American corporate finance & the wealth of nations, with Donald H Chew

American corporate finance & the wealth of nations, with Donald H Chew

Donald H. Chew, Jr., founding editor of the Journal of Applied Corporate Finance, joins Ross Butler on Fund Shack to discuss the evolution of corporate finance and its impact on national wealth. Based on his latest book, The Making of Modern Corporate Finance, Chew explores the shareholder revolution, Japan’s stagnation, China’s middle-income trap, and private equity’s role in reshaping global markets. A masterclass in corporate & financial governance, offering insights into how corporate finance fuels economic prosperity. 📉 The Shareholder Revolution & the 1980s Breakup of Conglomerates 🦬 Corporate America in the 1970s suffered from inefficiency, with large conglomerates prioritizing stability over investor returns. The 1980s shareholder revolution broke up these inefficient structures, restoring a focus on productivity and capital efficiency, in contrast to Japan’s stagnation. 🎌 Japan’s Corporate Governance Failure: For three decades, Japan’s economy has stagnated as corporate structures resist shareholder influence and fail to optimize capital allocation. The lack of investor control has slowed productivity and exacerbated demographic challenges, leading to economic decline. 🐉 China’s Middle-Income Trap & Market Manipulation: Chew argues that China’s financial system mimics American capitalism in appearance but lacks key investor protections. State-controlled enterprises dominate capital allocation, IPO markets are manipulated, and foreign investors face barriers, all of which prevent sustained long-term economic growth. 🏢 Private Equity as a Force for Good: Despite criticism, private equity and activist investors drive corporate efficiency by restructuring underperforming companies. By enforcing financial discipline, improving governance, and maximizing efficiency, PE has been a key driver of economic growth. 🌍 The Global Financial Crisis: A Political Incentive Problem: Rather than a failure of capitalism, the 2008 crisis was driven by government policies encouraging subprime lending. Political incentives distorted the housing market, leading to systemic financial risk that was amplified by European banks. 📈 The Future of Corporate Finance & National Prosperity: Chew emphasizes that corporate finance is the foundation of national wealth creation. The U.S. stock market serves as a leading indicator of economic productivity, outperforming global peers due to a dynamic, investor-driven corporate culture. ♻️ ESG: Enhancing Value or Distorting Priorities? The debate over ESG investing centers on whether it aligns with shareholder value or imposes politically driven constraints. Chew contrasts Milton Friedman’s shareholder primacy with Michael Jensen’s concept of enlightened shareholder value maximization, arguing that long-term profitability must remain central to corporate decision-making. 🔗 SUBSTACK https://privateequitypodcastfundshack.substack.com/ 👉 LinkedIn https://www.linkedin.com/company/fund-shack/ 📧 Katie Mitchell: katie@linearb.media CHAPTERS 00:00 Introduction to Donald H. Chew, Jr. 01:12 Transformation of American corporate finance 02:39 How investors reshaped corporate governance 04:39 Japan problem: Why investor control matters 07:09 Volkswagen vs. GM: Corporate governance case study 09:56 Japan’s ‘30-year slumber’ and the role of shareholder activism 12:29 China’s middle-income trap 14:56 The illusion of Chinese economic success 21:04 The real cause of the Global Financial Crisis 27:02 The dangers of bad financial metrics 32:00 The rise and fall of EVA 39:05 The overlooked role of PE in shaping corporate governance 45:02 Michael Milken and the rise of private credit 52:05 Best indicator of real productivity 55:00 New key metric for company success 1:00:02 Why Milton Friedman was right about profit 1:05:00 Is America heading for recession?

Transformative financial services investment, with Corsair Capital's Raja Hadji-Touma

