Olivier Sarkozy, Andrew Ferrer, Julia Kahr, Eric Liu, and Arjun Thimmaya Discuss Private Equity at Greenwich Economic Forum | Traders Network Show – Greenwich, CT

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Olivier Sarkozy, Julia Kahr, Andrew Ferrer, Eric Liu, and Arjun Thimmaya discuss private equity at Greenwich Economic Forum (Greenwich, CT)


  • Sarkozy has advised on over $100 billion worth of transactions in the banking industry
  • Warburg Pincus has been a private equity investor since 1966
  • Warburg Pincus has completed more IPO’s with its companies than any other global private equity firm


INTERVIEW TRANSCRIPTS: Olivier Sarkozy, Managing Partner at Further Global, Julia Kahr, Senior Managing Director at Blackstone, Andrew Ferrer, Managing Director at General Atlantic, Eric Liu , Partner at EQT, and Arjun Thimmaya, Managing Director of Financial Services at Warburg Pincus

Julia La Roche – Correspondent, Yahoo Finance: 00:00

For our next panel, you will hear from some of the most senior deal makers in the private equity space. Now there’s a lot going on in private equity these days in terms of trends you’re seeing, high valuations, a questions around regulation and even questions around the existence of the industry. So it should make for an interesting conversation. And our panel chair needs no introduction. It’s Olivier Sarkozy, the founder and managing partner of Further Capital. Today he will be joined by Andrew Ferrer, managing director of General Atlantic. Julia Kahr, senior managing director of the private equity group at Blackstone. Eric Liu, partner at EQT, and Arjun Thimmaya managing director of financial services at Warburg Pincus. I’ll let you all take it away.

Olivier Sarkozy – Managing Partner, Further Global: 00:47

Thank you. So much for that introduction. I’m going to just add one thing to it. I’m from New York city and we did not somehow put New York on the map at that recitation. So where is that place? We pay taxes over there. We’re here to talk a little bit about private equity with me I have four very senior folks from four of the largest firms in the business. I’m going to ask some to introduce themselves very briefly so you can get a sense for who we’re talking to. And then we’re going to talk a little bit about private equity and why we think it’s one of the greatest things on earth. So with that, Andrew.

Andrew Ferrer – Managing Director, General Atlantic: 01:37

My name is Andrew Ferrer. I’m partner on the consumer team at General Atlantic. Now, for those of you who don’t know General Atlantic we have an office here in Greenwich. We’re based in New York city. We have 14 offices around the world manage about $35 billion. And we’re exclusively focused on growth equity investing across a few different sectors, which we can get into.

Julia Kahr – Senior Managing Director, Blackstone: 01:58

Great. Hi everybody. Julia Kahr. I’m a partner at Blackstone in our private equity group. I lead our investments in the healthcare area, and I’ve been at Blackstone about 15 years.

Eric Liu – Partner, EQT Partners: 02:07

I’m Eric Liu. I’m a partner at EQT. We’re a private equity firm based in Stockholm, Sweden. Actually we actually just went public a few weeks ago as well. We manage about 40 billion Euro in assets under management.

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 02:23

Arjun Thimmaya I’m a partner at Warburg Pincus, I focus on the financial services ecosystem. And we invested in everything from growth investments to buy outs in that space.

Olivier Sarkozy – Managing Partner, Further Global: 02:35

Well, thanks for that guys. And we’re going to spend the next 35 minutes cruising through private equity generally and what it is that we do and why we think it is a valuable way to invest, how firms differentiate themselves, etc. And then we’ll end with a lightning round of questions where hopefully the audience we’ll participate following, which I think we’ll have time for whatever questions you all have. So let me start with the most basic of all questions, which is why private equity? We’ve seen the S and P 500 return, 15% on average over the last three years, just under 13% over the last 10 years. We hear a lot about private equity returns being in the 20s, but that’s of course before we take our modest fees. Why should an investor care about private equity? And Eric, if you could if you could start us off.

Eric Liu – Partner, EQT Partners: 03:42

Yes. I think one of the if you think about the investors that provide us with the capital, the typically insurance companies, pension companies you know, high net worth individuals, sometimes they have actual return departments. You know, people have did an average seven, 8% return environment for their retirees. And one of the things that investors really like about private equity is it’s an asset class that over time has demonstrated the ability to generate consistent double digit returns. You know, depending on the firm, obviously some are higher than others, but in terms of how the value is created that I think that’s really why people care. I mean, I think when the industry first got started is a little bit of mis-priced securities. I mean, there were certain companies that were perceived as boring, but they were really quite consistent in their cash flows.

