a slither of that is onwards pass to real asset investments, you know, commodity related type things. And maybe the incentive that they have for it to be a private asset that's not always going to get marked. It's not going to get marked on a, on a daily basis.

It's much steadier in the portfolio to make their, but returns look more balanced, at least for a period of time. Well, Kevin, just saying no, no expert on on this subject. This is all, you know, secondhand not haven't been yet spending a lot of FaceTime with with those sorts of asset managers. But what I could say is that, you know, they, most of them don't understand mining. You know, in terms of finding those that understand mining,

that's quite rare. So a big part of the the marketing of the PE fund is probably just educating, you know, these LP's on why they should allocate to natural resources and commodities. So that that is a big piece. The second piece is those that do understand commodities. Yeah, still, you know, need still pretty simplistic in their, in their approach there. You know, all these PE funds in, in mining have, you know, quite nuanced and, and diverse

approaches. So you know, they're receptive to to all of these and they're probably going to allocate to 1, maybe two of those. But you know, just finding those that you know, want to allocate to mining is is hard enough. So that's, that's how they think about mining. If you go back a step, yeah, they, they have these enormous, enormous funds where, yeah, they're thinking more about, you know, how much they're allocating to, you know,

private, private markets. That's a big decision as well. So, yeah, minimizing volatility in the portfolio, having exposure to private equity where there's largely like private asset classes that can be sort of mark to market, you know, without the volatility of, you know, movements in the macro environment that that is a nice way just to smooth out their

portfolio. And that can be, you know, one of the reasons why they're entertaining looking at, you know, other private equity managers or increasing the bucket size that's going to to private equity and potentially like, you know, mining private equity funds. Yeah, yeah. That, that education component is I think that's prevalent for for all investors in the mining space as well, specifically the ones outside of Australia. I think in Australia we get it a bit more.

But Even so, there's been a kind of dearth of of equity managers in, in the mining space as well. And it's hard to get you allocations. And perhaps that's just a component of a bigger problem with with active management. Yeah, I think that's, I mean more just a bigger challenge for the industry, right? It's a poorly understood industry, yeah, even in this country, but you know, you know, globally as well. Yet now I think it's more awareness about supply chains, critical minerals.

It's starting to get a little bit more, you know, visibility. But it is just a poorly understood industry for what is quite meaningful in in most economies. Can I ask you a question about the opportunity selection? Like in some respects, like there's a very diligent investment process that you have to kind of go through to get a deal done within these like. We talked about construction risk and how concentrated portfolios are.

So, you know, the underwriting process for this is is got to be very, very thorough. Yeah. And it's, it's thorough. It I imagine can happen quickly, but often might be like take a bit of time. Like are there any limitations or anything to do with with with the way that that happens? Do you think private equity sees the best deals? Like what do you think?

The best deals sometimes don't even get seen by private equity. Yeah, that's a really good question. Selection bias, yeah. Yeah, there, there would be. I would say, look, you know, when it's a really hot commodity, it's in vogue, you know, you're you're moving, you know, the top end of the cycle. Public equity is available.

Look, right now in precious and you know, arguably in some of these critical metals like, you know, rare earths as well, you know, companies are able to go and raise, you know, significant quantums on on public equity markets right now. They don't need to come to a private equity fund or alternative, you know, sources of capital and, you know, pay higher fees or give a little bit more more a way to bring that

capital in the door. So, you know, the private equity is needed in in markets when you know, you're at the bottom of the market and public equity can't be raised. You're in, you know, really nice commodities that are poorly understood, that need a lot of work to, to understand the fundamentals of those, those commodity markets or they're,

you know, far fun places. You know, there might be great projects too, but you know, just we'll be outside the risk appetite for most, you know, public equity investors as well. So do they see the best deals? You know, it depends. You know, there's, there's great assets out there that you had absolutely no love in, in the public markets and they'll picked up by, you know, PE funds.

And then, you know, the markets turn, you know, a lot of work's done to de risk, risk appetites change and these PE funds can find an exit for these assets that are viewed very differently in a different market, different conditions. And that is like the perfect your private equity investment. You find something unloved and at the bottom of the cycle do some work and then, you know, get the timing right and and it is recognized and there's huge value uplift there.

