Simon Wotherspoon
Welcome to Capital Conversations brought to you by Perks. I’m Simon Wotherspoon, head of Perks Private Wealth, and I’m excited to kick off this first episode of the series with my co-host, Christo Hall. And for those listening who haven’t had the pleasure of meeting Christo, I can tell you he’s someone who knows a thing or two about the markets. Christo is chair of the Perks Investment Committee with more than 30 years’ experience in markets. He’s worked everywhere from Argo Investments here in Adelaide to Goldman Sachs, JB Weir and BlackRock in Hong Kong. And he’s now helping guide some of Australia’s most sophisticated investors.
So, Christo, welcome to the show.
Christo Hall
Yeah, thanks, Simon. I’m very happy to be here and this is my first podcast ever. So not quite sure how it’s going to pan out, but I’m very excited to be co-hosting with you ⁓ our Capital Conversations podcast series.
Simon Wotherspoon
And to kick it off, I’ll just say that our mission in this Capital Conversations podcast is to give you listeners access to private markets, big investment ideas, and the leaders shaping the future of wealth. So no pressure there, Christo, but that’s what we’re trying to achieve.
Christo Hall
That’s why I had the disclaimer, Simon. ⁓ Looking forward to it. It be good to have good conversation.
Simon Wotherspoon
Well, before we dive into today’s special guest, let’s talk markets for a bit because, gee, there’s a lot going on at the moment. I mean, this weekend, we’ve got the US Fed hosting the Jackson Hole Economic Symposium.
I mean, effectively, it’s where central bankers go to fish and hike and maybe casually decide the fate of the future of markets.
Christo hall
Very true.
Simon Wotherspoon
And of course, Jerome Power, who’s ⁓ giving the keynote markets will be hanging on his every word, won’t they? And wondering whether there’s going to be interest rate cuts or whether he just sits on the fence again and claimed it’s going to be data dependent. Yeah.
Christo Hall
Well, I think if, if he doesn’t cut rates again soon, Donald Trump’s person got to go around and hang him. Absolutely. ⁓ no, being very public about what he thinks of the, ⁓ of the federal reserve chair and what direction he thinks rates should be heading in right now.
Simon Wotherspoon
Absolutely. Well, and then, you know, closer to home, the ASX, I think just yesterday, cracked through 9,000 points for the first time ever, which is huge, really. I mean, I remember when I started in this game and that seemed like a long way away. And presumably when you started in this game, that just seemed like science fiction.
Christo Hall
Yeah, absolutely. It’s hard to believe that we are, are, but you know, the market’s changed a lot over the 30 years that I’ve been involved in market structure, particularly the rise of ETFs, the rise and rise of ETFs and passive investing versus active. Some interesting trends there, which we can touch on as well. But that’s certainly been the case, not just here, but…around the world. And I suppose the other thing happening at the moment here in Australia is there’s a sort of symposium or round table happening at the moment where our politicians are getting together. And really, I suppose there’s growing whispers of new taxes, probably not a surprise. But nonetheless, promise of no taxes at last election. And here we are, there’s whispers coming out pretty strongly that there may well be. Typical politicians. Exactly.
Simon Wotherspoon
Would you expect anything else? So, I mean, you’ve just come back from Sydney.
What are you seeing in markets at the moment, Christo, and how are you reading it all?
Christo Hall
Yeah, so a couple of really interesting points. Firstly, let’s start locally first. So we’re going through earnings season in Australia, and it hasn’t across the big some big moves which we’ll touch on later on the podcast but overall it’s been OK. It hasn’t been, you know, too disastrous. There’s been a few a few bad examples, which we can mention later on. But things are holding together.