Eric Liu – Partner, EQT Partners: 04:23

They were good companies and private equity by those companies and generate an attractive return. You know those days are pretty much over. I think valuations are high. I think most companies are generally pretty well run. And so when you’re a private equity firm, the way you can generate consistent above or consistent high rates of return over time really requires you to improve the value of the companies that you’re acquiring. And so sometimes what you can do is, and obviously it’s easier to do when you don’t have to market to market every day. You can really think about things over the long-term. And so I think as private equity firms we can upgrade management teams and boards much more efficiently. I think a second thing we can do is a lot of firms have certain capabilities sets or certain relationships that they can bring to those companies that they wouldn’t otherwise have themselves, whether it’s digital capabilities, healthcare sector knowledge, software transformation, knowledge. And then the third thing is that in a private equity ownership context, you can also do a lot of accretive acquisitions to enhance the value of the companies. It wouldn’t be as efficient as a public, as a publicly owned company. And so I think overall I think the returns are good when you can demonstrate the ability to add value over time to companies and make them more valuable than they would have been had you not invested.

Olivier Sarkozy – Managing Partner, Further Global: 05:31

Arjun, how do you guys think about at Warburg?

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 05:34

You know, I’d say the biggest advantage, private equity has our competitive advantages. It’s patient and flexible capital. So the patient helps you in that new building. Companies were thinking about billing it for the next five, seven years. And we can make investments like that. You know, we will, we just made an investment a couple of months ago and in sort of the strategy kickoff session we sort of went through all the growth the company’s going to make. And this is a business that is sort of, you know, is somewhat market dependent. And the CEO said, well, what happens if there’s a market downturn next year? What do you want me to do, take these investments off? And we said, no, actually, you know, what we care about is, well, this thing looks like in five, seven years, we’ve built a capital structure that we, that will withstand a downturn.

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 06:17

And you know, we look at the free cash flow characteristics of this business. Cash flows will go down, but you, but you’ll be able to manage through it. But we care about our, what this thing looks like at the end, which is five, seven years from now. So continue those investments. So that is sort of the patients that you don’t get, you know, being public has some benefits but being, being private and our form of capital gives you that, you know, that advantage where you don’t have to think sort of short term, which is sort of a, year a quarter. The flexibility is also we can adapt as the market adapt. So, you know, in financial services, we what we were doing in sort of in 2009, 2010 was sort of a lot of the recapitalization capital. So banks, insurance companies needed capital to survive. We were putting that capital and then we evolved to doing carve outs of businesses that they decided they didn’t, they didn’t want to do. And then we evolved to doing growth capital as sort of the market’s recovered. So, you know, we had the flexibility to sort of invest like where the blankets gravel.

Olivier Sarkozy – Managing Partner, Further Global: 07:17

I must say from what I’ve seen the ability to be ROI focused and not have to care about gap quarterly requirements has really made all the difference. And talented managers 20 years ago uniformly wanted to run a public company. Now they all uniformly want to run private equity back companies. Julia, how does Blackstone differentiate itself? And you’ve got to differentiate yourself really for two people. One, one is your investor base, the other is the companies that you’re looking to acquire. What, what do you point towards in a world that’s so now filled with private equity companies where whereas 10 years ago there were half a dozen of them.

Julia Kahr – Senior Managing Director, Blackstone: 08:09

Sure. Yeah, no, look, it is competitive as you say, and I think it’s really a couple things. You know, Eric touched on, ultimately we have to create value with the companies we buy. And so it’s about what are we going to do with the companies we own, how can we leverage and what resources do we have at Blackstone to help make those companies better? And for us, the biggest single driver of returns is actually operational improvement and operational intervention at our companies. And that could mean anything from investing for growth where in a public company context, you know, the management teams couldn’t invest that capital on a quarter to quarter basis to drive the growth of a new business line. Whether it’s funding acquisitions, whether it’s actually getting better at productivity and efficiency, such that you can actually make more and therefore sell more of your product.

