The influence of fund managers is usually a more important factor in fund selection than the institution that they represent, according to fund of funds specialists Pantheon International.
Bringing the often-exclusive domain of the private equity world to general retail investors across the globe is something that many observers might point to as a bold and pioneering move. But pioneering is something that Pantheon International’s Andrew Lebus is no stranger to, as Gary Robinson reports, in this special feature.
Andrew Lebus joined Pantheon International in 1994, and was quickly thrust in the spotlight as one of two young fund managers sent to Hong Kong to take on the then relatively unknown world of emerging markets
This was particularly true in the Asian region, but as Lebus quickly found out, new frontiers can produce great opportunities.
“When we started we had about 12 people around the world but just two of us in Hong Kong. It had all of the excitement of working in a small business. Since that time as our success has become more established in terms of investment success and as the word has spread the number of clients we manage capital for has grown.”
“We now manage on behalf of 300 institutional [clients] in excess of US$30bn. PIP (Pantheon International Participations Plc, the listed private equity fund of funds) is a bit less than 10% of that figure and is our most public window of what we do.”
So when it comes to Asia, how does one go about picking the right funds in a traditionally volatile region?Lebus is quick to point out that within PIP, most of the fund managers that he invests in are directed towards investments in the United States. Europe also is around 30% in the portfolio – including the UK. Asia is somewhere around 15%.
“It is a minority of our exposure but also an important opportunity because we think that we can get access to things that are capable of potentially growing faster in some of those developing economies,” he says.
“I think the important thing to understand about private equity is that the market for managing private equity tends to develop over time. And the way that we approach it (is that) we are looking for proven experience in the managers that we back in terms of their ability to generate returns, not only by buying good companies but also going through a value creation process and selling those business at the end of the process – and doing it enough times that we can demonstrate real skills rather than luck. An environment such as emerging markets is much more volatile [than others].”
“Opportunities for liquidity if exiting through IPOs, for example, can be shorter in their duration because of volatility. You have to be even surer that you are investing in the right management teams taking their business through those varied markets.”
Lebus makes the important investment decisions for PIP but also for Pantheon’s private clients and institutional investors via the investment committee for Asian activities and the company’s secondary activities teams.
Manager is key
And to Lebus the fund manager is key, as opposed to the process or the investment houses they represent. Managers who have been able – usually over various cycles – to generate money above and beyond the markets and their peers are the managers that he is looking to back.
“Can they maintain this in the future?” asks Lebus. “It is our business to evaluate who those businesses are operated by and how the ownership is shared between key individuals.”
“We can choose any potential fund in the world. In our mind the manager is the most important thing. One set of assets can be worth completely different amounts depending on who is managing it.”
“It is about how a group of individuals that are very experienced and very knowledgeable in a certain sector and are able to organise themselves to be able to maintain their competitiveness rather than a simply the stamp of a particular institution on the door.”
Lebus also points out that it is the managers that own their own business that are far more attractive than institutions with big brand names, as it is often their own pension pot along with clients’ money that it is at stake.
“It is our job to understand when we are committing to funds that are usually ten years in duration, it is our job to understand how the manager is going to conduct any succession or retirement issues, and how they are invested themselves.”
“There have been many instances where we have pulled back, despite liking the fund,” he concludes.
Name: Andrew Lebus
Position: Fund manager, Pantheon International Participations (or Pantheon International or PIP) PLC
* Joined Pantheon International in 1994.
* First managed Asian investment program for 8 years in Hong Kong looking after the firm’s Asian investments.
* Began managing the listed investment trust Pantheon International PLC (PIP) in 2002, a global fund of funds investment vehicle and has done that ever since.
* PIP is the longest established private equity fund-of-funds company on the London Stock Exchange and, according to company statistics, it has outperformed the FTSE All Share and MSCI World benchmarks since its inception in 1987.
Andrew Lebus also features here, in the latest of International Investment’s The Big Interview video features series.