LP Special: How Emerging Managers can win in 2024

Tsubasa Suruga (Moderator):

The title is Backing Emerging Market and First Time Managers in Adverse Times. It gives a gloomy outlook and tone, but at the same time, we have been seeing a number of first-time fund managers closing substantial amounts for the investment funds.

And today we'll be discussing some of the most recent trends and challenges and what it takes for first time managers in this changing environment. So today we are very honored to have the perfect panelists to discuss this matter. And without further ado, I'd like to start the session, first with a question for Yar-Ping.

So far this year, LPs seem to already be showing preference toward allocating funds to trusted relationships and making a bit harder for first-time managers or those with limited track record. What is your view and to what extent has the recent changing tide has actually shifted some of your investment strategy?

Soo Yar-Ping:

Yeah, actually LPs always have a preference backing funds with trusted relationships and long track records. So I think that hasn't changed. I think when people look at account, first time fund, it felt I don't know this person at all. And then I back this person to launch his fund.

In reality, you would have many years of communication with somebody, whether in their previous career, and been tracking their career, their investments that they have been making before committing to them. But having said that, this year is harder. There's a global headwinds.

I think the difficult part is really, capital is in general more constrained, right? So when people have to allocate, I think there is a tendency to just go re-ups. The bar is higher. So to your point I think, this is harder but it's not because they're first-time funds and people don't trust them or don't know about their track record.

Tsubasa Suruga (Moderator):

How has it affected your assessment of some investments?

Soo Yar-Ping:

I think that part hasn't changed, we have definitely backed emerging managers in the past. Looking at what Adam Street has done in Asia, backing spinoffs is part of our strategy as well. Identifying groups that, you know, maybe some other groups are less familiar with, but because we know them for a long time.

I cover Asia for Adam Street, and really the question is, should I look into Asia today, or which part of Asia? And between that I'm probably not going to do x number of managers in Asia this year, probably 0.8. And I, I think that is part of your question, this as well, right?

Tsubasa Suruga (Moderator):

Great. So I'd like to look at some of the recent examples in the market. So Growtheum capital Partners had a first close of $400 million this year and they have a target to double that to as much as $800 million. Asia Partners closes debut fund at nearly 400 million and Tower Capital Asia has also recently closed its maiden fund at the same amount.

So in terms of regional VC funds, DealStreetAsia’s report shows that the median value of the nine of the first time funds close in the first half of this year indicates rising fund sizes. My question is, has the average size for both PE and VC funds increasing? And if so, what is the reason for it? And in addition, are we seeing a bifurcation between some of the first-time funds?

Huai Fong Chew:

Sure. For those who don't know IFC is the private investment arm of the World Bank Group and we invest in emerging managers globally.

In Asia alone, we have more than I would say almost a hundred funds that we are invested with. So we do have longstanding relationships with all these managers. You rightly pointed out that we have done some first-time emerging market managers that is core to our DNA. And even in times like this, it's not something that we change, it's not a strategy that we change.

I do see that there is also a flight to quality, right? You know those managers that you know very well, in their previous lives, you know that they have done something similar before, you tend to back them again. Even if it's a spinout or they're coming out under a different name.

If you know them, you tend to back them. And hence, some fund sizes are getting bigger just because the LPs know them better. But there is also a bifurcation between the smaller first-time funds and the bigger ones.

Fundraising is very difficult. I think it's even more difficult for this part of the world, and very difficult if you're a first-time manager. So, you do see some just struggling and hoovering around that smaller check sizes, some smaller ticket fund size, and they just never get there. So I do see a bifurcation. It just really, I guess the story you tell and how long the LP has known you for.

Tsubasa Suruga (Moderator):

Yeah. I'm interested in what are some of the attributes of the successful first-time fundraiser. Sarah, would you like to share your thoughts on this?

