Exchanging notes on the CVCA conference

Overheard at a recent ILPA luncheon….

Scott: How did things go at the annual conference of Canada’s Venture Capital & Private Equity Association last month?

Julie: You were right to skip it. We got the usual heat about not investing in Canadian funds, but the mega LP panel was not the usual “blah, blah, blah”. As challenging as I’ve ever seen.

Scott: Really? I would have enjoyed that.

Julie: Don’t be so sure. Kensington’s Rick Nathan was the moderator, and he raised almost every sacred cow question that could have come up over the past few years. The ones that everyone always thinks about, but is too afraid to stand up and ask for fear of being blackballed by the Star Chamber.

Scott: the Star Chamber?

Julie: You know. The group that is deciding which Canadian funds survive.

Scott: Does Rick have a death wish?

Julie: His firm is in a strong place right now, so I guess he wanted the panel to talk turkey, rather than be just another public ego stroke of the big LPs. Plus, he’s the Chairman of the CVCA, so he’s expected to make the conference worthwhile for the folks who paid $2500 to attend.

Scott: Did he ask about the double standards?

Julie: He was more oblique than that. He asked CPP Investment Board’s Mark Wiseman about how they compensate their direct investment team, and if it is similar to the GPs that CCPIB invests in.

Scott: That’s new ground. What did Wiseman say?

Julie: He said the CPPIB often has assets like Chilean power lines that they don’t want to sell for 20 or 25 years, so they pay their team their promote on a four year rolling NAV appreciation basis. You know, based upon a notional mark-to-market figure.

Scott: What did Nathan say?

Julie: He reminded the audience that GPs have to wait for exits to get their bump, and also have to wait to get paid their promote at the end of 10 years.

Scott: Interesting!

Julie: Nathan also asked about alignment of interests, and queried if pension fund direct teams invest their own cash in their own deals, just as GPs do.

Scott: Oy.

Julie: Wiseman did a great job. He said they couldn’t…that there were regulatory challenges with that.

Scott: Did Nathan ask him if pension plans were applying to have those “complications” dealt with by the regulators?

Julie: Hah! No. Guess he thought better of it.

Scott: A question for next year, perhaps.

Julie: But he did ask Paul Renaud to talk about the direct venture capital initiative that OMERS announced at the 2009 CVCA conference.

Scott: How did he do?

Julie: Paul did great; as well as you could under the circumstances. OMERS believes that having deep pockets and a long investment horizon are two keys to making money in venture. They’ve succeeded with their direct PE strategy, and there’s nothing to say they can’t repeat it with venture.

Scott: What did Nathan say to that?

Julie: He got Brooks Zug of HarbourVest to pick up the string.

Scott: Uh oh.

Julie: Exactly. Brooks said that “they see this from time to time”. That, in their experience, pension funds usually decide to go direct at the top of market. And eventually shut it down again.

Scott: That must have hurt, although this isn’t the top of the venture capital market.

Julie: I’m not sure it was a comment about venture so much direct investing in general. Brooks said that when the pension fund direct investment teams do really well with their investment strategies, they eventually leave and start up their own PE fund or fund-of-fund. “They decide they want the fees for themselves.”

Scott: How true. Did he mention Erol Uzumeri by name?

Julie: He didn’t. But Brooks didn’t pull any punches.

Scott: Guess it takes a guy with US$25 billion under management to speak the truth. I’m sorry I missed the fireworks.

Julie: Don’t be. I have 75 emails and voicemails from GPs looking to get some time with me. Something about fundraising season.

MRM
(disclosure – this is satire, although the panel dialogue is legit)