Raja Hadji-Touma, Partner at Corsair Capital and Head of European Buyouts, discusses Corsair's focus on asset-light businesses in financial services, technology, and business services. He explains Corsair's thematic approach to identifying trends and opportunities, emphasizing hands-on value creation, digitization, and scaling businesses through operational and strategic improvements. Insights Specialization and Evolution Corsair Capital, originally part of JP Morgan, began as a solution to recapitalize troubled financial institutions after the U.S. Savings and Loan crisis. Over time, the firm shifted focus from capital-intensive businesses to asset-light services and technology within the financial services ecosystem. This evolution allows Corsair to focus on operational efficiency and scalable growth, targeting sectors like insurance distribution, fund administration, and B2B payments. Value Creation and Hands-On Approach Corsair prioritizes active value creation by establishing clear 100-day and long-term strategic plans with management teams. Their approach involves operational improvements, talent development, and technology enhancements. With a focus on institutionalizing businesses, Corsair utilizes operating partners to assess organizational needs, streamline go-to-market strategies, and execute M&A strategies for growth. Market Trends and Opportunities The firm targets fragmented markets, especially within insurance distribution and B2B payments, leveraging consolidation opportunities to scale businesses. Raja highlights the impact of AI and automation as key trends driving efficiency and new investment avenues. Corsair also sees regulatory requirements as growth catalysts, creating demand for compliance-related services and technologies. Sector Focus: Building Platforms in Niche Markets Corsair focuses on mid-sized businesses with EBITDA between $5-20 million, scaling them to $50-70 million through buy-and-build strategies. The firm emphasizes recurring revenue models, high cash flow conversion, and resilience against economic cycles. Their thematic approach allows them to identify promising sectors and proactively source deals, often in bilateral settings. Outlook and Strategic Growth: Despite slower deal flow in 2024, Corsair remains optimistic about the next six to nine months as private equity adjusts to market conditions. With strong sector tailwinds, such as digital transformation and regulatory compliance, Corsair continues to back businesses positioned for long-term value creation and consolidation opportunities. Like this content? Please support us -> Subscribe to Spotify and ⁠Substack⁠ [https://substack.com/@privateequityfundshack] -> Follow us on ⁠Linkedin ⁠ [https://www.linkedin.com/company/fund-shack/] -> ⁠YouTube ⁠ [http://www.youtube.com/@PrivateEquityPodcastFundShack] -> Suggest a guest or become a sponsor: email Katie@linerab.media   Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group. ⁠Linear B Group [https://linearb.media/]

The man who private equity execs trust with their own capital

Arjun Raghavan, CEO of Partners Capital is the man private equity executives trust with their money. And not just them. Partners Capital has evolved from managing private equity executives’ wealth to overseeing $60 billion for smaller endowments, family offices, and foundations globally. In this conversation, Arjun speaks to Ross Butler about the firm's "Advanced Endowment Approach", emphasizing diversification, resilience, and early-stage access to niche opportunities.  Origins and GrowthPartners Capital was founded in 2001 to offer investment management services inspired by the endowment model. Initially focused on private equity partners, the firm expanded to serve smaller institutional clients and family offices. Under Arjun’s leadership, the firm scaled operations globally, now managing $60 billion across Europe, Asia, and the US. Twin-Engine Investment PhilosophyCentral to Partners Capital’s strategy is the twin-engine model. The beta engine focuses on cost-efficient diversification across traditional and alternative asset classes. Meanwhile, the alpha engine targets illiquid, high-return opportunities, providing both resilience and enhanced returns. Together, these engines ensure robust portfolio performance through cycles. Adapting to Market DynamicsIn a challenging market environment marked by concentrated gains in public equities and the saturation of alternatives, Partners Capital remains agile. It prioritises resilience through true diversification, embracing strategies like private debt, venture capital, and specialist asset management.  #PrivateEquityPodcast #AdvancedEndowmentApproach #PartnersCapital #PrivateEquity #Diversification #FamilyOffices #EndowmentModel #AlternativeInvestments #FundShackPodcast #ArjunRaghavan Like this content? Please support us -> Subscribe to Spotify and ⁠Substack⁠ [https://substack.com/@privateequityfundshack] -> for this episode summary with the best clips: https://privateequitypodcastfundshack.substack.com/p/episode-68-the-man-private-equity -> Follow us on ⁠Linkedin ⁠ [https://www.linkedin.com/company/fund-shack/] -> ⁠YouTube ⁠ [http://www.youtube.com/@PrivateEquityPodcastFundShack] -> Suggest a guest or become a sponsor: email Katie@linerab.media   Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group. ⁠Linear B Group [https://linearb.media/]