Sarah Chen-Spellings:

Yeah, sure. Hi everyone, really good to be back here in Singapore. It's been a while and really good to just get back together. And just a little bit of context I launched the Billion Dollar Fund for Women together with my co-founder Shelly Porges in 2018. And over the last couple of years, we've really had tremendous success and hit the billion dollar goal in terms of a pledge campaign to allocate more into female founded companies. And that really created the shift into Beyond The Billion.

And the reason why I'm sitting here today, is because as we went along the journey, we realized that it was not only the female founder to the VCs, but also the VCs themselves who would most likely invest into female founders and allocate more. Are a lot of them challenged as Hui Fong has said with fundraising?

Fundraising is a lot more difficult than anyone expects, even if they come from top quartile funds. Many of them were probably operational partners where they were responsible for the deal flow, things like that. But we're not necessarily looking out from a fundraising perspective. So what we realized was we needed to engage the limited partners around this discussion on how can we do better to drive returns through diversity, aligning profit and purpose.

And with that, I think what we've seen is a couple of things, right? So we have 106 venture capital funds that we work with now, and also increasingly more and more limited partners from the profiles of foundations and endowments, family offices, high net worth individuals.

And I am based in Washington, DC; this is a global initiative. So happy to bring that global perspective and of course the American view as well, which is predominantly our operations are. From what makes them successful, I think what we've seen is a lot of our managers fall into the merging manager category, right?

So that's fund one, fund two, fund three, no matter what the size, and especially in the early years it's a chicken and egg scenario, right?  I liken it to giving a young person an internship and you're looking for the job experience as they're applying for the internship.

And it's a similar request of fund managers where they're being asked for their track records, that not everyone in that position would have had the privilege and opportunity to gain that track record. And that's what makes it difficult.

How they've overcome it, there is a couple of ways. One, I think it's about having a fundraising strategy. Many of them before they actually spinout from their sort of initial funds, have identified anchor partners that will be able to underwrite the champion check. And that really helps to drive things because at the end of the day, as much as we like to believe otherwise, LPs are still human beings that follow familiarity, right?

So people that they know, trusted relationships, all these terminology falls into the habit of “what are the patterns of success” that I've seen before. And what that means is that, people who may not have had those opportunities, that come from different backgrounds don't fit into that mold of patterns of success, right?

And it's incumbent upon LPs, all of us here today as capital allocators to say, what can we do to change the narrative and make things different? So it's about having a strategy from day one, having an anchor that will champion your fundraising strategy through and through.

And on top of that, what we've seen the first pledge campaign of the Billion Dollar Fund for Women was between 2018 to 2020 and was a billion dollars to be deployed by the end of 2020. And $638 million of that was deployed into close to 800 companies, of which 11 are unicorns.

And what we found was that a lot of them were able to generate traction early by executing on SPVs, warehousing deals, and rolling that up into their key funds. So whilst it's been difficult, I've had funds where they spun out from places like Insight, right? They've had the track record, so and so forth.

But even with that, it took them 18 months to close the first check. So what did they do in the meantime? They built traction. They proved themselves over and over again that, hey, guess what? I don't have the capital right now, but if you give me a little bit, let me execute on this deal. Let me prove to you, because at the end day, what's the job of a VC It's two things, right?

One is you can prove that you can win the best deals. You can get into those deals and deliver on that. Number two is that you can fundraise and manage a firm, and ultimately by showing initial traction, they were able to then go on to raise that 18-month scenario.

She closed a $50 million check at the 18 month and after that, more and more checks were closed and happy to report she's on to fund two now in raising $200 million. She's done $150 million to date. So I've been very encouraged with a lot of this, and I think the key characteristic that I see that really differentiates an extraordinary fund manager is truly grit and resilience, right?

And being able to say, how can I win today?

Tsubasa Suruga (Moderator):

Dave, you and Capria just backed Ascend Vietnam Ventures, and it's a brand-new fund, but the team is also from 500 startups, right? So a lot of these first-time fundraisers, they're not first-time investors or entrepreneurs, and they come fresh from what they've been doing already. What did they bring to the table in your view?