So let's talk about the conditions now. You mentioned 15,000 private equity groups before. Obviously only a small number of them are in the mining space, but there has been an increasing number over time. We've also seen more and more sources of capital in in the mining space, be it sovereign wealth funds, be it the government coming in, be it streamers and royalties flexing their muscles and having greater allocations. How does the the landscape look right now, perhaps contrasting

with when you came in? And what do you see that looking like a few years down the road? It's a good question because it certainly is evolving and you know, has been evolving for a long time. Look, there's I think lots more

mining PE funds around now. Yeah, there's the those that were early in the game, you know, 1520 years ago that now have multiple strategies that have been, you know, quite successful, sustainable, raised multiple fund vintages in each strategy, diversified across different strategies as well. And there's new entrance to the game as well. People that have worked in one fund, they've gone out to start their own fund, etcetera. So there there's definitely more

mining PE funds out there. But in terms of capital being allocated to, to mining PE, my gut feeling is it's probably hasn't changed that much. However, there's more competing sources of capital for the the actual assets out there, as you say. So you've definitely seen your sort of government step up and want to be involved more. They don't know how to do it well and, and try still trying to figure out, you know, the best strategy to allocate there.

But you know, you are seeing them, you know, have a great appetite to move and, and prepared to write checks now. And that's something that's changed and that's ultimately competing for a competing source of capital for PE. You know, that's getting might be squeezed out on some particular deals, particular commodities there as well, the sovereign wealth funds as well. I think that's probably more on sort of the stage you are in the value chain these commodities.

But certainly things that private equity probably didn't chase, things that were midstream or downstream where, you know, the returns are probably more industrial like, you know, single digit percents. Yeah, there's not not great economics in these assets, but you know, there's a lot of broader, broader, broader benefits, you know, in country building out, you know, skills, whole supply chains, et cetera.

You're seeing those groups start to want have a big appetite to do that and get ready to step in there. And they're happy to to make these investments without compelling economics too as well. And when you do go midstream downstream, obviously you need the upstream feed to come along there. So yeah, that's where, you know, PE is starting to tie in with some of these groups that are looking to build out the midstream downstream in their countries, in their regions as

well. So that that's definitely growing and I think it will continue to. And that's really just playing into this whole, you know, onshoring of the supply chain, thematic, you know, across the whole world. So what does that mean for for private equity returns going forward?

Well, I think it, it just narrows the line of where they can play again to these other groups, you know, with sort of streamers royalties able to provide, you know, pretty low cost capital to some of these assets just means the universe of assets that private equity might invest into is probably

shrinking. And in terms of private equity being a competitive solution for these companies and assets, they're trying to finance it, They're probably less competitive compared to what else is being given to them right now as well. There's probably always going to be a need for, you know, PE financing in, in you get difficult jurisdictions, obscure commodities, yeah, things they've got some sort of overhang there that, you know, needs quite a lot of effort to resolve.

But the all the easy low hanging fruit I think is is becoming financed by by others. Is there is there a pro cyclical nature to the ability of private equity funds to to to actually raise their own capital as well like to the endowments more forthcoming with with with with, you know, you know, big funds at at very like you know, cyclical highs in commodity markets and then you have to deploy it in the high times.

Is there any pro cyclical element to to the history of private equity research I. I think fundraising probably has a degree of pro cyclically. Yeah, ideally you raise the up and then you wait for the crash and then you deploy them. Yeah, I mean, the the hardest thing I think investing generally is be truly counter cyclical, not pay attention to to the noise and everything else going on.

And I'd say, you know, whether it's, you know, pay manager, you know, you and I investing retail investors or even these, you know, enormous asset managers, it's no different. It's really hard to be disciplined. So I think certainly. I don't know what you're talking about. I've done more trades in a bull market. Certainly when when you're in a good market, you know, I think they're a lot more receptive to, you know, marketing conversations with the pay funds

that that are fundraising. And again, when it's it's probably the wrong time to be, you know, deploying, you know, they should have been there, you know, years ago. So they could come in right at the bottom of the cycle. So, yeah, it is difficult because, you know, by the time a fund's raised and they're deploying, you know, you're potentially at the top of the cycle or you've missed it, you know, for particularly commodities. And you have to shift, you know, your strategy to other

commodities as well. So it's a very dynamic process. You know, in an ideal world, yes, you'd have a lot of dry powder, you know, a lot of capital committed to you, to your fund that you hadn't called down on yet. And you could call it down at the very bottom of the market when you saw the very best opportunities. In an ideal world, that would be how it worked. But realistically, you know, things are doing well now. You have some fantastic exits in an older vintage fund.

You're getting momentum there. Yeah, LP's are probably pretty receptive to putting money into a new fund, even though, yeah, the commodity cycle and market is really at a different point in time. Like the old time record, you know, best private equity deals in in the mining industry. It's like you get like, yeah, you hear stories of when you when you join a PU fair. I mean like, oh mates, such and such was the best deal ever. Yeah, look, there's, there's,

there's plenty of those around. You know, people talk about tin baggers, but you know, I've, I've seen quite a few of those. I know RCF had some phenomenal wins in, you know, rare earths in the early funds with Mountain Pass. You know, that's, that's a pretty well known example.