⁓ here. ⁓ It’s slower, the economy is slowing, know, growth is slowing, company earnings are very moderate. We’ve started cutting rates obviously here in Australia and we’re probably likely to see one or two more cuts ⁓ going forward as we’re heading towards the end of the year and maybe another one thereafter. ⁓ But you know, I think what we’re trying to all fathom is just how much the economy is going to continue to slow from global impacts and that takes us off into international sphere, which will be a big topic. Obviously, Jackson Hole is about tariffs and just what is happening ⁓ with the imposition of tariffs on companies.
Simon Wotherspoon
Seems like the inflation data still is reasonable in the States, but the recent the price index peak last Friday and signs perhaps that the costs of the tariffs are going to start to flow through?
Christo Hall
They are. starting to. That’s right. So and you’re seeing that. again, the earnings in the US have been very robustly by tech. But again, those tariffs, there’s going to be a lag effect and that we’re just going to start seeing them come through. I think the data is starting to weaken enough in the short term to suggest that rate cuts will be back on the agenda in the US as well. So there’s been a of a pause. I think there’s some more to come there.
I also know that the Federal Reserve is going to be very, very focused, as are all central banks, about what the inflationary impacts are going to be in this new tariff regime. I think it’s really important, Simon, to talk about this because we are, and I see this as something which is structural. We’re getting to a stage where politics, geopolitical, influences, you know, becoming a lot more pronounced. We’ve seen in a long, long time. And that’s going to have an impact on both, you know, what we call fiscal policy and monetary policy, being interest rates. We’re already starting to see that with rates. But it’s really important also to acknowledge that, you know, governments have been spending a lot of money since COVID, a lot of money and their own balance sheets, their own financial health is being severely compromised, including that of the US. Now, the Donald wants to add $3 trillion onto the deficit through tax cuts. Well you know, for me, I think what we’ve got to be very ⁓ mindful of here is what this means for the US dollar. Now, we’ve already started to see that the Aussie dollar appreciated in the last four months, it’s up about 10%.
But I think we’re entering a stage now where the US is reaching a bit of a structural inflection point here where it’s not just against the Aussie, it’s against multiple currencies, leading currencies that we’re going to see some longer-term pressure on the US dollar.
Simon Wotherspoon
So think on your international equities, would you be hedging a bit now?
Christo Hall
Yes, that’s right. I think that’s absolutely right. So we’ve got to be very, very mindful of that. And that’s one thing I flag from that. And what that then means also for if you have a situation where ⁓ the currency is under pressure, the whole, what we’ve referred to as the excellence of the US being the world leaders, that’s getting questioned as well a bit here. So when you have countries like Japan and China who are huge owners of US treasuries, there’s a reason why the gold price has been running so hard.
And the reason for that is because these countries are getting nervous about the US dollar exposure, which is through holding US bonds, US treasuries, and they’re worried about the trend of longer-term interest rates. And B, they’re worried about the currency now. That’s why they’re going to be big buyers of gold.
Simon Wotherspoon
So there’s sort of short term, potentially subject to Jackson Hole this weekend, light in terms of reduced interest rates and moderating CPI, et cetera.
But longer term, this sort of huge amounts of public debt and increasingly so in the US, like the unwinding or what impact that has over time. There’s still lots of.
Christo Hall
Yeah, absolutely. Yeah, it’s going to be a very interesting journey here. The unwinding of that, really, tight fiscal position is going to take going to take some time. So the governments have kind of run it over and other bullets.
You know, pretty much across the the developed world anyway. So we want to head into another crisis like a covid or something that requires a bailout from the government. There’s just isn’t really the firepower to do that. The one the one one market which is really improving is is Europe, actually. I mean, they’ve kind of gone through their rate cuts and there’s been some fiscal stimulus out of Germany, which is affecting all of Europe in a good way. So that’s where the capital has been flying. So we’ve seen some reductions out of the US and flying into Europe.
So there’s been a bit of movement. Again, all that’s in response to obviously the tariffs as well and the implications for that because people are aware that the tariff impacts were really going to be felt in the US. So they’re actually importing inflation into their own economy, which means rates are going to be higher for longer. So therefore, there’s more attractive propositions elsewhere.