Dave Richards:

What did they bring to the table? Yeah. So, first let me just throw out a few data points that LPs think about. First is, the data shows that first- and second-time fund managers have better fund returns than later fund managers. That's just fact.

It's not obviously everyone has better, but on average they do. So, by missing out on first- and second-time fund managers, first- and second-time funds of fund managers, you're gonna miss out on returns. We have backed a whole range of first-time managers, and we tend to focus on first- and second-, the odd third-time manager usually when there's a sort of a micro fund starting, so the third is really a second.

But we think that actually, the reality is you make a lot of mistakes in a first fund. That's one of the challenges and despite that, actually a lot of first-time fund managers do well because generally what's happening is good and attractive first-time fund managers come with a different value proposition than existing managers.

And one of the things that, that we're seeing is not only they've learned from things that they've done in other careers or other places they've been, they've seen a new opportunity and new opportunities emerging. The companies that are being invested in 2022 and 2023 and 2024 are very different than some of the companies are invested in 3, 4, 5 years ago because the market is constantly evolving.

And just because you were good a couple years ago at investing in e-commerce doesn't mean you're necessarily gonna be good in investing in a climate tech in the next few years, or whatever the next kind of area is. So we backed the Ascend Vietnam Ventures team after looking at the market. Vietnam is the new, the next up and coming market and our view for tech in the region after Indonesia, as far as where the market is and where really great entrepreneurs are and really the ecosystem is building.

And we really found that the combination of the experience they had from 500 startups, the connections into Silicon Valley and the US, plus a deep understanding of the team of the Vietnamese market and the growing thing was a really good fit.

I'll make one other comment. There are two kinds of LPs. There's LPs that invest for fund returns and there's LPs who invest primarily for actually getting deal flow over co-investments. And so you do have to distinguish between, we actually fall more in the second bucket, and so fund returns actually matter to us, but actually what's more important to us is access to great deals that we can actually co-invest in and put more money down and double down on and triple down on things.

As you're thinking out there as a fund manager raising capital, you distinguishing those two buckets is actually pretty important.

Tsubasa Suruga (Moderator):

Yeah. They just mentioned about some of the strategies, and it actually diversifies some of your investments. So, to LPs investing in these funds diversifies their strategy and which can add up to their return profile as well.

But larger institutional LPs, they tend to have easier time to commit to first-time fund managers due to the internal resources and large portfolio. How does it work for different types of LPs?

Soo Yar-Ping:

Actually, we see there's a lot of under-resourced large LPs, this is where I guess fund of funds likers come in. So there's, I guess there's different categories. So there are very large LPs: US Pension Funds but actually very under-resourced, don't have boots on the ground; there're also Sovereign Wealth Funds who are large and generally better resourced. But actually for both category, I do say, because they're large LPs, so for them to spend their time, they need to write larger checks as well.

And for a lot of the emerging managers, they are not raising billions of dollars. Some very rare category do. So maybe they raise a hundred, $200 and these LPs are writing like $500 million equity check. And in many cases they actually do not. Some of them might have a small category for emerging managers, but I would say the focus of their time is really writing these larger checks.

And also co-investments are important part for the more well-resourced LPs. The other thing is for, I guess for the larger LPs, they are often, they meet with the most senior team members of the funds. And then if you're thinking about backing first-time managers, usually they are not the first generation leaders, right?

They're very good investors and they actually don't see a lot of LPs. They were like really focused on investing, and this is when you need boots on the ground. People come meeting, not just with the general partner, the third guy doing investments, and your team also needs to have layers, right? So you cannot spend time with these people, knowing what they're working on.

So I think one of the questions you may or may not have asked is like, and actually you asked Sarah, right? What makes a first-time fund manager successful? I would say quite generally, they're very good investors, they're focused on investments; but they are not spending time with LPs, they're not marketing themselves.