One of their other strategies in mining innovation, you know, where they invest in a lot of different mining technology, they invested in company called BMT blast movement technologies, these little, you know, balls with RFI DS that go inside blast holes and they can track the heave, you know, you know, pit gold mines. So you can track where, you know, the the always being distributed post blast. I mean, that was a phenomenal investment.

It was, you know, it's a sort of product that could be readily consumed to low cost, you know, at at gold mines globally. So, yeah, another one of those, you know, phenomenal returns you hear about, you know, you've got to be lucky.

But there's also a lot of work behind the scenes in identifying, you know, identifying, yeah, the right market, the right product in that case as well-being counter cyclical, you know, making a bold call to allocate, you know, significant capital at the bottom of a market when it's hated as well. So yeah, there's, there's a lot of thought to it, a lot of work, a lot of diligence done to the very, you know, calculated, you know, risks that are taken.

Tembo and Spartan wasn't a bad bet, and the RCF Pilbara one that had a pretty pretty speedy returns. Although in my mind they're just not private equity bets you're buying a stake in. Balance sheet down around, it's like, yeah, yeah. Yeah, I mean Altura was a distressed because I mean every, I mean arguably Pilbara didn't have the biggest balance sheet at the time too. Galaxy, you know, needed raise capital at the time too. It was survival for all of the lithium players at that time.

But you know, Purebra, I mean it was one ore body and had a fence put over the middle of it. It really should have been, you know, a single operator from day one. It was a very logical consolidation to do. But yeah, had the support of patient counter cyclical money, you know through RCF there to to underwrite, you know the acquisition there, which you know would have been hard to do

on that particular example. You know, there was other bidders in there, another, you know, listed company that needed to raise capital that had a had a proposal there. But again, contingent on raising, you know, public equity at the bottom of the market for you know, close to its market cap would have been pretty hard to execute on versus you know, a fully underwritten solution with you know, private equity money

there too. So, yeah, there is definitely like a role to play on the M&A side and providing some funding surety. Actual synergies in mining, that's amazing. There's a lot of these odd bodies with fences across the middle. It's just too easy. They're layups for you. One last one from me, Fraser, I want to talk about the commodity traders and then stomping on the feet of of private equity.

And perhaps they're just another player that makes the, the the playing field a bit smaller for, for private equity. But we've seen a number of these traditional oil commodity traders come in, build out metals and mining teams. A lot of them want off takes and they're sort of finding their way in. Are they a competitor you think represents a a challenge to the the PA industry?

Yeah, they are, They are, right. Look, they've got an, you know, enormous balance sheets that aren't particularly productive. So, you know, low cost of capital, you know, for them they can, you know, provide financing, you know, well, that's very competitive, you know, to any company that's looking for financing to build their project. So their balance sheets have grown. Their cost of capital is very competitive and they're willing to deploy it now to secure a product.

So their, their appetite to transact is a lot higher and the size of the checks they're willing to write for the equivalent amount of metal and product is probably higher as well. And there's more players in there. There's the conventional, you know, oil and gas, other types of commodity traders that are now willing to, to get into, you know, proper, you know,

concentrate trading. And, you know, they're going to be quite aggressive on their terms to secure supply, particularly as, you know, they're coming, you know, they're getting into the space. They're trying to steal a little bit of market share from, you know, the incumbents as well.

So that's definitely going to be, you know, competing source of capital for Pai mean if you know traffic euro comes in and does, you know, an off take prepayment facility at so for plus 2% circuit 8%, well, you know, PE funds not going to be able to get a return if they had an 8% coupon on their facility to, you know, they're probably going to be a lot higher. They need to find other ways to get the return. So really hard for for people to compete there.

The trade off is maybe giving a what there's a bit of leakage on the terms of the actual off take as well. That's somewhat of a black box too. Hard to really know how much leakage there is what is you know market standard there. But you know they're certainly offering very competitive financing packages in parallel

with with off take there. At the same time, you know some of these other groups, you know some of these other governments and just even PE funds to looking to secure off take as well. It's no longer free up for grabs for everyone. There is a lot of demand for the actual product. The rights to that product are becoming more and more valuable. The the exits of private equity is just one thing I want to touch on too.