Julia Kahr – Senior Managing Director, Blackstone: 08:56

Whether it’s actually investing capital in building new facilities, which is something that we often do with our companies. But we have a whole team at Blackstone that we think are real water walkers in their respective functional areas who help our companies as a free resource to our companies. And so that for us is the single biggest way that we add value. I think also just scales. So we’ve got a very large fund and so we can be a single counterparty to whether it be a corporate who’s selling a business or selling a partial stake in a business. In a case of say at Thomson Reuters for example, where we were talking about a $20 billion deal where we were the single point counterparty in that. And so the trust in a, you know, in a very complex situation, is just very important and the ability to move very quickly.

Julia Kahr – Senior Managing Director, Blackstone: 09:49

And so the scale and the experience frankly with corporate partnerships and the ability to structure things that are complex, that have high degree of sensitivity, you know, and to do that in a way that preserves the reputation and the ongoing business that those corporates have. I think those are really the most important things. I think finally, just the benefit of being at Blackstone is we have a number of other businesses, another, you know, a number of other alternative asset classes that can be actually also quite helpful. So real estate, we’ve got the leading real estate private equity business at Blackstone. And having that as someone who can actually, you know, most of the companies we’re buying large global companies, most of them are real estate. And so to be able to help them with their real estate for example, or to actually get value out of that real estate and in a different way, you know, those are things that that we bring to the table as well, that that help also create more value for our companies.

Andrew Ferrer – Managing Director, General Atlantic: 10:49

Yeah, I think you know, General Atlantic defines itself by growth. And so what differentiates us is every thesis we have is a growth driven thesis. The median growth rate in our portfolio is 30%, which obviously means, you know, half of the companies have even higher growth rates. If you just aggregate our returns, three quarters comes from top line growth. And so we’re not big users of leverage. We don’t underwrite multiple expansion generally. And, you know, we’re not squeezing a bunch of margin out of these companies. It’s really a growth based thesis. Profitable companies for the most part, and trying to back the best businesses we can find and really help them for that next leg of growth. We do have a set of resources that are supposed to enable that growth. And it’s everything from helping with the technology stack to pricing, marketing HR or designing compensation as these companies go through these growth phases.

Andrew Ferrer – Managing Director, General Atlantic: 11:45

You know, we’re catching them hopefully at a moment where the business is proven but they need to build the business and the organization around what’s a proven business model. And then I think the other lens that general Atlantic always takes, so we’re one global pool of capital. We all invest out of the same capital base across our 14 offices. And so we really try to leverage global opportunities. I do all consumer, so, you know, we’ll invest in a brand that might be based in Australia, but has growth opportunities in the US and Europe and China. And we’ll connect the dots for them around the globe as they’re looking to take over in these different markets and gain market share. And then the final piece really is our technology heritage. So half of our investments are technology investments. But that logic really flows through all of our investments in healthcare and financial services and consumer as well. Really trying to be with businesses that are using technology to improve and to beat the competition. So, you know, between the globalization and the technology component, we’re trying to pick the best businesses and back them.

Olivier Sarkozy – Managing Partner, Further Global: 12:49

Yeah, I grew up as an investment banker in the financial services world as consolidation took place. He saw these companies become massive the entrepreneurialism at those companies just got killed. And what’s really impressed me about all of your firms is how big you’ve become, and yet how entrepreneurial you manage to remain. I think it’s really the critical difference that’s allowed you to be so successful. Talk a little bit about the environment. Obviously from a valuation perspective, it’s about as goofy as it’s gone in a while we promise for the most part, 20% returns gross to our investors. Is that still the case? And in this valuation environment or are we as an industry still really targeting 20%. And if so, how are we going to get there and given what the entry prices look like Arjun how do you think?

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 14:00

Yeah, when we look at, I mean for our investments, I think we, you know, we, it’s because we’re doing growth to buyout. So we’re looking at our return spectrum for our investment where some things are sort of lower than 20% in, some things are a higher. We also have the benefit of one fund, which we’re doing, you know, energy, financial services technology and business services and around the world. So we sort of, you know, it’s sort of, it’s flexible capital and it’s dynamic and we move capital towards where the opportunity is. So there’s some areas we, we pulled back from when the opportunity set isn’t there. But for individual investments, you know, the for low-risk investments, the returns would be sort of in the high, you know, in the high teens for high risk stuff it’s higher. But we’re trying to still build a portfolio that has a 20% return. But we pivot our capital based on where the opportunities are.

