As my 12 years running the Cornell University Endowment Private Equity portfolio wrapped up last month, I had an opportunity to reflect with dozens of our General Partners. In addition to generating great returns for the Endowment, we had established deep relationships that will last a lifetime. In private equity it is possible to make both money and friends, I joked, while in many other asset classes you might not make either.
When I joined Cornell’s Endowment in 2012, it was popular to say that the partnership era of private equity investing was over: We had now entered the “institutional” phase of the asset class, exemplified by the recent public listings of the world’s largest managers. I rejected this notion then – and still do – and included an evaluation in our manager scorecards which we called “spirit of partnership.”
As an allocator to private equity funds, I focus intently on the quality of the alignment throughout the value chain; from a portfolio company’s customers and employees to the managers and owners; to the dynamics within the private equity partnership itself; and finally, to the relationship between the GPs and their LPs. Importantly, these are two-way streets - the principle needs to flow in both directions. I believe this focus made all the difference to our success during my time at Cornell.
In his seminal 1989 article on private equity, “Eclipse of the Public Corporation” (hbr.org) Michael C. Jensen of Harvard Business School predicted the long-term rise of private equity ownership versus the public markets. At the core of his argument is the concept that the private equity model is more aligned than the public markets. Understanding this - the partnership component - remains the true north of successful investing in the asset class.
I founded Summation Capital to expand this philosophy: We are creating a new kind of institutional LP that will seek deep partnerships with the world’s best established and emerging private equity GPs. Summation will also extend this tenet to the relationship between allocators and asset owners, providing a fully turnkey asset class vehicle in a uniquely low-cost and aligned manner. I often ask new managers why they feel the world needs another private equity firm. In the case of Summation Capital, the answer is simple: To spread the spirit of partnership.
For more information: Summation Info