An Insider’s View of RIAs, Family Office Syndicates, and Private Equity’s Freak Evolution

“Private equity has evolved into an asset management business rather than an investment management business,” said Elizabeth Browne, Head of Entrepreneur & Family Office Partnerships, of RedBird Capital Partners.

Elizabeth Browne (Courtesy photo)

Elizabeth Browne

(Courtesy photo)

Success runs in Elizabeth Browne’s family. Her grandfather was the CFO of Sears, Roebuck and Company during its 1960s heyday and later launched a series of successful businesses in China. Her mother held a senior role as a corporate banker in the 1970s when few women worked in the business. “My mother took a sledgehammer to the glass ceiling,” said Browne.

After business school, Browne joined Goldman Sachs’s investment management division in Chicago to work with family offices. Her background made her a good fit for the job given her liberal arts undergraduate degree, business school degree, and experience working on global social issues for women. Browne then spent more than four years at a single family office in Chicago that focused on direct private markets deals. There she worked as a member of the investment team and head of deal sourcing.

Today, Browne is Head of Entrepreneur & Family Office Partnerships for RedBird Capital Partners, a Manhattan-based private investment firm that manages $4 billion across verticals in sports, TMT (technology, media, telecommunications), financial services, and consumer. She primarily works with families and business founders on transaction sourcing, company building, and co-investments.

While Browne thrives working on deals and building meaningful relationships, she also helps girls and women break into finance. Browne insists that women must be represented if they are to succeed. Through her own philanthropic endeavors and by leading a company-wide women’s initiative for RedBird, she is trying to make that happen. Browne is also focused on helping women given that the coronavirus is disproportionately forcing women out of the work force.

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Below is our recent discussion, edited for length and clarity, about her career, how she’s navigating the pandemic, and what she sees ahead.

Q: What has your career path been like?

I’ve had a very nonlinear course into finance. My first job was in public interest law as an advocate for domestic violence victims and after that I was thinking about law school, so I gave corporate law (in China, as a corporate paralegal) a shot as public interest and corporate law, respectively, were the most likely paths post-law school. I moved to China where my family businesses were based at the time and it was in Beijing that I fell in love with working on deals as a corporate paralegal, working on M&A and private equity transactions. At the time in 2008 China was the only country with a robust balance sheet and they were privatizing their state owned assets.

When I came back to the states in 2009, I worked for the Chicago Council on Global Affairs where I covered a range of global, political, economic, and social issues in my role as program officer and ultimately ran the women in global development forum that shined a light on economic and social issues for women and girls.

After that I went to business school at Kellogg (School of Management at Northwestern University) — the scariest thing I could do at the time as a liberal arts major who had studied psychology and sociology and was intent on majoring in finance.

I was born and bred in a family that prioritized broad liberal arts degrees. I decided to keep my head down and double major in finance and international business, forsaking the social experience of business school.

In 2012, we sold both our family operating businesses in China—both public and private— within six months of each other, while I was in business school. My grandfather, beloved patriarch of our family, who was the CFO of Sears in the 1960s, had encouraged me to study finance as well as accounting, as then I would understand the language of business.

Ultimately I ended up with a spot in asset management at Goldman Sachs where I spent two years in Chicago covering predominately single family offices, a time before family offices were treated as an asset class and before banks had their own dedicated family office coverage groups.

I was later introduced to a member of a family in Chicago that was in the process of launching their family office and focused on direct private markets deals. I joined them to pursue a mandate of early stage through mature operating company investments, as a member of the investment team and head of deal sourcing. I covered a range of industries and sectors that focused on family owned businesses that would benefit from long-term capital partners.

I joined RedBird a year ago. It was a natural evolution with my time working with family offices. We have a company-building and investing model predicated on partnerships with founders and family offices and rely on our entrepreneur and family office network for differentiated deal sourcing. We help them grow their businesses and further professionalize them.

What has the evolution of family offices/ RIAs, especially as per direct investing, looked like from your perspective?

There’s been a mass proliferation of single and multi-family offices, the latter through RIA platforms creating informal syndicates of families investing together and sharing services that relates directly to private equity. Most families have broad, opportunistic mandates and have flexibility when it comes to check size and sector.

The big caveat is there is that family offices are getting wealthier and wealth creation has enabled the development of family offices whereby families can bring a dedicated fiduciary/fiduciaries in house to manage their range of investment needs. Offices have proliferated in response to families’ disenchantment with the traditional passive, blind pool, 2 and 20 private equity model, which many families worry promotes misalignment between general partners and limited partners, prioritizes quick return of capital over company building, and relies on leverage/financial engineering rather than growth and investment.

Another consequence of that is the disenchantment among the largest families who have the asset base to start a family office or multi-family office but find fundamental short comings in the traditional private equity model. Private equity has evolved into an asset management business rather than an investment management business.