Olivier Sarkozy – Managing Partner, Further Global: 14:52

Eric that’s the case of your shop too?

Eric Liu – Partner, EQT Partners: 14:54

Yeah, I said the as Arjun said, I think the thing we think about is the risk reward spectrum. So there could be two deals that on a piece of paper look like they have a 20% return, but the reality is one of them, maybe there’s no downside at all and the other one has to achieve a bunch of things in order to get to that return. And so you have to every time calibrate. But the reality is, it’s funny you spend so much time when you’re looking at an investment, is this 19%? Is it 21% because you can fidget with little things in the model that it move it one way or another, but it feels like you’re paying a lot more when you’re pushing the return down to 19% or 18 or whatever the number happens to be. But once you actually own the company, the thing that we’ve seen over time is that the good companies are always better than you think and the bad companies were always worse and you would think that there’s like a bell curve distribution where like most deals would be kind of around 20% but it’s actually bi-modal.

Eric Liu – Partner, EQT Partners: 15:44

It works the other way in the sense that the companies, the deals that don’t work out, they usually really don’t work out and if you’d paid 25% less, they’d still be bad because you have to, the market was bad, the company was bad or something happened. Whereas for the good companies, there’s always more opportunity than you could do more M and A, you can attract better board members that are managers. Maybe you exit earlier so the IRR is a bit higher. Maybe you get multiple expansion and so that’s, you actually tend to see it go this way. Even though at the actual decision point it just sort of feels like, Oh gosh, she’s at 19 or 21 can I win or not? But I think as a practical matter we found is that overall cycles, if you find the right deals, there are plenty of opportunities to deliver well in excess of 20% returns over time.

Olivier Sarkozy – Managing Partner, Further Global: 16:25

I think that’s right. You know, I think all of us always look for a correlation between something that work so you can draw it up, put it back into play. And the only thing I noticed that has any sort of a correlation is that a good management team typically produces a good outcome. A bad management team produces a bad outcome. If you really think about it, we’re sort of glorified HR people. It’s a good business. The economic expansion, a historically long, obviously some would say gone well beyond anything that economic models would typically suggest. When you’re buying companies today and you’re trying to generate that 20% return, are you building in a de-facto recessionary environment? How do you think about that in the context of having to achieve these returns? Julia you’re in health care, that’s sort of recession proof.

Julia Kahr – Senior Managing Director, Blackstone: 17:35

Yeah, I mean, nothing I think is recession proof. I think it’s about how does the recession impact, you know, your specific business. I think certainly we’ve been spending a lot of time, we were talking about this earlier on you know, pharma services as an example and tech enabled services that enable pharma companies to actually drastically shorten the time of their clinical trials and also dramatically reduce the cost, right? So something like that as a business model, which is a relatively small expense that a pharma company is spending for massive ROI, you feel pretty good about that kind of a trade over a long period of time. And you know, pharma R&D budgets generally have been definitely not recession proof, recession proof, but much less sensitive to downturns than say industrial companies. Right? So I think at the core we try to be thoughtful about how is a downturn going to impact our specific business that we’re looking at?

Julia Kahr – Senior Managing Director, Blackstone: 18:31

How is it, we try to look forensically back as many cycles as we possibly can. And to the extent that it’s a newer business, we can look overall at the underlying, you know, end market to try to understand what happened in prior downturns. And then you know, I think certainly folks, I’m sure we all have somewhat different views around what this next downturn will look like. I’m sure we all are thinking sometime here in the next few years there’s going to be a downturn. It’s a question of what kind of downturn are some sectors going to be disproportionally affected versus others and what does that mean ultimately for the specific company that you’re looking at? You know, so healthcare yes, generally tends to be a more defensive industry than more cyclical ones. But it really about the specifics of that business and fundamentally what value are you providing and to the extent that you are underlying, and customers are under any sort of financial stress. If you’re actually providing, you know, an ROI for them, then perhaps you’re more protected than you know, than other parts of that sector.

Olivier Sarkozy – Managing Partner, Further Global: 19:33

Andrew, how do you guys segment your growth bias?