The Dawn of Passives in private markets, with NewVest

Ross Butler speaks with Edward Talmor-Gera, Founder and CEO of NewVest, and Matthew Chapman, Director at NewVest. NewVest is a pioneering company providing low-cost, diversified index funds for private equity, private debt, and other private market strategies — revolutionizing how investors access private markets. Insights: Why Passive Investing in Private Markets is Revolutionary Edward explains how indexing challenges traditional notions about private equity by providing diversified exposure to the market’s average return, which has consistently outperformed the median. He reveals that 70% of private equity funds in any vintage year underperform the pooled average, making an index approach both efficient and attractive. Debunking Myths About Private Equity Performance Edward and Matthew address a common myth: that trying to select top-performing funds is the only way to succeed in private equity. They share data proving that relative performance persistence among fund managers is statistically limited, making an index strategy a reliable alternative. NewVest’s Unique Approach Fund Structure: NewVest employs a no-management-fee structure, charging only a low carry.  Access to Top Funds: NewVest invests in the 50 largest private equity and private debt funds each year, gaining near-complete access to the top players in the industry, including Blackstone, KKR, and Carlyle. Diversification and Cost Efficiency: By weighting investments according to target fund sizes, NewVest offers exposure to the asset class while drastically reducing fees and risk compared to active fund selection. The Evolution of Private Markets Investing Matthew emphasizes how passive instruments complement active strategies, allowing investors to focus on areas where they can achieve true alpha while leveraging the stability of an index for broader diversification. Future Plans and the Vision for Private Markets NewVest envisions a future where passive investing in private markets is as ubiquitous as it is in public markets. They aim to introduce sector-specific and niche indices, such as clean tech or geographic-focused products, and even indices for first-time funds. Aligning Interests and Democratizing Access Edward shares how NewVest’s alignment with LPs and innovative approach is attracting institutions, family offices, and even individual investors.  Like this content? Please support us -> Subscribe to Spotify and ⁠Substack⁠ [https://substack.com/@privateequityfundshack] -> Follow us on ⁠Linkedin ⁠ [https://www.linkedin.com/company/fund-shack/] -> ⁠YouTube ⁠ [http://www.youtube.com/@PrivateEquityPodcastFundShack] -> Suggest a guest or become a sponsor: email Katie@linerab.media   Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group. ⁠Linear B Group⁠ [https://linearb.media/]

The huge opportunity in minority private equity partnership investments, with David Whileman of Inflexion

Ross Butler speaks with David Whileman, Partner at Inflexion Private Equity, about the untapped potential of minority private equity investments. David shares how minority investing provides entrepreneurs with the resources to scale without selling their businesses. The conversation explores the fund’s strategy, its impact on portfolio companies, and the competitive advantages of minority investments in addressing a vast market underserved by traditional private equity. The Untapped Potential of Minority Investments:David explains how minority investing offers private equity benefits without requiring businesses to sell outright. This approach opens private equity to 75% of companies that are not typically for sale, particularly family-owned or entrepreneur-led businesses. Inflexion's Partnership Capital Fund Performance:Since launching in 2015, the fund has raised £1.75 billion, completed 24 investments, and exited nine, including several that achieved exceptional growth. David emphasizes the fund’s ability to serve as the first institutional investor for established companies averaging £350 million in value. Building Trusted Relationships:Key to minority investing is fostering trust and alignment with entrepreneurs. David highlights how Partnership Capital avoids prescriptive exit strategies, allowing for collaborative decisions that benefit both investors and business owners. Expanding Globally and Corporate Partnerships:Inflexion has extended its reach across Europe and recently into corporate partnerships, where it supports divisions of large corporations seeking independence while maintaining alignment with their parent companies. Value Creation Beyond Capital:Inflexion delivers more than funding, offering expertise in talent management, technology adoption, pricing strategies, and global expansion. Its offices worldwide provide portfolio companies with the tools to enter new markets and scale effectively. Cultural Fit and Talent Recruitment:David underlines the importance of hiring professionals with emotional intelligence and entrepreneurial mindsets. He describes Inflexion’s team as diverse and collaborative, ensuring alignment with the needs of entrepreneurs. RW Blears: Our sponsor for this episode is RW Blears, a UK law firm specialising in fund management. If you are a UK venture capital manager or growth investor and need a trusted legal adviser, visit https://blears.com/ #PrivateEquity #MinorityInvesting #PartnershipCapital #InflexionPrivateEquity #Entrepreneurship #BusinessGrowth #PrivateEquityPodcast #DavidWhileman #FundShack #AlternativeInvestments #CollaborativeInvesting #PrivateEquityInsights #RossButler Like this content? Please support -> SUBSCRIBE -> SUBSTACK https://privateequitypodcastfundshack.substack.com/p/episode-66-the-huge-opportunity-in -> Subscribe to Spotify and ⁠Substack⁠ [https://substack.com/@privateequityfundshack] -> Follow us on ⁠Linkedin ⁠ [https://www.linkedin.com/company/fund-shack/] -> ⁠YouTube ⁠ [http://www.youtube.com/@PrivateEquityPodcastFundShack] -> Suggest a guest or become a sponsor: email Katie@linerab.media   Fund Shack is a private equity podcast and global media channel for alternative investment professionals. Fund Shack is produced by Linear B Group. ⁠Linear B Group⁠ [https://linearb.media/]