Educational Alpha: S2 – Conversation with Yann Robard, Managing Partner, Dawson
Release Date: November 13, 2024
Introduction
In this episode of Educational Alpha, host Bill Kelly engages in an insightful conversation with Yann Robard, the Managing Partner of Dawson. The discussion delves into the evolving dynamics of the private equity secondary market, Robard’s unique career trajectory, Dawson’s innovative solutions for liquidity in private equity portfolios, and his perspectives on private market valuations. This comprehensive summary captures the essence of their dialogue, enriched with notable quotes and timestamps for reference.
1. Yann Robard's Career Journey
Background and Early Career
Yann Robard begins by sharing his unconventional entry into the private equity sector:
“[...] I started with a Mexican furniture store based in Toronto. Always had entrepreneurial blood flowing through my veins. That was back in the late 90s.”
[02:16]
Robard highlights his transition from entrepreneurship back to finance, joining JP Morgan briefly before a significant tenure at the Canada Pension Plan Investment Board (CPPIB):
“When I joined [CPPIB] in 2001, there were 24 people managing $7 billion. Fifteen years later, it had grown to 1,200 people managing $285 billion.”
[02:16]
Founding Dawson
Robard attributes his entrepreneurial spirit and scaling expertise gained at CPPIB to the foundation of Dawson in 2015. A pivotal moment during his bike trip from Yukon to Alaska inspired the creation of Dawson, focusing on providing structured liquidity solutions for private equity investors.
“The concept of Dawson is to provide new tools in the tool set for people to accelerate liquidity on their private equity portfolios, but keep the upside and the flexibility.”
[02:16]
2. Evolution of the Private Equity Secondary Market
Decade of Institutionalization (2001-2011)
Robard outlines the initial growth phase of the secondary market:
“From 2001 to 2011, the secondary market grew from $5 billion to $25 billion. This was the decade of institutionalization, establishing pioneers and track records.”
[06:07]
Decade of Innovation (2011-2021)
The market saw significant innovation, expanding from $25 billion to over $125 billion:
“We added levered LP secondaries, GP LEDEs, single and multi-asset continuation funds, private credit secondaries, infrastructure secondaries, real estate secondaries, preferred equity, NAV lending, and GP stakes.”
[06:07]
Decade of Capitalization (2021-2031)
Robard projects that the secondary market will grow to a trillion dollars by 2031, emphasizing the importance of capitalization:
“Anytime you’ve got an industry with more supply than capital to absorb it, there’s opportunity for capitalization. We see the market reaching a trillion dollars by 2031.”
[06:07]
3. Maturation of the Secondary Market
From Last Resort to Strategic Reallocation
Robard discusses the market's maturation from a means of last resort to a strategic tool for portfolio management:
“Over the last 25 years, the secondary market has matured from a lender of last resort to a tool for tactical reallocation and portfolio management.”
[10:43]
He emphasizes that the secondary market now facilitates sophisticated portfolio strategies, akin to public markets’ rebalancing practices:
“The secondary market provides the tools for private equity investors to be more sophisticated in how they manage their portfolios.”
[12:55]
4. Dawson's Structured Liquidity Solutions
Innovative Offerings for LPs and GPs
Dawson positions itself between debt and equity, offering tailored solutions that provide liquidity without sacrificing upside potential:
“We’ll give you 60 to 70% of the value of the portfolio, take 100% of the cash flows until a minimum multiple or IRR is achieved, and then split cash flows.”
[16:35]
Robard explains that Dawson’s solutions cater to LPs needing liquidity while maintaining their investment upside:
“Our solution enables LPs to generate liquidity without losing their relationship with their GP, allowing continued access to co-investment opportunities.”
[16:35]
Customization and Innovation
Dawson prides itself on bespoke solutions, listening to client needs to craft win-win scenarios:
“Every one of our solutions is so bespoke, so customized. We create tailored solutions to find the win-win in everything we do.”
[16:35]
Robard likens Dawson to a tech innovator in the private equity space:
“We think of ourselves as the Google of private equity. We are innovative, creating new financial products and technology.”
[19:24]
5. Culture and Business Philosophy at Dawson
Emphasis on Integrity and Respect
Robard underscores the importance of culture in Dawson’s success, advocating for ethical behavior and respectful relationships:
“If you treat people with respect, they want to do business with you. Repeat business comes from being a good person.”
[20:56]
Performance and Cultural Consistency
Dawson integrates cultural alignment into performance reviews, ensuring both results and behavior are evaluated:
“In performance reviews, we score both the what and the how. To move forward, you must excel in both areas.”
[21:55]
Commitment to Giving Back
Dawson dedicates a portion of its revenues to charity, reflecting Robard’s personal commitment to societal causes:
“1% of our revenues goes back to charity. This is important to us and me personally.”
[22:55]
6. Insights on Private Market Valuations
Defending Private Market Valuations
Robard presents data from Dawson’s white paper, arguing that private equity valuations have been consistently rational and even undervalued:
“Private equity has been undervalued in good times and bad, with an average pop of 28% at exit from two quarters prior.”
[25:22]
Comparison with Public Markets
He contrasts private equity performance with public markets, highlighting long-term outperformance despite short-term discrepancies:
“Private equity has outperformed public markets by 200 to 400 basis points over the long term.”
[25:22]
Robard addresses recent market fluctuations, drawing parallels with the Global Financial Crisis:
“Private equity acted similarly during the GFC and the current crisis, maintaining consistent performance and recovering through liquidity returns.”
[25:22]
Future Outlook
Believing in a “super cycle” for private equity, Robard anticipates a resurgence in liquidity and performance:
“Private equity is entering a super cycle where liquidity will normalize and performance will outperform public markets.”
[25:22]
7. Democratization of Private Markets
Expanding Access to High Net Worth Individuals
Robard advocates for increased access to private markets for individual investors, emphasizing the potential benefits and necessary education:
“Access to private markets for individuals can provide outperformance benefits, capturing 2 to 400 basis points.”
[32:02]
Challenges and Opportunities
He acknowledges the complexities involved in democratizing private markets but remains optimistic about the positive impact:
“With $150 trillion in assets managed for individuals and a significant portion allocated to private markets, the opportunity is immense if approached correctly.”
[32:02]
8. Conclusion and Future Outlook
Ongoing Growth and Innovation
Robard expresses his excitement about Dawson’s trajectory and the ongoing opportunities in the secondary market:
“We’re just getting started. The trick is staying grounded and grateful, focusing on doing right by our investors and counterparties.”
[20:56]
Optimistic Projections
Reflecting on Dawson’s growth and the secondary market’s potential, Robard hints that their trillion-dollar projection might be conservative:
“Your thesis that the $1 trillion number might be conservative is spot on.”
[34:07]
Final Remarks
Robard reaffirms Dawson’s commitment to investors and the private equity ecosystem, anticipating continued success and innovation:
“Thank you for those words. We’re excited for what’s ahead.”
[34:45]
Closing Thoughts
This episode offers a deep dive into the maturation and future prospects of the private equity secondary market through Yann Robard’s extensive experience and visionary insights. From the foundational growth phases to the innovative solutions provided by Dawson, listeners gain a comprehensive understanding of the opportunities and challenges within private markets. Robard’s emphasis on culture, ethical practices, and democratization further enriches the conversation, providing valuable takeaways for finance professionals and investors alike.
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