Simon Wotherspoon
I mean, we could probably talk a lot about what’s going on globally and there’s a lot to sort of water gun to the bridge, I suppose. But right now there’s ⁓ the Australian reporting season. In fact, there’s the US reporting season happening at moment, earlier season. I think I might be right. Might be jumping the gun, but I think you’re going to have a spray at something here. So I’m going to jump to this segment that we’re going to start doing. It’s called Christo’s Spray of the Day. And this is where we basically bring your famous rants to the table and you’re able to take aim at something that’s caught your eye. So I think the whispers that it might be something going on in Australia’s earnings season is.
Christo Hall
Well, not just Australia. This started about six months ago and the company is James Hardy, which the listeners would have known that the stock price has been absolutely decimated. It’s down 40 percent, I think, in the last week. But it really kind of set the scene when it made a very unfavourable acquisition with its shareholders in the US called ASEC, ⁓ which was at a huge price paid $14 billion Aussie for it. And it was highly dilutive to earnings. So that didn’t really get the shareholders thrilled or the market thrilled. For that matter, nothing on the day it was the stock was down 10 % back in March because the earnings were dilutive by a similar amount or a little bit more. But what that did was that increased again their exposure to the US even more so.
And Azek are a company they’re involved in. When they’re a good company, they’ve got some good products, high value end, know, Pagolas and Patios and, you know, railings and things like that. Big company. But the price they paid at this stage of the cycle just seems to be incredibly excessive. And so what then happened a couple of days ago was when they went into the reporting period, and behold, a huge earnings miss, not just from…not just from the US, but pretty much right across the board, but the US a big part of it and it’s slowing. And I think that’s what, you know, that housing picture is what’s going to, I think, underwrite the next rate cuts in the US.
Simon Wotherspoon
Who are you pointing your spray at? Is it the board of James Hardie?
Christo Hall
I think it’s the board and the management. Exactly. The board have to ⁓ have to sign off on the deal, which they would have.
And the CEO is obviously been driving the strategy. ⁓ But I think that, you longer term, it might turn out to be all right, but there has to be a consciousness of valuation ⁓ and the delivery of those synergy benefits, which they’re claiming that will come with that. I mean, that’s going to be debatable as to how quickly they can come through. you know, you see so many companies go offshore with big acquisitions. ⁓ And some have done well, but…
Look, it’s been a graveyard quite often for many companies as well. Let’s see how it goes. But the market has voted with its feet, and I know the stock’s going to stay in the the sin bin for quite some time here before it gets
Simon Wotherspoon
Pleasingly from our client point of view, we don’t call James Hardy and we’ve sort of come through so far earning season relatively unscathed. think mostly certainly we’re ahead in the market on that one. Our Aussie shares and a couple of stocks under review, but predominantly come out fairly well unscathed.
Christo Hall
Yeah, that’s good. Yeah, that’s right. Because it’s all about, you know, picking the winners and avoiding the losers as you know.
Simon Wotherspoon
So, look, now we should probably move on to today’s feature conversation. While you’re off tackling the big issues in Sydney, Christo, I had the privilege of sitting down with Cameron Blanks. Yes. He’s the managing director of Pacific Equity Partners or PEP, as it’s commonly known. And Cameron’s been with PEP since 2002 after stints at Bain and the company and the mining and construction industry in Australia, Asia, North America. So he now heads the PEP Gateway program, which is all about essentially unlocking private equity and providing access to private individuals and clients like us. So, it’s a really good chat and a really informative chat. And I suspect maybe even you might learn something from it. Totally. Take notes.
Christo Hall
Great, great amount of respect for Cameron. So I think it’s going to be a fantastic chat to hear from ⁓ him.
Simon Wotherspoon
So Cameron, you grew up in South Australia. You went to university at University of South Australia, now Adelaide University, ⁓ and then went on to study at ⁓ MIT and did management there.
