Performance and persistence in private equity — Josh Lerner, Harvard Business School

October 13, 2017
Conventional wisdom in private equity has often gone like this: Performance persists across funds for the same partnership.

But the view over the last years is mixed. One 2014 study found that post-2000, there was “little evidence of persistence for buyout funds, except at the lower end of the performance distribution.”

The question was addressed again recently at A Roundtable Sponsored by the Notre Dame Institute for Global Investing and the Private Capital Research Institute. Here a group of limited partners, academics and general partners met to share their thoughts on performance and persistence in private equity investments.

Their conclusion: “the once robust persistence of performance across buyout funds has weakened, along the historical outperformance of private equity relative to the private markets.”

But what does this finding mean in terms of various important inputs, factors like: approaches employed in selecting fund managers, factors influencing performance in the current environment, industry trends and performance benchmarks, comparisons between venture and buyout investing, alignment issues, and the importance of culture?

I asked Dr. Josh Lerner, Chair of the Entrepreneurial Management Unit
and the Schiff Professor of Investment Banking at Harvard Business School. He also serves as Director of the Private Capital Research Institute, a nonprofit devoted to encouraging access to data and research about venture capital and private equity.

More honors: Josh is Vice-chair of the World Economic Forum’s Global Agenda Council on the Future of Investing and was named one of the 100 most influential people in private equity over the past decade and one of the ten most influential academics in the institutional investing world.

HowSilicon Valley Farming Startup Addresses Extreme Poverty, Global Food Shortage — John Denniston, Chairman of Shared X

August 26, 2017

The problem is challenging and enduring – and to listen to John Denniston, it also just may present the perfect opportunity to both do good and well.

It’s called the Yield Gap – the difference in agriculture yield from farms in developed countries – which are more efficient and deliver more food per acre – vs. emerging countries, which are, of course, the very places where food is most needed.

And that gap is part of the reason why Denniston, whose career has included investing in green tech and more as a partner at Kleiner Perkins Caufield & Byers, as well as heading Tech Investment Banking  in the Western U.S. at SalomonSmithBarney, launched Shared X – which he describes as a for-profit agriculture impact company with two key goals: Generating financial returns and generating social returns.

But for this longtime investor, the a ha moment that led to Shared X came not through number crunching – though he does plenty of that – but rather on a trip with his kids. What did he realize on that family vacation that changed their outlook and their lives? That’s what we discussed…


Conversation on Leadership and Culture — Ron Williams, Chairman & CEO of RW2 Enterprises

July 21, 2017

It’s a question that any executive or wannabe executive asks: What defines great leadership? Are great leaders born – or can the skills be learned? And how does strong leadership get connected to successful business outcomes?

To learn more, I spoke with someone who not only spends much of his time thinking about leadership, he also writes and talks about it – and most importantly, has spent much of his life doing it.

Ron Williams is the former Chairman and CEO of Aetna. When he joined Aetna in 2001, its loss from continuing operations was $292 million, with earnings per share loss of $0.46. By the time Williams left in 2011, the company’s full-year operating earnings were $2 billion, with operating earnings per share of $5.17.  During his tenure, Aetna was named FORTUNE’s most admired company in the Health Care: Insurance and Managed Care category for three consecutive years.

Since Aetna, Williams has continued to help drive leadership in business, including in private equity. He as served as Operating Advisor to Clayton, Dubilier & Rice, where he is chairman of CD&R’s portfolio company, agilon health, and successfully guided two other CD&R portfolio company exits.

His influence and experience doesn’t end there: Williams is a Director of American Express, The Boeing Company, Johnson & Johnson, Envision Healthcare and is a member of Deutsche Bank’s Americas Advisory Board.  He also served on President Obama’s President’s Management Advisory Board from 2011 to 2017, where he worked to bring the best of business practices to the management and operation of the federal government.

As you can tell, Williams is motivated by leadership – why it matters, what it looks like, what it can do to improve business and, frankly, society.


