Educational Alpha: Conversation with Roger Vincent, Founder and CIO, Summation Capital

Episode Details:

• Title: Educational Alpha
• Host: CAIA Association (Bill Kelly)
• Guest: Roger Vincent, Founder and CIO, Summation Capital
• Episode: Season 3
• Release Date: April 30, 2025

1. Introduction

In this enlightening episode of Educational Alpha, host Bill Kelly engages in a profound discussion with Roger Vincent, the Founder and Chief Investment Officer of Summation Capital. Drawing from Roger's extensive 30-year career in private equity, including his pivotal role at Cornell's Endowment, the conversation delves into the complexities of the evolving private equity landscape, the democratization of alternative investments, and the future role of artificial intelligence (AI) in investment strategies.

2. Roger Vincent’s Professional Journey

Roger Vincent begins by recounting his three-decade-long career in the private equity sector. Starting at Donaldson, Lufkin & Jenrette (DLJ) in the early '90s, Roger gained invaluable experience in both buyouts and venture capital during a dynamic period marked by the dot-com boom and bust.

Roger Vincent [03:15]: "It was a wonderful place to start. I ended up spending a little over seven or eight years there just through the Credit Suisse acquisition of DLJ."

After acquiring an MBA, Roger transitioned to Founders Equity in New York, where he advanced to a partnership role, honing his skills in deal leadership and portfolio management. His career took a significant turn when he pivoted from the General Partner (GP) side to the Limited Partner (LP) side, driven by a desire to engage more broadly with investment strategies beyond microeconomics.

Roger Vincent [07:49]: "I had an epiphany that I wanted to be a little bit wider than what I was doing in the GP side."

This led to his 12-year tenure managing Cornell’s Endowment’s private equity portfolio, where he emphasized strategy design and implementation, achieving top-tier performance. Seeking new challenges, Roger founded Summation Capital just over a year ago, aiming to democratize access to high-quality private equity.

3. Evolution of Private Equity

The conversation shifts to the transformation of private equity from an exclusive asset class to a highly complex industry. Roger emphasizes the massive expansion in the number of GPs, from 24 globally in the early '80s to approximately 10,000 today, highlighting the increased difficulty in selecting top-performing managers.

Roger Vincent [11:51]: "While access has gotten easier, quality has gotten harder. Manager selection or access is really critical."

Roger explains that democratization has made private equity more accessible, but this accessibility comes with challenges. The proliferation of GPs necessitates rigorous due diligence and sophisticated manager selection to avoid underperformance.

4. Democratization of Private Equity

Bill Kelly and Roger Vincent discuss the motivations behind democratizing private equity, touching upon the fears of investors mistaking private equity for higher returns without fully understanding the associated risks and fee structures.

Roger Vincent [21:57]: "Most people are making actual investment decisions on things that don't come straight out of the University of Chicago. I would have to believe that the median investor is focusing on private equity for higher returns, not for some esoteric view on risk premia somewhere."

Roger warns against the simplistic perception of private equity as a mere avenue for higher returns, emphasizing the importance of understanding risk-adjusted returns and the complexities involved in private market investments.

5. Manager Selection and Fee Structures

A significant portion of the discussion revolves around the critical role of manager selection and the impact of fee structures on investment performance. Roger critiques the current industry model where investors often pay substantial fees for private equity exposures that may only offer beta (market returns) rather than true alpha (excess returns).

Roger Vincent [33:09]: "We wanted to create a fund structure that got people professional exposure to private equity... but only charge them for what we consider true value add. And that is the alpha."

Summation Capital aims to address this by offering a fee structure aligned with alpha generation, ensuring investors are not overpaying for market exposure without the potential for excess returns.

6. Summation Capital’s Role as an Outsourced CIO

Bill Kelly introduces the concept of Summation Capital acting as an outsourced Chief Investment Officer (CIO) for investors seeking to allocate to private equity. Roger elaborates on how Summation provides diversified private equity access, leveraging his endowment experience to deliver high-quality portfolio construction.

Roger Vincent [30:05]: "We can be that outsource for that piece of the portfolio. And then for other of our investors who are 100% of their private equity... they have other interests in life and they just want to know that they have a portion of their assets in private equity."

Summation Capital offers a turnkey solution for managing the operational complexities of private equity investments, including handling capital calls and ensuring diversified, high-quality exposure.

7. Future of Private Equity and AI Integration

In the final segment, the discussion touches upon the future integration of AI in investment strategies. Roger expresses cautious optimism, acknowledging AI's transformative potential while recognizing the challenges it poses in manager selection and due diligence.

Roger Vincent [44:49]: "We are using it to enhance productivity first and foremost and it's not something that I think is going to be a credible tool for manager selection anytime soon."

Roger compares the current AI landscape to the dot-com era, highlighting the need for experienced judgment to navigate technological advancements without falling prey to hype cycles.

8. Conclusion

The episode concludes with Bill Kelly commending Roger Vincent for his insightful contributions to democratizing private equity. Roger expresses gratitude for the opportunity to share his experiences and underscores the importance of professional intermediation in ensuring responsible and effective access to private markets.

Roger Vincent [47:51]: "I think there are a lot of threads we could have pulled on a little harder had we had more time. I would love to come and be a guest again..."

Key Takeaways:

• Private Equity Complexity: The private equity industry has expanded exponentially, making manager selection increasingly crucial for achieving desirable returns.
• Democratization Challenges: While access to private equity has become more widespread, ensuring quality and managing fee structures remain significant hurdles.
• Summation Capital’s Approach: By acting as an outsourced CIO, Summation Capital provides diversified, high-quality private equity exposure with a focus on alpha generation and transparent fee structures.
• AI’s Role: AI holds transformative potential for investment strategies but requires cautious integration to complement, rather than replace, experienced investment judgment.

Notable Quotes:

• Roger Vincent [11:51]: "While access has gotten easier, quality has gotten harder. Manager selection or access is really critical."
• Roger Vincent [21:57]: "Most people are making actual investment decisions on things that don't come straight out of the University of Chicago."
• Roger Vincent [33:09]: "We wanted to create a fund structure that got people professional exposure to private equity... but only charge them for what we consider true value add. And that is the alpha."
• Roger Vincent [44:49]: "We are using it to enhance productivity first and foremost and it's not something that I think is going to be a credible tool for manager selection anytime soon."

This episode offers a deep dive into the intricacies of private equity, emphasizing the need for informed investment strategies and the value of professional management in navigating this complex landscape.