And you ultimately, I think I’m right in saying, went into engineering or consulting engineering in some way. What brought you into private equity and perhaps your learnings from your studies in engineering and MIT, et cetera, have you brought to your life in private equity?
Cameron Blanks
Yeah. So I mean, think the great thing about being an engineer and living in the outback of Australia and working on mine sites and working on construction projects is it really gives you an operating empathy, I would call it where.
You you’ve had to go through the process of getting people to actually get stuff done. A lot of people in private equity actually don’t have that background. They’ve come straight out of university and straight ⁓ into management consulting or into investment banking and the like that find their way into private equity. So I think it’s quite a unique background. I think it really helped me ⁓ sit on boards with management teams and have some operating empathy.
So my transition ⁓ out of engineering really was through MIT in Boston, where I did an MBA and then joined Bain & Company, which is a strategy consulting firm. ⁓ And PEP was set up within the Bain & Company office here in Sydney. And so, it was really quite an easy transition. I literally walked across the hallways and started working on private equity due diligence for PEP and then joined the company 23 years ago.
Simon Wotherspoon
Well, tell us then a bit about PEP and sort of talk about the genesis of it. But I think I’m right in saying it’s Australasia’s largest private equity firm and you manage about $17 billion of funds out of management with an exceptional track record, sort of averaging 28 % per annum net to investors.
So what do you think’s been the key to that success?
Cameron Blanks
I think it does come from that Bain background. As you said, we’re by far and away the largest of our top of firm in Australia. There’s over 100 people who work at PEP and we’ve been around for 27 years. But the real origins of the firm go back to the early and mid 80s in the US. A couple of our partners were working with Bain & Company, the strategy consulting firm, when Bain, set up or their partners set up Bain Capital in 1985 with university endowment money. So if you imagine in Boston, the likes of Harvard, MIT, Yale, Stanford and the like were the original investors in Bain Capital. And then effectively PEP was set up by Bain Capital, the same people in 1998 to be Bain Capital in Australia in 1998. And we PEP effectively went our own way very shortly after that, not because we didn’t get along very well with the Bain guys. They just weren’t interested in being in Australia, is the honest answer. They actually then reappeared in Australia about a decade and a half after that. And obviously, we’ve just done the float of Virgin. So we share a lot of DNA with the Bain and heritage and that sort of approach to ⁓ creating value in the portfolio companies that we own.
Simon Wotherspoon
So, I mean, the world of private equity, ⁓ people hear about it, the Virgin ⁓ refloat, et cetera, you hear about it in the news, but it’s a very broad spectrum of possibilities in private equity. Can you just explain a bit about where PEP focus?
Cameron Blanks
Yeah, so we really focus on what’s called late stage buyout, and that is buying mature businesses, often market leading businesses, and really reinvigorate them. So we call it underperforming market leaders is what we focus on. And typically that tends to be corporate carve outs from big multinational companies of non-core divisions, ⁓ or taking companies that have lost their way, their way in the public markets, private, and really reinvigorated. And that’s what we focus on. But as you said, there’s a lot of different flavours of private equity and really, you know, all the way from venture capital, you know, to growth equity.
And so, yeah, we are really on the mature company. And we think that’s a place where you do find a great risk reward where there’s limited downside. We can do our due diligence and make sure, you know, that the businesses are solid and that we’re going to, even in recessionary environments, we’re going to deliver a reasonable return to our investors. So you know, that downside capital preservation is really important to us.
Simon Wotherspoon
And you mentioned before about the likes of Yale and Harvard endowments and things like that. And I think I’m right in saying that traditionally the capital that you get for your buyout funds has come from institutions, endowments, et cetera, overseas money. so now it’s seemingly that there’s the ability for individual private investors in Australia to have access to some of what you do and private equity in general.
Why, suppose, is now the right time for private individuals to start allocating the private equity?
