The 13th annual SEM Conference brought together a diverse group of 750 professionals across the small and emerging manager and investor universe with the collective goal of advancing the alternatives industry. The event lived up to its reputation as a “must attend” conference for both managers and interested institutional investors.
This year’s conference addressed lessons from the recent past, highlighted current trends, and encouraged participants to anticipate what’s next for the industry. Prominent themes included environmental, social, and governance (ESG) and impact investing, applying data and metrics effectively, and maximizing returns through alpha generation.
The two-day program featured thought-provoking speakers, facilitated networking and training, and 15 panel discussions relevant to investors in hedge funds, private equity, real estate, and infrastructure strategies. View the 2019 SEM Conference Agenda for more details.
The SEM Conference also highlighted the distinct backgrounds and experiences that next-generation and diverse managers bring to the industry. GCM Grosvenor is a diverse and inclusive organization and is proud to play a role in the industry’s progress toward the same goals. As always, networking between investors and managers was an invaluable part of the conference. Learning from one another’s triumphs and challenges has been a crucial part of the conference since its inception.
In his opening remarks, Michael Sacks, GCM Grosvenor’s Chairman and CEO remarked, “I am proud of the firm’s dedication to make an impact by investing responsibly, operating the business with integrity, and creating a diverse and inclusive workplace.” He cited the GCM Grosvenor 2019 Impact Report, which details the firm’s efforts to create positive change for the industry, its employees, and our communities.
Jon Levin, President of GCM Grosvenor, built on Michael’s comments and emphasized the value of having so many talented managers, investors, and consultants come together for the SEM Conference: “The goal of this event is to give managers the knowledge and connections they need, so they can, in turn, deliver value to the industry and investors.”
“GCM Grosvenor’s broad global platform provides us with a powerful lens into the asset management industry,” added Jon. “It is through that lens that we have consistently observed over time that alpha has been driven by well-designed programs that invest in emerging and diverse talent. And that is what all of us in the room care about: seeking to deliver the best performance to our investors.”
Jon highlighted data that demonstrates emerging and diverse manager outperformance compared to established counterparts over time and across alternative asset classes. “It’s challenging to pinpoint causation,” he said, “but outperformance can be due to the attractiveness of the size of the market, the managers’ laser focus, their nimble execution ability, or other factors.” He added that diverse managers also benefit from diversity of thought that allows for investment sourcing and execution that is separate from the rest.
GCM Grosvenor’s Peter Braffman shared insights from his team’s proprietary research on the emerging and diverse manager universe.
+ The definition of “emerging manager” is changing as firms get larger and launch more funds, and as the universe becomes more inclusive of LGBTQ and other managers
+ Of the 14,000 alternative funds launched since the global financial crisis, 6,000 of them have been by small, emerging or diverse managers, dominated by private equity 
+ LPs tend to “stay with what they know,” as recent trends show that over 90% of investments per year come from re-ups with managers 
+ Therefore, re-ups present a challenge for small and emerging managers, but the industry is evolving and adapting
Indra Nooyi, the Former Chairman and CEO of PepsiCo, sat down with GCM Grosvenor’s Chairman and CEO Michael Sacks for a fireside chat. As an immigrant from India and as a driving force for PepsiCo, she shared compelling insights about being a lifelong student, the importance of doing what’s right, and her advice on how best to allocate time.
Through stories of her life experiences, Indra demonstrated the importance of ongoing learning. She grew up in a conservative home with no television or radio, where education was not just a priority, it was the only focus. She excelled in school, but to set herself apart from her siblings, she took up cricket, played guitar, and learned numerous languages. When she came to the U.S. to attend Yale, she had no idea what to expect. Indra explained, “I had never been to a grocery store or eaten pizza – but I had my hopes and goals, and I worked hard on my studies and learned to adapt to a new culture.”
Indra encouraged attendees to say “yes” to the tough projects. She said, “I have experienced my share of difficult assignments. In taking them on, I figured out I could learn a lot in a short period. Plus, no one remembers you for doing something easy, only for doing something difficult.”
At PepsiCo, her leadership and strategy, paired with a willingness to visit stores and homes to learn how people purchased and consumed products, allowed her to execute a successful restructuring and diversification of PepsiCo’s brands. During her time as CEO, PepsiCo grew net revenue by more than 80%, and its total shareholder return was 162%.
When Indra introduced Performance for Purpose at PepsiCo, she was an early adopter of corporate responsibility; now it’s “table stakes” for any big company. Indra explained, “We viewed doing the right thing as a sensible way to make money, not give it away. And, it was the only way I knew how to run the company and promote organic growth. I believe if a business doesn’t invest in organic growth, its best and brightest will leave.”
She added, “I don’t care about being perceived as a powerful woman, an immigrant, or appearing on lists. All I cared about was running the company the right way. And not just for the duration of my tenure as CEO, but for the life of the company. I focused on balancing the level and duration of returns, and not sacrificing sustainable performance for short-term gain.”
Indra encouraged attendees to be mindful of time spent between professional and personal lives. As a mother of two daughters, she has always prioritized their relationships, but she admitted that if she could do it all over, she would spend more time with them.
We welcomed women from across the industry to the fourth annual Women’s Networking Luncheon, which provided female attendees the chance to connect with one another and hear from guest speaker Donna Orender, a proven leader in sports. For more about Donna’s philosophy and GCM Grosvenor’s focus on investing in women at the firm, read Investing in Women at GCM Grosvenor: 2019 Women’s Leadership Summit.
Once a “niche” strategy, ESG investing has evolved quickly and is now on everyone’s minds.
“ESG used to be associated with ethical investing when investors were prepared to leave returns on the table. Not only does that not align with asset managers’ fiduciary duties, but many now believe that ESG and responsible investing represent a better way to manage portfolios and achieve desired risk-adjusted results.”
“There are several ‘top-down’ ESG principles at the portfolio company level, including an organization’s carbon footprint, gender diversity on its board of directors, or average board tenure as a proxy for governance.”
“We need to align the ‘tools’ of ESG investing with our investment strategies, and focus on those that accelerate growth.”
“We weren’t always calling it by name, but ESG has long been part of infrastructure investing’s DNA.”
Investors and consultants shared peer-to-peer insights about emerging managers in a closed-door session.
“Over the last decade we are seeing a proliferation of diverse and emerging managers – many worked for the bigger firms and spun out.”
“We need consistency in data (to evaluate managers).”
“Emerging managers should not be considered as just one ‘bucket.’”
“This is an apprenticeship business; managers need to start somewhere.”
With so many institutional investors and consultants on hand, GPs were privy to a lot of direct feedback.
“To be a long-term partner and be part of an LP’s select pool of managers, emerging GPs need to be transparent, responsive, friendly, and have a long-term view.”
“GPs should have a good reason if they cannot share something. If we (an LP) can’t get transparency in reporting, that’s a stopper upfront.”
“We’ll take meetings from partners who provide warm intros. If someone from a firm like GCM Grosvenor recommends you, we’ll take your call.”
“Don’t spend time talking about one home-run deal. Tell me what’s repeatable, talk about lessons learned, and describe your firm’s ‘special sauce.’”
 Sources: Preqin, Hedge Fund Research, GCM Grosvenor
 Source: Preqin