Andrew Ferrer – Managing Director, General Atlantic: 19:38

Yeah, I think first of all, it’s from a portfolio management standpoint. So we’re taking liquidity all the time. Last year, you know, while we invested four and a half billion of new equity out the door, we took $5 billion of liquidity. So trying to manage risk that way and always capture liquidity where we can second of all, our portfolio does not use a lot of leverage of a hundred plus portfolio companies. I think only four of them have more than five times debt on them. So it’s overall a very low leverage environment for us in our portfolio, which through a recession we think will serve well. And then in terms of specific deals, I think we are really looking for business models that are recession resilient. I mean, again, in consumer you’re a little bit exposed to that macro environment. But we have an investment in a great company called Authentic Brands Group. They have a diversified portfolio of 50 different brands that they manage through long-term contracts and licenses and royalties. They don’t have a bunch of leases. They don’t have a bunch of inventory. And so really looking for those business models that as you imagine going through a recession you know, will hold up and come out on the other side as strong as they were before.

Olivier Sarkozy – Managing Partner, Further Global: 20:48

Arjun since you’re in a cyclical industry for sure. Financial services or are you building in recessionary cases and things that you’re looking at? You bought a pet insurance company recently?

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 21:05

Yeah, we’ve got pet insurance. Well that one’s probably less cyclical, but we have, you know, we bought a wealth management business, you know, a couple months before that that is you know, that has interest rate as well as sort of, you know, equity market sensitivity. Right. and frankly, we, in our piece case projections and when we put our projections together, we sort of have an outcome, right? We have sort of a series of outcomes and we’re looking at sort of what is the spectrum of returns you look like. But if you had to sort of point towards that base case we actually run a recession in all financial services stuff next year. So we have basically the market’s down you know, equity markets around 20%, and we have interest rates going to 10 basis points. And we have to have companies that sort of survive that. Now in some ways, what matters is surviving through it, right? And having the capital structure, but it is resilient to it. But I think we’re cognizant that listen, this is what earnings would look like and would survive. And do we have a capital structure that is rock solid to get through that.

Olivier Sarkozy – Managing Partner, Further Global: 22:13)

How did you project the pets? People stop paying for their pets?

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 22:19

No, we expect I mean, that’s a bit of a, that’s a penetration story in the US so it’s a, you know, it’s a very low penetration business in the US versus the rest, you know, versus your office sort of 1% penetration versus other 25% penetration in Europe. So that one, you know, the secular trend should make up for it. People love pets.

Julia Kahr – Senior Managing Director, Blackstone: 22:39

In what we’ve seen actually people take better care of their pets than they do of themselves. And again, you could relate.

Olivier Sarkozy – Managing Partner, Further Global: 22:48

I’d promised Julia that we wouldn’t get too political, but it is private equity is getting on the radar screen here of the political discourse. And what does that mean? What are you doing to deal with it? Getting in front of it are we as an industry trying to fight back is the wrong term, but change the perception. How are you guys thinking about that environment going forward? Eric?

Eric Liu – Partner, EQT Partners: 23:28

Yeah. So the funny thing about the private equity industry, so I’ve been doing this since 1998 and when I first started, like, no one heard of what I joined the Blackstone group. And they’re like, what? What is that? And you know, when you’re graduating colleges throughout the, explain that to people. And but it was a really, it was a cottage. We had a $3 billion fund and there were few other firms that existed that also no one had heard of. That didn’t employ that many people. And what’s happened over time is that there’s more of the firms, they’re bigger, the deals are bigger, the companies are more well known in the press. You know, Mitt Romney ran for president that really put a spotlight on the industry. So that’s sort of the media political side. But the other thing that’s happened is, you know, when an industry gets to this size, some of this regulation is probably not a bad thing, right?

Eric Liu – Partner, EQT Partners: 24:12

I mean, you’ve got, you’re dealing with pensioner money. And so I, I would say that ever since I’ve been working here, there’s just been more regulation. And I think a lot of the large private equity firms are public. They’re FCC registered. You know, it used to be that when we bought companies, you didn’t have to do them, you didn’t have to Mark the market, but you actually do, you Mark your portfolios once a quarter, every six months and they actually get publicly audited. So I think that’s something that’s just happened over time. But the other thing that’s happened is obviously there’s more of a political spotlight. I think obviously the whole financial crisis put a spotlight on the financial sector generally. But I think some of the more successful people in the financial services industry have been people who have run large private equity firms. So that’s put the spotlight on that obviously in the political environment. Generally I think there’s a spotlight and anything that seems to be too profitable, making too much money, including the tech industry. And I think that one of the things that’s important for the industry to do is just to really clearly articulate the value that we’re actually providing to society. And I think there’s sometimes this perception in the media that all private equity firms buy companies that are perfectly healthy. They fire a bunch of people. The shareholders should make money and is bad for everyone.