Cameron Blanks
Yeah, look, it was a bit of an evolution of the industry. For the first 20 years of our 27-year history, we were exclusively funded by institutional investors. know, this is obviously those endowment funds have been investors of ours for a long period of time, but also big sovereign wealth funds, other big pension funds, insurance money and the like, sort of fuelled our growth for the first 20 years.
And they still remain of that 17 billion, there’d be probably 14 billion of that 17 billion would still be from those big institutional, global institutional investors. About six or seven years ago, we started to offer some of our funds to some of our family and friends and some big family offices. And we’re quite surprised about the demand that we got from that sector. We started to really sit back and think about the fact that we felt like we’d really missed a trick because while we were getting a lot of money from overseas institutions, they weren’t helping us build the networks and connectivity into the Australian business community and ultimately broader community. So a big part of our push to open up our funds for individuals and wealth firms like Perks is to broaden our networks. ⁓ And it really helps from a deal sourcing perspective and a talent management perspective. So you know, it’s been a very focused and strategic thing that we’ve been doing over the last six or seven years to open up our funds to individuals.
And that really the driver is to be more connected into the Australian ⁓ investment community, if you like.
Simon Wotherspoon
And I suppose from that point of view, an investor point of view, if you can get access to those sort of high returns in mature businesses that sort of manage the downside well, it’s a pretty good thing to do.
Cameron Blanks
Yeah, and I think the other thing that you said why now, I think as the whole industry globally has matured, there’s now different vehicles that are available ⁓ to give individuals access. If you think about the original type of private equity vehicle was a 12-year lock-up vehicle, which made sense for the endowment funds, but doesn’t really make sense for an individual. People have different circumstances that happen in their life, whether it’s death or buying a house for their kids or divorce. All those things do happen to individuals or families. So at points in time, people do need the liquidity ⁓ out of things you know, the original institutional 12 year lockup fund wasn’t really very conducive for an individual investor as well. So that’s why you’ve started to see these evergreen vehicles come out and they’re meant to be able to provide liquidity to individuals when they need it, but still deliver those sorts of returns. So they’ve been delivering for a long time.
Simon Wotherspoon
Cam, can you tell us then specifically about the PEP gateway fund and perhaps the evergreen version where, historically, as you say, the 12-year lockup type institutional funds, you would raise the capital, get commitments, ultimately buy eight or 12 businesses, and then as those businesses are realised into sales in some way, the institutions get their money back. But as you say, the 12-year lockup’s not that appealing for firms like us and our clients. But this evergreen structure, you’ve got the Gateway program? We do, Tell us about that.
Cameron Blanks
So look, it started off really as about four or five years ago, this one. ⁓ And it was something that we’d actually been doing on our own personal account, which is investing alongside our peers in North America and Europe into their better deals. And so we had a lot of our family and friends and ⁓ lawyers, accountants, investment bankers, but also our ex-management teams come to us and ask us to invest alongside of us. So we sort of conceptualise this vehicle which we now call PEP Gateway to give those people access to come alongside of us and invest in these great opportunities. And it’s sort of as really built from there. Literally, we started the fund by sending ⁓ emails to people and inviting them to come and co-host with us. That’s how we got going. You know, today it’s a pretty big program. We’re heading towards a billion under management in that strategy, in the Gateway strategy got access to a great set of deals. We see about 100 different deals from around the world every year. And we probably do about 12 to 15 of those deals a year. really go and pick the eyes, the best of the best, if you like, out of global private equity using our knowledge of the industry, our broad connectivity with the global private equity world, and then ultimately using our skills in due diligence in assets to pick the ones that have characteristic of low downside ⁓ capital preservation, but with really runaway upside potential. That’s what we focus on in the TPK.
Simon Wotherspoon
And before we started the podcast recording, we talked about GPs and LPs. so in your buyout funds, you’re acting as the GP, which is responsible for managing and finding the companies and buying them out and so forth. And this Gateway program, there’s some of that. But you’re also acting as LPs alongside other GPs from around the world. So your buyout funds tend to be Australian, New Zealand focused companies and a gateway program, some of that, but global.