If you've got a got a fund that's coming to the end of life in the end of the 10 years, like what are the options available if, if some of the some of the assets that are within that portfolio maybe haven't been realized yet or or there's there's liquidity challenges to realizing them? Yeah, good, Good question. Because yeah, it doesn't always go right. Yeah, you're in something pretty niche, you know, diamonds in Lesotho to, you know, book

siding. You know, you can't, you can't just run a sale process and flip those things overnight. So what do you do? You can, you can try really hard to, to make the project more attractive. And maybe that's an, an expansion, it's consolidation with, you know, a neighbor sending it into a larger vehicle that's more diversified. And maybe you'll, you'll, you'll take a hit there on on the valuation, but you might have a pathway to liquidity eventually. Being another fund.

Or well another another mining company there assets, assets. So these are things you could do with the portfolio company, the investment itself. If that fails, what do you do? Well, it's probably more a problem for, you know, you see, you see more in general as PE, but you see extensions to funds. So that might extend the fund beyond those 10 years. But they're not, you know, getting a management fee on, you know, the, the capital they're managing anymore.

They're just, you know, trying to buy some time to get towards an exit or pending that not working. You do see what's called like private equity secondaries where they're effectively selling, you know, the individual portfolio companies or you know, all of the portfolio to another fund. And there's dedicated PE funds that just go around mopping up, you know, these mature assets from, you know, yeah, funds that are in there for life and they'll buy them a big discount.

The pitch for them is that, you know, they're much, these investments are much closer towards their exit. There's been a lot of capital sunk, a lot of value added. They just need a little bit more time to get towards, you know, the exit. And so the prize is there and there are actually some examples of really successful funds that just do. Sounds like a good show. Secondaries. The marking of how they measure those is pretty controversial. Absolutely as well.

And and valuation across the board, you know, for private companies, you talked, we talked earlier about, you know, some funds, you know, raising funds very quickly. You know, they've got all of these private investments, you know, public company they took private. What's it going to be valued at at 30th of June? Well, it's, it's a work of fiction. It can be whatever you want, right. Look, there is process to it. It is ordered.

But ultimately, yeah, there is some, it's a narrative on valuation and, you know, commodity prices. You're choosing. Yeah, every mining project sensitive to that, you know, let's say it's it's a market based approach, you're looking at other comparables transactions, you know, you're cherry picking what you want there. So you know, these funds can manage the valuation volatility by managing these private

company valuations. If your whole portfolio is private company investments, you can call it whatever you want and you know, magically in two years, you know, these they've been marked up really well. That's been quite cynical, but you know, there is a little bit of wiggle room, you know, you could have there and you know, you could say, hey, My Portfolio is, is sitting at, you know, a 1.3 X mark to market today based on my private company valuation. So someone coming in.

So actually that that looks great. I'll come into that fund or not even put some money into your next fund. This looks great. So there's, you know, the incentives are there for it to be a little bit abused. I think it it's tricky though. They generally genuinely are, you know, lots of private investments within these portfolios and you know, there is a bit of, you know, a bit of room to move on, on a lot of

these things. And and you know, PE funds have got a lot of conviction for these things too, you know, so. There's there's a view out there. It's a view that like we've we've said before or parroted and it's even a view that we've we've heard from like, you know, massive, massive capital allocators as well. And that's the private, like private equity mining just doesn't quite work. Like the, you know, there's,

there's a floor in the, in the, in the funding model of the returns don't quite kind of get there. Do you disagree with that take? Yeah, I look, I would say, you know, there's pros and cons to, you know, this asset class and product, you know, in in the context of this industry, does it provide capital to projects that wouldn't have otherwise be

funded? Yes, I would say some of these, you know, niche industrial minerals, you know, good quality projects in far-flung places, you probably couldn't raise capital to build them. Without, you know, capital coming from PE. So yeah, is there on the balance more projects built, more supply because of it? I'd say yes. However, you know, there is, you know, there's a lot of leakage in the model for investors that go into it, you know, through management fees, performance

fees. You know, it's still a really risky asset class. You know, you know, they're illiquid, generally illiquid investments and it, it is really hard to, to find exits for these things. You know, you might not get more than one shot to get your exit on, you know, what might be, you know, a few $100 million investment, you know, so still, it's not an easy game to play.

There are some really good managers out there with a lot of experience and you know who, who've learned how to navigate these and build sustainable platforms that that do it really well. You know, when we talk about managers, I mean, you know, there's there's investment committees, there's, you know, a deep amount of in house

technical expertise. Yeah, there is a lot of of people behind the scenes, you know, thinking through, you know, what this might look like doing a lot of work very hands on in managing these investments, you know, through the way there. It's not, I think you know, a handful of people just, you know, pocketing a lot out of it. There is some generally some heavy lifting to be done and and that's why the the fees are there and there's incentives.