Eric Liu – Partner, EQT Partners: 25:28

And they realize that’s not really how most deals, the vast majority of deals don’t look like that. The industry is too competitive. The US economy’s too vibrant for you to have companies sitting around where it will be. People aren’t doing anything if we didn’t have them. The company be much more profitable. I mean the most private equity deals that are done that are really successful deals where you’re growing the company, you’re making it more profitable, you’re hiring more people. And so I think one of the things that our firm does that we track every year is annual growth and revenue and growth and profit and our growth in head count at our portfolio companies. And I think over time we’ve generated 10 plus percent growth in each of those metrics over time across our companies. That’s obviously, well EQT is a Swedish from Sweden is a socialist country. They don’t really like things that are profitable. And so that’s always been in our DNA. But I think for us it’s really important that we’re doing things that are good and that we let people know the benefits of what we’re doing. And I think in the US I think that’s something that the industry has to do a bit better job of as well.

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 26:26

I think when you look at it, the just the pendulum of conversation in the US is swinging a bit and it’s applies to both private equity and public equity. There used to be sort of a singular sort of due North of shareholder and delivering on that meant you were achieving what you set out to achieve. And I think there’s a very healthy conversation going on right now of, you know, shareholder value is a very important component. That’s obviously why we all do our jobs, but there are other constituents whose voices are getting more heavily weighted be it employees and the environment and all these things that I think all firms are really starting to reflect on more. And we have an ESG initiative and really trying to say what is our broader impact besides still delivering the returns that we owe to our investors. What do we owe to the environment and employees and other constituents. And I think, you know, it’s kind of swinging that way right now in US, which is probably a good thing.

Olivier Sarkozy – Managing Partner, Further Global: 27:21

Arjun, you guys have stayed a partnership and stayed below the radar screen as a result. How do you react to being called, you know, the evil private equity capitalists or whatever the latest venture all is?

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 27:38

Yeah, I mean, I think, you know, so far we’ve actually benefited from I think a lower profile just because we’ve stayed, you know private. And that is that, you know, that’s helpful. But you know, I think one of the things that we, we do believe is that our companies are going to get a lot more scrutiny. So if are going to make an investment, that company’s going to get a lot more scrutiny than if we didn’t make that investment. Especially when you sort of combined sort of, you know, the feedback loop between sort of social media, you know, regulators and politicians it can be quite vicious on any individual company. So for every individual company we’re looking at, you know, one of the things that we’re doing is sort of as part of, you know, when we make the investment, what are sort of the risks are on this business from that aspect and what are we doing to address that business?

Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 28:21

So a lot of our companies, we have a playbook in terms of how they are managing their online profile, in their social media because it banners from, you know, vendors are looking at it employee prospective employees are looking at it. So it is sort of increasingly important for them to look at it and them to manage it. So that’s an area we sort of have a focus on managing that. And at the same time when we are, we’re still trying to figure this out, but you know, we’re trying to figure out what we make our companies from an ESG perspective, what we actually do. We’ve never been, you know, we’ve never come from slow philosophy of forcing our companies to do anything. But we give our companies a bunch of options if they say, you know, what, we tried to figure out what they’re doing from an ESG perspective and if we don’t think that’s enough, we come to them with suggestions and you know, and also ways for them to, you know, with people we have on staff who can help them think through implementing those suggestions.

Olivier Sarkozy – Managing Partner, Further Global: 29:15

Well, what I find interesting, and you know, I come from a political family, so take this in the spirit in which it’s meant. We actually, as an industry, I think get a lot of pressure from our LPs to be very ESG or whatever acronym you want to use or described to be very conscious of that issue. And we in turn have become as an industry, I think very conscious of the issue. And funnily enough, we’re probably well ahead of political in terms of addressing these issues and taking them seriously. Then the verbiage that we’re hearing would suggest. So another interesting dichotomy in the time we’ve got left, we thought we’d do a quick lightning round. Maybe ask our panelists some fairly basic questions that have a one word answer and then as you in the audience your views to see if they’re consistent. For instance will the S&P 500 be higher or lower 12 months from now. Eric.