Cameron Blanks
Correct, exactly. And if you think about what an investor really needs, they need a good globally diversified portfolio of high quality private equity deals. So that’s really what we’re trying to deliver to them. Our view is there’s some fantastic private equity firms around the world in North America and Europe, rather than going and competing with them and setting up offices, ⁓ we see this as a way to use our relationships with them, to partner with them, to go invest, if you like, alongside of them into their best deal. we think that it gives us a bit of a unique advantage because we sit down here in Australia and New Zealand, ⁓ and we’re not competitive to those firms in their local markets, but we do know them and we know their approaches and we’re able to sort of access that global diversification.
Simon Wotherspoon
So they’re not threatened by you as far as getting access to the best deals.
Cameron Blanks
No, not at all. They really see us as a studied partner. We are obviously a GP or a manager here in Australia or New Zealand. So we can sort of talk very similar language with them and ask them some important but very clear pointed questions ⁓ that will tell us whether something’s going to be a good deal. We don’t have to sort of boil the ocean if you like, which a lot of the investors will tend to do when they’re looking at things.
Simon Wotherspoon
So ⁓ if we think about the opportunities you’re chasing, we spoke about before the podcast sort of bottom up finding good managers or good businesses, but are there any sectors or industries that ⁓ you find better economics in or you just find better deals in? And one of those clearly on the top of our minds at the moment is just AI and the rise of AI. Is that finding opportunities there or how do you see the world of in that way?
Cameron Blanks
think every what we try to do is make sure that we’re seeing every opportunity we possibly can and really expanding the top of the funnel because then you’ve got a very large universe that you’re looking at and then it’s a matter of filtering down through the characteristics that you’re looking for. Absolutely, we don’t like things that have got lot of volatility, a lot of risk because this capital preservation as the starting point. So it’s more that filtering through. So when you come to things like AI, it’s about really thinking about each of the companies that you’re being presented an opportunity to invest in, thinking through the impacts and opportunities that AI presents ⁓ on every single asset. ⁓
Now we don’t tend to take a sort of a big macro view that we’re going to invest in AI companies. We’re not, we’re a late stage buyout. So by our nature, we’re investing in mature companies. you know, the AI startup, that’s not going to come from us. But AI is so pervasive and it’s going to become more and more pervasive. You’ve really got to think about AI’s impact on the businesses that you’re investing in. So we sort of think about it more through, you know, through that lens on.
Simon Wotherspoon
So, mean, mature businesses meaning probably tends towards certain industries generally that generally favour your style of investing. I mean staples.
Cameron Blanks
Yeah, I mean, generally it’s things like, you know, health care and, because we’re investing in the US and Europe, you know, we see companies that you wouldn’t necessarily see here in the Australian economy, some more tech companies, you know, some more industrial global industrial companies and the like insurance. There’s actually quite a lot of sectors that we look at. We are sector agnostic, but what we really steer away from is probably more important in some ways than what we steer towards. And we steer away from companies that have a lot of volatility. ⁓ They might be exposed to interest rates, or they might be exposed to a commodity price or they might be exposed to some other external factor that the management team can’t control.
And it’s really what we like to do is invest in businesses where generally they are in relatively stable industries with demand that aren’t exposed. That’s why you end up in things like healthcare and the like, know, people get sick regardless of what the economy ⁓ is doing.
Simon Wotherspoon
Could you give maybe an example of one of the companies and perhaps more from the buyout, know, pet, GP, point of view?