But it could, yeah, it could. It's it's somewhat self-serving as well. If you were there and the capital's available and you're raised to all these funds, yes, you could have a lot of GNA. If you were like, if you were an LP, for example, like is there a type of strategy or something that you'd be like most most favourable to like having, having, you know, thought about the, the model as deeply as as

you have? Do you think there there are some some models that are like more compelling than not? Yeah, definitely, definitely. I think partnering is really important. I think you know being the only source of capital and having a control equity position means you know if there is risks and you have to follow on fund it's you know that could that could bleed you pretty quick.

So having you know one or two other you know groups in there that are aligned and that might actually be some other PE funds that you know you're just Co investing on similar terms in the same parts of the cap structure.

So having. If we do that with Aussie Super, sometimes it'd be a. Yeah, look, yeah, Aussie Super was in there on Pilgrim Minerals and in Genesis to I think more on some other projects have been financed where, you know, you see a whole group of PE funds there in similar parts of cap structure. So having some partners there and and maybe it's even a trader there who has the off take, but it's also in similar parts of the capital structures.

You, you know, someone who's also incentivized for the equity to do well as well. They're not going to give you aggressive terms because they've got a bit of equity too. So having just everyone aligned and and having the the capital providers relatively diversified, I think that makes a lot of sense. The, you know, the average, you know, capital cost to build a project has been increasing and will continue to capital intensities rising. You know, there's inflation in the sector as well.

So the ticket size that a lot of these funds, right, if they've got a billion dollar fund and they do, you know, 5 to 10 investments, that can be a hundred $200 million checks. It's not enough to build these projects on their own anyway. So partnering up I think makes a lot of sense. Keeping these things private through construction, I think makes a lot of sense. Construction ramp up's a really tricky time for a project. There's a lot of surprises, you

know, they don't go smoothly. You know, there's a lot of people learning about the ore body. There's ore body knowledge, understanding, you know, the metallurgy, geometallurgy, the variations there and you know, how the plant performs, where there's the bottlenecking needed. You know, there's a lot of

things to iron out. You know, if you didn't have to do quarterly updates, you know, I think that'd be a great thing as you can, you know, ramp up this properly, get it set up and then take it to the public markets. I think that'd, that'd work great and that that would be a, a nice strategy. I think you couldn't do that for your whole fund. Yeah, you don't want to take, you know, that sort of construction risk at the same time, you don't want to be building 2 projects at the same

time. So you probably don't want more than half your portfolio in construction. So just having a a blended approach to, you know, in construction projects, but also finding these, you know, turn around opportunities, M&A opportunities, finding, you know, just great management teams you want it back and you know, corner stoning their next acquisition investment things. Having a really diversified rounded out approach. But yeah, mix of private investments in the fund would

make a lot of sense. Partnering with other groups. Yeah, just having a small mounting construction, the rest in sort of operating strategies have a little bit more, you know, different kind of strategic drivers there. That would be a great fund if I was doing it. I'm with you there. I'm sure there's a lot of managers out there that would love to not quarterly report as well. I think that'd be helpful for for a lot of folks out there. And the fees would be a little

bit different. I think I would keep it pretty lean. I think, you know, if you can raise sort of a billion dollar fund and you're making 510 investments, you know, do you really need an enormous team to find opportunities? You know, I think that's probably an area where you can be very targeted in what you want to go after. So you don't need a huge amount of resources there managing it. Yes, you definitely need yeah, a good team that to be involved with the portfolio companies

there. But you know, do you need to do in house everything in terms of, you know, finance, accounting, legal, maybe you can outsource a lot of that and just run with a really lean headcount. Yeah, maybe that, that is model to have a really lean management fee so you can keep a small, small team and yeah, weight it towards you know, your performance fee to really, you know, be incentivized.

Yeah, that's a, that's a real point of difference with just out and out equity investors that the team size is a a huge point of difference. Fraser, this has been spectacular mate. I've really enjoyed learning all about the, the PE world and I'm sure all the money miners have as well. So thank you for coming and and sharing all your wisdom with us mate. Thank you. Just just a few gems.

Mate, that was, that was unreal. A massive thank you to our wicked partners, Sandy Ground Support, Intralinks. Check them out. Focus the platform by market tech. You should do it over my shoulder most times. We've also got a big thank you to make to exceed capital and last but not least, switch technologies. Check out our local engineers right here in Northridge, mate. Budry money manas budduru. Now remember, I'm an idiot. JD is an idiot.

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