Andrew Ferrer – Managing Director, General Atlantic: 30:33


Julia Kahr – Senior Managing Director, Blackstone: 30:34


Eric Liu – Partner, EQT Partners: 30:35


Olivier Sarkozy – Managing Partner, Further Global: 30:36

In the room, those who think lower. I guess a higher have it. We are rim of optimist. Actually. I would have been hired to, I just raise my hand anyway. Our interest rates 12 months from now, higher or lower, let’s use the five year as an example, Eric.

Eric Liu – Partner, EQT Partners: 30:59


Andrew Ferrer – Managing Director, General Atlantic: 31:12


Julia Kahr – Senior Managing Director, Blackstone: 31:13


Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 31:14


Olivier Sarkozy – Managing Partner, Further Global: 31:24

In the audience, lower? Lower in 12 months from now? Flat? Higher? Nobody believes in inflation. And that’s really kind of amazing. Trade Wars, do they intensify or relax over the next 12 months? Andrew?

Andrew Ferrer – Managing Director, General Atlantic: 31:44


Julia Kahr – Senior Managing Director, Blackstone: 31:45


Eric Liu – Partner, EQT Partners: 31:46


Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 31:47

Both. Intensify and relaxed. We can’t have it both ways, it will oculate.

Olivier Sarkozy – Managing Partner, Further Global: 31:58

In the audience, do we think it relaxes? I think people think it intensifies a, we’re sort of 50, 50. All right. Last question and then we’ll go to questions from the audience. Is the United States still the preeminent global power it was five years ago?

Andrew Ferrer – Managing Director, General Atlantic: 32:20

No, not to the same degree.

Julia Kahr – Senior Managing Director, Blackstone: 32:23


Eric Liu – Partner, EQT Partners: 32:24


Arjun Thimmaya – Managing Director of Financial Services, Warburg Pincus: 32:25

What it was his five years? Yes. 10 years ago? No.

Olivier Sarkozy – Managing Partner, Further Global: 32:31

No. Okay. In the audience, US still the preeminent global power. It was five years ago, and a lot of people sort of think so, but it’s obviously changing. If anybody’s taken that fundraising run in Asia where you start at the top and you’d go down South, you hit 10 cities, it makes JFK look like the third world to be, sorry, JFK is a third world. We have exactly five minutes, which means I did my job properly. Thank you very much for audience questions if there are any.

Speaker 1: 33:17

I’m just wondering if you’ve had to change your approach to potential targets based on either direct investors, a single or multifamily offices or even public activists coming into similar opportunities?

Olivier Sarkozy – Managing Partner, Further Global: 33:51

Julia, do you want to try that answering that one?

Julia Kahr – Senior Managing Director, Blackstone: 33:53

Yeah, I mean, I think the activist trend certainly in particular has been a major one across you know, the public markets and I think it’s certainly catalyzed situations in a different way. I think the backdrop to that has been, you know, the public market environment has been pretty challenging for private equity investors given you know, valuations. And so we’ve done relatively less of public to private and relatively more of, you know, large corporate partnerships, private situations. And so while it’s been a factor I can’t say that it’s necessarily that it’s resulted in us doing more of public to privates. You know, I think in general, as we’ve all talked about, you know, the environment has gotten more competitive. In terms of, you know, the different types you know funds a number of funds, the amount of capital going after attractive private equity likes situations.

Julia Kahr – Senior Managing Director, Blackstone: 34:52

And so differentiating ourselves, bringing something different to the table in terms of what we can actually do with the companies to create value. I think you know, that competitive intensity, you know, has played out and will continue to play out. And that’s really where we’re focused is on any single company that we’re looking at investing in. You know, what are we going to do differently with the company? How are we going to grow the company essentially? And I think, you know, several of us have sort of echoed that point in different ways.

Speaker 2: 35:22

I think private equity has gotten some good press. I think private equity is good practice because of the success of Yale’s endowment model and how the fastball is it still true the endowment model was helping you guys or [inaudible] their returns are a little bit depressed from there. Where is success of 10 years ago? Does that matter to you? Have you seen it?