Cameron Blanks
Yeah, well, look, I mean, we’ve invested a lot of things. You know, the one that we, you know, I’m probably most proud of is this business called Intellihub. You know, it’s in the smart metering ⁓ area. So in Australia, ⁓ generally, we’ve had ⁓ a long period of time where we’ve just had meter readers walking the streets, if you like. So some legislation has been passed just recently, there’s been a series of legislation, legislation just been passed recently where 100 % of homes in Australia have to have smart meters by 2030. So there’s a massive demand as that’s going. And the reason why the government’s done that is smart meters actually really do enable the energy transition that we’re going on. So if you think about solar battery and all that type of thing. this was a corporate carve out from Origin Energy.
So it was a non-core division of Origin Energy. It’s reasonably capital intensive because you need to roll out the meters and then get paid over a long period of time. So Origin didn’t want to continue to invest in it. So we were very fortunate to buy this business of Origin Energy and it’s going to continue to grow. And it’s not exposed to energy prices. It’s exposed to providing data to the energy retailers.
And so it’s completely recession proof. ⁓ It’s got inbuilt growth from regulatory change and it’s something that’s going to grow for an awful long time to come. They are the type of businesses that we love to invest in. And so that would probably be one of my favorite personal favorites.
Simon Wotherspoon
Well, looking ahead and probably coming back to our clients and investors, what do you think or do you see private equity being a bigger part of individual private clients’ portfolios over time?
Cameron Blanks
We do expect that and I think most of the research that you people read and that are done, it makes a lot of sense for private equity to be in people’s portfolios. If you look at institutional investors like those endowment funds we talked about, for example, they can be up to 50 % of their whole portfolio can be in private markets. A lot of them are up around 30 % if you look at Australia’s future fund, our wealth fund, that’s up around that 30 % when you look at private markets. So generally, individuals have very little exposure to the private market. So logically, to get higher returns and less volatility, we do expect individuals to expand their exposure to private markets. So, it’s only a matter of time in our minds that you know, that sort of 20 to 30 % of people’s portfolios will be in private market. We feel very privileged to be in the position that we are to be able to provide Australians access to really high quality, late stage private equity.
Simon Wotherspoon
We have, Cam, we have investors listening on our podcast and we also have advisors. What would you say to advisors about how they should think about incorporating private equity into client portfolios?
Cameron Blanks
Well, I mean, I think it’s important that you do have some liquidity as well. mean, clients, unlike endowment funds or sovereign wealth funds, they do need access to liquidity. So I think these evergreen structures make a lot of sense ⁓ into private wealth portfolios because they do provide liquidity for investors. when you start looking at the universe of those evergreen products, you we feel like we’re quite uniquely placed because as we spoke about earlier, we’re down here in Australia and we can really pick off the best of the best ⁓ in private equity. You we’re not a funder funds. We are a direct investor ⁓ and we have that heritage. We’re also not trying to create a captive ⁓ Evergreen, if you like, which tends to just be, you know, a single manager and the deal is for a single manager. So we think we’re quite uniquely placed to provide a solution for private wealth firms like yourself.
Simon Wotherspoon
And then, because private equity certainly in Australia for individual investors is relatively new, of, of course it’s been around for a long time, but access has been difficult. What do you think are the biggest misconceptions that you see in the world of private equity?
Cameron Blanks
Yeah, and I think like every industry, there’s good operators and there’s people who been around a long time with great track records and there’s people who’ve hung out a shingle with a couple of people and not too many dollars. So it’s a big broad ⁓ range. And I think the ⁓ misconceptions sometimes come from putting everybody into one bucket. You’ve got different, you’ve got from anywhere from venture capital to growth equity to late-stage buyer. And you’ve got managers that have been around for a very short time or a very long time. So it’s actually a very big universe. There’s probably five to 10,000 private equity firms in the world. And sort of knowing who’s who in the zoo is very important. So that’s one thing that I think there’s a misconception.