How to Close the Global Skills Gap — Jake Schwartz, General Assembly

July 18, 2017

For many Americans, a central reason that the inequality gap may be getting worse can be summed up in one word: Jobs.

Job openings have been increasing. And yet as we all know – perhaps personally, perhaps from the news, and definitely from the most recent U.S. election –employment prospects for workers left behind by the current economic expansion seem increasingly dim.

Now, there are many causes for this trend, many of which come under fierce debate. One is the skills gap.

As LinkedIn CEO Jeff Weiner said recently: “Is there a skill gap, is there not a skill gap? I think when you think about it in the aggregate across the United States, you can debate it. But unquestionably, at the local level, there are skills gaps. There are cities that are hiring, they’re hiring quickly. They’ve got fast-growing industries and they don’t have the talent with the requisite skills to take on those roles.”

Jake Schwartz is trying to do something about it.

Jake is CEO of General Assembly, a pioneer in education and career transformation, specializing in today’s most in-demand skills. Specifically, General Assembly bridges the gap between job seekers and companies needing talent with relevant skills. In just about 6 years, they’ve opened 20 campuses on four continents, with more than 35,000 graduates.


Global Investing, Leadership & Education — Kevin Burke, Notre Dame Institute of Global Investing

July 17, 2017

The role and importance of global investing continues to grow – and get more complicated. At the same time that globalization trends, cross-border transactions and supply chains, technology and more have flattened the world and extended the range and importance of investing, new counter trends of protectionism and nationalism may be changing the game.

The need for understanding, education, and heightened capability around global investing skills arguably has never been higher.

What are these skills? Which trends will be most important as we consider the next generation of global investing?

Kevin Burke is managing director of the Notre Dame Institute of Global Investing at the University’s Mendoza College of Business. In fact, he’s the Institute’s first managing director; Burke is spearheading the launch of this important effort within one of the world’s leading universities to create a first-class research and education facility that, among its many goals, seeks to help integrate graduates into leadership roles within the competitive global investment markets.


How the Internet Can Help Stop Human Rights Abuse

July 17, 2017

This is special edition of Working Capital Conversations.

Sadly, there is no shortage of work these days for global human rights abuse investigators.

From Syria to Yemen to Sudan and beyond, the horrible ways in which humans torture, starve, and kill other humans seems unending. We all condemn the horrors, but most of us find ourselves with little opportunity to do anything directly.

Today I’m talking with someone who does.

Alexa Koenig is Executive Director of the Human Rights Center at UC Berkeley, a 2015 winner of a prestigious MacArthur Award for Creative and Effective Institutions. As Koenig describes, the Center is “a research organization that brings the tools of science and law together to address some of the world’s most pressing human rights issues.”

How much impact has the group already made? The Center has led investigations and research in more than a dozen countries, including Iraq, Rwanda, Uganda, and the former Yugoslavia. It also has launched what it calls the Human Rights Investigations Lab.

But unlike frontline and onsite human rights workers, these students do the bulk of their work from an undersized space on the UC Berkeley campus. So how does the Human Rights Center chase global perpetrators while sometimes never setting foot in the offending and offensive locations?

As I learned in my conversation with Alexa: Welcome to the power of the Internet.

By the way, if you are moved by the conversation and want to support the Human Rights Center, there’s a link embedded in the text introduction to this podcast. You also can go to


The Business Case for Corporate Social Responsibility

July 17, 2017

Be honest – when you think about Corporate Social Responsibility, what comes to mind? Colleagues taking an afternoon off to build a house or paint a schoolyard? Perhaps, a fundraiser to send money across the world for an emerging environmental concern?

Well, if you haven’t been paying attention, a massive transition has occurred in corporate social responsibility, or CSR.

CSR is now more about hands on, deeply embedded activity that not only delivers direct benefit to the city or country where corporate employees and leaders visit, but also measurable benefit accruing back to the business itself. When done right, CSR has moved from a nice to have – a highlight in the annual report – to a concrete business opportunity generator.