Families want the private markets access and it should return 6% to 8% above and beyond public markets if you can stand the illiquidity. It can be difficult if you don’t have a four to five person deal team to source and execute deals in a heavily capital-saturated market in which there are many investors chasing too few good opportunities, but many families understandably don’t want to field another operating company equivalent in-house. That tension has spurred the buildup of family offices who want dedicated professionals to be on their side of the table and RIAs have benefited from this in a meaningful way as families have increasingly turned towards RIAs with a multi-family office feel.

What interesting private equity trends are you seeing now? Forecasts for the future?

Historically cheap credit with the injection of the Federal Reserve propping up the credit markets today has created an extraordinary saturation of capital along with historic levels of private equity dry powder. There is just so much capital chasing deals, and when capital is a commodity, you still need the ability to have a unique angle on the deal.

Families are thinking about the next generation of investing—impact investing, renewables, bridging the rural digital divide, taking advantage of shorter term market dislocation via credit and distressed vehicles, especially in that March/April timeframe as families could respond to the economic circumstances in the U.S.

What advice would you give for RIAs looking to enter or increase their exposure to private equity?

Find great partners. RIAs and family offices usually lack developed direct investment capabilities in-house. While some are beginning the process of building them out, they still don’t have them now. They would be best served about learning from other family offices and RIAs on where they have gotten it right or wrong.

You either have to be fully committed in-house or fully partnered. Either build out a full investment team capability or build out third party general partnerships and relationships that can have the expertise that you want to access and leverage opportunities for those types of deals. You see far too many RIAs and families have a middling approach that makes it difficult to source or execute the quality and quantity of direct investment opportunities they would like and to address issues of adverse selection.

What are clients looking for more of/ less of during the pandemic?

Credit opportunities— especially in the first six weeks of pandemic—were a huge focal point. But when I talked to industry friends then, they kept waiting for this credit market opportunity set and before they could act on it, the opportunity was gone.

Investors were also looking at distressed investment opportunities, but most families/investors were not pursuing distressed opportunities themselves given that valuations in public and private markets were incredibly rich, so many waited on sidelines and are still waiting for valuations to come down.

Some did pursue distressed and took advantage in some sectors of attractive pricing, but overall most valuations haven’t really come down. In many cases, they’ve deployed less capital than they would have hoped for relative to the current environment.

How are you handling COVID, career, and motherhood?

My daughter is four years old and has been back to school in person for the last month. The silver lining of COVID by far has been not traveling and my office has become my home office. I’ve gotten to spend time with my daughter, in a way I wouldn’t have been able to—but that comes with the compounding stress that you aren’t executing at your best anywhere.

It’s incredibly hard not to have an overwhelming sense of guilt on where your gaps are and missing time and work versus family. I have the benefit of childcare help for much of the last several months, which I recognize and empathize is not the case for many parents.

The startling trend that I see is women/moms exiting the workforce at about four times the rate of their male peers. I worry about that in the context of the pandemic and all of that social consequence that will set back the labor force and economic gains. It will be by far one of the most devastating consequences of this whole thing.

Q: How do you work with other women in finance?

My mom was a corporate banker in the 1970s and she was one of the only women—period. I remember asking her about gender issues. I asked: how did you both tolerate being one of the only women or the only woman in finance and how did you deal with, at times, an openly hostile environment? She told me that she thought of being a woman as an advantage because everyone remembered her name.

My mom inspired me with that, even though finance is still an incredibly male dominated industry. That’s why I always made a point to convene with women who were 10 to 15 years ahead of me and get them together for drinks or dinner on a no-agenda basis, since its fundamentally different being a woman in finance. Today, I co-head our women’s initiative at RedBird and spend time philanthropically on helping women and girls pursue careers in finance and business more broadly.

Q: What are some of the top concerns of women rising in this space?

At a recent virtual Kellogg (my alma mater) event in October, I was asked the same question. It comes down to some permutation of: if you can’t see it, you can’t be it. Representation matters.

I get this question a lot from women in their early 20s: do I have to change fundamental aspects of who I am to be successful? Do I have to self-promote? Be the most aggressive person at the table?

They are afraid that the models that they see from senior leadership is the aggressive, self-promoting one. They think if they don’t behave that way, they won’t be successful. They also ask if it possible to succeed as a woman? Can you be a senior woman in finance but have a family or outside interests? If they’re a marathoner or a caregiver for elderly parents, are they capable of putting in the hours to be successful?

I was also recently asked: how should I approach timing for having children in terms of a finance career?

My advice? Have your children whenever you want. Plan your life according to your values and what works best for your family, and the rest will follow.

Thank you, Elizabeth.

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