Simon Wotherspoon
So you’re the lion in the zoo or are you the…
Cameron Blanks
Well, we’re definitely… We’re definitely the lion in the Australian zoo, in the global world, we’re probably the meerkat. But yes, no, it’s… So there’s that sort of lots and lots of manager out there. I think that’s a misconception generally that we’re all the same and we’re not. It’s understanding the specific investment strategies of each of the firms. And then I think there’s this old caricature that’s a hangover from the late 80s, which is all the barbarians at the gate. Our only objective is to ⁓ buy a business and strip it apart and sort of ruin it, you know, using lots of debt, very little equity is the caricature of private equity. I think that might be, you know, might have been true in the late eighties, know, here 30 odd years ⁓ Later, it couldn’t be further from the truth. The reality is when we’re buying a business, you know, we need to make it better and make it look more attractive to the next buyer. And to do that, you know, requires a real investment in the team that was running it, you know, the business need to, most businesses need investment to continue to grow. So the style of private equity has changed a lot over the years. And generally, the use of leveraging, know, leveraged buyout now is something more like 40%, 60 % equity, 40% debt, you know, actually over leveraging a business and having management distracted by, you know, debt repayments is a really dumb thing to do. Give the management team the tools that they need.
Just like public companies, yes, we do use a little bit of debt, but we make sure that that debt is not distracting to the management team to actually get on with their job of building a better business.
Simon Wotherspoon
We’re coming towards the end Cam, and something that we want to start doing is a quick-fire question to each of ⁓ interviewees. So I’m just going fire some questions at you and just your first instance is the right one.
Simon Wotherspoon
Okay, so best investment you’ve ever made.
Cameron Blanks
IntelliHub.
Simon Wotherspoon
One thing you’d never invest in?
Cameron Blanks
I think that’s a really hard one actually, but I would say it’s probably a mining company. Okay, too cyclical.
Simon Wotherspoon
If you weren’t in private equity, what would you be doing?
Cameron Blanks
I can’t imagine. Probably sitting on a beach.
Simon Wotherspoon
What’s your favourite beach?
Cameron Blanks
Palm Beach.
Simon Wotherspoon
Very nice. You live near there, don’t you?
Cameron Blanks
I can’t say anything else there.
Simon Wotherspoon
Now, remembering we’re in South Australia,
Coffee or wine?
Cameron Blanks
Definitely wine.
Simon Wotherspoon
Well answered.
Cameron Blanks
Barossa Red. There we go.
Simon Wotherspoon
All right. Now this one might put you on edge, but what’s in your personal portfolio?
Cameron Blanks
So most of it is actually PEP product, particularly PEP Gateway, as you would imagine. But I do have a little passion project that I can share with you. So it’s a business called Serata. It ⁓ basically goes and analyses all of the underlying shareholders, beneficial owners of shares in the public markets. I have a private company. It’s a private company ⁓ and ⁓ it’s an AI company and it’s a huge growth story. I actually got to know the guys who founded the business because I was on the board of Link Market Services or the competitor to ComputerShare for about a decade. So they’re really extraordinary guys. ⁓
I’m very, very hopeful that they do turn into a very big business. Okay, good.
Simon Wotherspoon
Thanks, Cam. Appreciate having you on the show.
Cameron Blanks
Right. Thank you. Thanks, Simon.
Simon Wotherspoon
So there you have it, first interview down for our first Capital Conversations podcast. How did it go, Christo?
Christo Hall
I think those questions were the greatest stylishly dixies I’ve ever seen. There were no tough leaves. Oh, Cameron, you let him off easy. No, it’s a very compelling story and one which obviously, we’ve been talking about the investment in private assets with our clients for some time now. And basically, if I look at where private wealth sits relative to the big institutions and now private wealth has been historically underweight, private assets, including private equity where can and pet play. ⁓ But there’s some terrific opportunities that exist in that market. And look, they are looking to seek capital from those private wealth markets now.
I think it’s going to give a lot of ⁓ choice for the right managers, such as PEP to our clients, which will really help with their risk return proposition.
Simon Wotherspoon
Absolutely. Well, thanks everyone for listening. We’ll see you again soon.
Christo Hall
Thank you.