So one thing that, let's say if I am a second generation investor in a direct fund, for example. Because actually quite often, they find I just wanna focus on investments, it's a waste of time like somebody else is doing the fundraising. But you need to build that kind of connection right before you decide to launch your own fund. And as Sarah say, like when you do that, you must have a LP that knows you well enough to really anchor the fund, so you're not just coming in blind, kind of like meeting everybody and seeing who might invest in you.

Tsubasa Suruga (Moderator):

Yeah. Thank you. Speaking regionally, how does Southeast Asia benefit as new investors might seek a path to enter from China or maybe even Europe since they're new? Will partnering with emerging funds payoff will be better? Or do we see a flight back to quality on the familiar ground?

Huai Fong Chew:

We see two models, right? We have seen and backed also fund managers where they're not from here, they partner with someone on the ground and they manage to have a successful partnership and launch a family of funds.

We have done things like that, but those are, I would say, relatively rare. Because of course, just to select the partner on the ground takes a while. And if their partner already is good at investing, has shown DPI, has been in the market for a long time, they can launch a fund themselves, right?

So that selection process is not easy, of course, they have been successes in the market and we have backed them. But I think that path is not easy. From the LP lens, we think that the more partnership involves, the more kinks you have to solve, right? There's just might be more friction, there are more agreements you need to agree to on, there are more models that you need to follow. It is not necessarily the best model unless of course you find a perfect fit.

We have also seen the other side, whereby, you know like for instance, I think this two weeks we see a lot of Chinese GPs, lot of European GPs coming and thinking about Southeast Asia, right?

Diversifying their portfolio, their pipeline. I think that's also a good step but my advice would be just don't come in blind. If you had never done anything here in the region, this is a very heterogeneous region, if you don't know the market then don't just jump into it blind.

Maybe start off with one or two deals in your current fund and slowly prove and set up that track record before you launch a dedicated Southeast Asia fund.

Tsubasa Suruga (Moderator):

So it can be quite challenging for some of the new fundraisers, but with all these challenges, I mentioned that the nine first time funds reaching final closed this half year.

And this is actually up the seventh debut funds that closed in the whole of last year. And in 2020, this was number five; it's been increasing. Sarah, I'd like to ask you how will the competitive landscape get more intense and how can GPs differentiate themselves in this current environment?

Sarah Chen-Spellings:

Yeah. Thanks for asking that. Despite I guess what we are feeling and seeing the doom and gloom, right? It's been a record year with regard to the amount of fundraising and what we're seeing is a lot of funds that have been successful and that have raised those billion dollars and more are being slow to deploy.

So I think that's a bit of a market correction that's happening. I think we're gonna see markdowns with previous vintages that's gonna happen. And it'll be a while before it trickles down, but no matter what, innovation will continue. Remember we're all here because we believe in venture, right?

And the fact that a lot of the top companies from Airbnb, Uber, WhatsApp, were born in the time of market down turns. So I think this will continue to be an opportunity. It will be competitive, but what we'll see is, we'll see a little bit of returns dispersion as Dave had said, the outperformance of first-time fund managers, the emerging managers story is a very strong one, right?

But the reality is, emerging managers are the top performers, they will continue to outperform and yet they remain under capitalized. So looking at the US, you asked me previously as well, some of what we're seeing in the US between 2008 and 2018 that the growth of VCs, the allocations into VCs has grown tremendously, but the percentage of what has gone into emerging managers has decreased significantly.

So comparing 2018, it was 66% that went into established managers and compared that to 2008, which was 34%. Which means that, there's a flight to the more established, which means it's going to be increasingly more challenging for emerging managers.

But having said that the data is there, and I think it's incumbent upon managers to really differentiate themselves by a few things - to be really clear on what is your niche. Where are you going to win? I like to win clearly, so I use that a lot of times. But how do you position yourself to be truly unique?