Olivier Sarkozy – Managing Partner, Further Global: 35:47

I want to read the press you’re reading. I must have missed that one, Eric how do you answer that?

Eric Liu – Partner, EQT Partners: 35:48

Yeah, I think so obviously you’ve gotten good press for having a long-term kind of above market. I think that positive press is generally applied to alternative assets as a category. I’m not sure that’s related to private equity specifically. I think some of that may be more you know, hedge fund type thing. I think private equity in the media is not generally gotten good press in the US.

Olivier Sarkozy – Managing Partner, Further Global: 36:22

It’s interesting cause I think US is the most vocal critics of it, what is private equity, they would have absolutely no coherent answers. It was just like this evil mass thing here when we’re running money for the same people that a fidelity is running buddy for anybody else for that token. So it is time in my view for private equity to start making a much more concerted effort to educate people on who the heck we are and what it is that we do. Cause I think a lot of a lot of the animosity comes from a lack of understanding or knowledge. There was a question over there.

Speaker 3: 37:08

We’ve had some discussion in the last couple of days about how much more of the investible world is now private versus public. And people who are participants in defined contribution plans have little or no access to the private investing that you guys do. And it’s very consistent with what you just said. Oliver is the reputation of private equity I think has to rise. But I’d be interested in knowing what are you doing to try to get into the world of defined contribution plans and will that be part and parcel perhaps of also trying to raise the reputation and help people understand the good that it does in the creation of wealth.

Olivier Sarkozy – Managing Partner, Further Global: 37:47

Julia, you’re at the biggest firms and I’m going to presuppose that you guys might be doing the most.

Julia Kahr – Senior Managing Director, Blackstone: 37:52

Yeah, I mean I think we’ve certainly tried to be creative in thinking about ways to allow individual investors to invest in our products and we’ve got, you know, various different options for that. So I think as we look at over time, the pools of capital, they’re going into our various funds, not just private equity but also our real estate, private equity and our other investing funds. We are seeing more of individuals more so that than per se you know, defined contribution at this stage. It’s certainly something we’re thinking a lot about. And you know, that one’s a little bit trickier to crack in terms of how to do that in a way that is and provides a liquidity. Cause I think the biggest challenge is also just the liquidity there and people wanting, you know, those folks want to be able to access that capital quickly. And that creates a bit of a challenge with the way we invest in the time period over which we invest.

Olivier Sarkozy – Managing Partner, Further Global: 38:54

One last question please.

Speaker 4: 38:59

I look at stage up there and I think of PI Olivier with the eyepatch on and margin with the Cutlass swing you around. You talked about coordination among the industry, getting together to change that perception not only in Washington DC but also in the popular press. What efforts are you taking across your firms to get that message out to both the popular press as well as DC?

Andrew Ferrer – Managing Director, General Atlantic: 39:29

I mean I think we’ve been historically a very under the radar firm and that’s been one of our sort of signature elements. And I think we’re stepping forward a little bit more and trying to tell some of the positive stories that we can out of our portfolio and companies that we’ve helped build. And I think it would be helpful if private equity takes that on the forefront a little more and gets out in front of some of these stories and points to the great elements instead of being so reactive and waiting for the moment in time where you know, we’ve stubbed our toe or done something wrong. Those stories are very easy to draw a lot of attention to. And then we end up on our hind foot and being reactive. And so I think it’s just a matter of continuing to dial up how we tell the story of some of the successes and how we partner with companies and help build them and do more of that.

Julia Kahr – Senior Managing Director, Blackstone: 40:22

Yeah, I mean I think as a public company, I think we’ve been quite focused on sharing that message and I think Steve in particular has been a great spokesperson for the industry in terms of talking about even some of his recent comments just around job creation and some of the statistics which are really, we’ve all talked about different statistics. They’re quite compelling in terms of what we’ve done to grow employment at our companies. And so I think it is, it’s just about getting that message out. Sometimes, you know, it can fall on deaf ears, so we maybe have to speak even louder than we think we need to. But I think we all own it as an industry and I think we’ve tried to be quite outspoken about the statistics for our own portfolio companies.

Olivier Sarkozy – Managing Partner, Further Global: 41:04

Well, you’ve been a great audience. I want to thank you. Thank our panelists. Thank the Greenwich business Institute and appreciate the time you’ve given us tonight. Thank you.

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