  • Why has this transition occurred?
  • How does this new approach work?
  • And specifically, how do businesses themselves benefit?

One person to ask is a fellow who helps companies do it every day. Paul Benson is Senior Corporate Partnerships Development Manager at Voluntary Service Overseas. VSO works with corporations and volunteers globally to actively support and affect Sustainable Development Goals. Since 1958, VSO has engaged over 43,000 volunteers to work on international development programmes in more than 120 countries.


Sweat Equity: Inside the New Economy of Mind and Body

July 17, 2017

You’ve seen them nearly everywhere – from Soul Cycle to Flywheel to Equinox and beyond. Boutique fitness outfits that might seem, at first glance, to be engaging, if not mildly costly places to get or stay in shape.

And if that’s how you see them, you’re only half right. The part you’re missing – Big fitness is also big business.

In fact, health, wellness and fitness, as the sector is called, is now estimated to be $3.4 trillion global industry. And as you’d expect, that has attracted the full range of financial players: From private equity to big banks, entrepreneurs to seasoned managers.

So while fitness has been around for decades, how did this industry experience exponential growth in just the last one? What are the trends – social, fashion, even status – behind the movement? Are they sustainable?

Jason Kelly is the person to ask. Jason is Bloomberg’s New York Bureau Chief. His first book was “The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything,” but his most recent one explores, as he puts it, “an entire economy… in apparel, gear, and entry fees” that has formed around people’s “pursuit of wellness.” His book is “Sweat Equity: Inside the New Economy of Mind and Body.


Corporate Boards Need Investor Relations Expertise

July 17, 2017

It’s no secret that corporate boards have increasingly come under increased scrutiny. And for good reason. From corporate scandal to CEO compensation, from cyber security to risk, investors and the general public want to know who’s in charge – and who’s keeping an eye on management.

And with this scrutiny, the makeup of corporate boards is slowly shifting, too – away from clubby groups and towards a collection of experts — finance, human resources, law, and more.

But what about Investor Relations? As new board level issues emerge from seemingly endless directions – and as investors demand more answer more quickly – should boards more strongly consider adding the IR perspective?

Robert D. Ferris certainly argues they should.

Ferris is an investor relations and crisis counselor expert, with more than four decades of experience with both domestic and foreign issuers. He’s also a former chairman of National Investor Relations Institute’s Senior Roundtable.


Investing Into Uncertainty — Lessons from Endowment Investing

July 17, 2017

Warren Buffett once said on CNBC: “The world—there’s always uncertainty. Now the question is, what do you do with your money?”

Buffett may have been talking about public markets – even personal – investing. But even on the institutional side, given that we are continually surrounded by uncertainty and given that stuffing cash under a mattress – while relatively certain – carries no financial return, how should today’s institutional investors think about uncertainty?

More specifically, is there a way to consider uncertainty –use it as an investing philosophy – to drive outsized returns?

And if so, where can we turn for a guide?

It turns out there is a small group of long-horizon end investors who consistently perform well in private markets. Their superior performance in this area of investing has contributed heavily to their overall superior long-term performance.

That group is endowments.

And if investing into uncertainty feels like a potentially uncomfortable approach, it’s also one that Daniel Feder has discussed, practiced, and succeeded with for years.

Feder is the Managing Director of Private Markets at the Washington University Investment Management Company. That’s the group that runs the endowment for Washington University in St. Louis. Previously Feder served as Managing Director of Private Markets for the Sequoia Capital Heritage Fund, an endowment-style investment fund sponsored by Sequoia Capital. He also served as Senior Investment Manager in the endowment services area at TIAA-CREF, and Managing Director at Princeton University Investment Company, the investment office for Princeton University’s endowment, where Dan led the development of a $4.0 billion global private equity and venture capital portfolio.