And what we've seen is a lot of specialists, so the profiles that I see a lot with emerging managers that I actually like, are those that were previous operators that have a specific niche, which means that they will have that arbitrage opportunity of a few things, right? Of verticals. So we've seen funds that are very specialists into say, deep tap into biosciences, life sciences, biotech, things like that, that have really tremendous GPI, all of the metrics that we care about.

And as well geographic arbitrage actually. So we've looked at funds, for example, that have a specific view into, say Africa, or even in emerging Asia with a specific niche. So I think really being very clear about who you are and who you are not from day one, is gonna be very important and sell that story again and again with LPs.

Ultimately it is a relationship business and it's about proving that you are what you say you are, and you are going to do what you're going to do, what you promised to do. And of course, if I may with LPs moving more and more increasingly to think more about ESG sustainability, I think, the train is leaving the station.

We all need to be thinking about diversity, equity, inclusion, sustainability, and building businesses that invest into themes we care about that will shape the lens of our world. And I think it's an opportunity, and I welcome GPs that are, in fact what we're doing with our LPs is, our LPs that work with us are getting their GPS to pledge to the Billion Dollar Fund for Women and Beyond The Billion to make a commitment, a dollar amount to be invested into female founders and diversity.

So I think going the extra mile, developing a brand, not just only doing investments or investment’s sake, but really thinking about why. I think especially the next generation, we're in Singapore and I was just looking at the stats because I'm hosting an event with family offices tomorrow and the growth of family offices next generation wealth, there's gonna be one of the biggest generational transfers to millennials and baby boomer wives actually as well because of the lifespan.

These women, these next generation are thinking about impact, right? So as much as returns are going to be important, how does your return strategy also bring forward the profit and purpose story? And I think that's how we make things different and win.

Tsubasa Suruga (Moderator):

Yeah. Speaking of stories, so Dave your VC, you guys are focused on the global south. If you can share your thoughts as well, how can GPS differentiate themselves on this challenging time?

Dave Richards:

Yeah. So as you said, we invest across the global. So we started in India 10 years ago, and then we've expanded over time into Latin America, Africa, and most recently into Southeast. And I think one of the things that we're seeing as a trend is two specializations of GPs to differentiate, so having more deep knowledge of a few sectors, not necessarily one sector.

Because there's always this question of you want to have an openness to see opportunities you couldn't have thought about ahead of time. Because usually you're picking your companies over 2, 3, 4 years and so you want to have some flexibility but having differentiation, especially against managers who you know, larger managers who are more generalists. I think being a specialist gives you an ability to get into a cap table, get into a great company, add value to a company in a unique way and allows you to, compete better.

I think another thing that we're seeing is diversity of teams. We think that having teams that have diverse perspective is going to enable you to find better opportunities, particularly for areas where that are emerging and changing culturally in places. You'd think that a lot of the companies built in the United States would just transplant, because they've built these great technologies and things, they just transplant into Southeast Asia. But a lot of times there's just a lot of significant local behavioral issues and specifics, obviously there's regulations and other things, so I think having more knowledge about that is a differentiator.

The other thing that we really emphasize is diversity. Culturally and gender is important in increasingly, I think in funds to have an edge, honestly to be able to perform.

Tsubasa Suruga (Moderator):

Great. Thank you. I think we have a few questions from the audience as well. The first question I'd like to read out, how are LPs working on blending private sector capital with DFI capital in emerging and frontier markets in order to create a sustainable investment? If any one of you would like to take a go?

Huai Fong Chew:

Yeah, I can take that. So at least in our investments given that we invest a lot in emerging managers and first-time managers, a lot of times we are alone with other DFI, right? A lot of other development banks, because if we are not the ones putting the first check, who else would, right?

So I think we have tried to bring in a mobilize private capital that's also a KPI of ours, so getting our GPS to go out there and also reach out more actively to sources of wealth. And at the same time, we also have pools of capital that we partner with and mobilize alongside ourselves into, specific sectors or different focuses like climate, tech, et cetera.

We also bring those money in. But after, one or two funds, we would expect the fund managers to be successful enough to graduate and to at least get some more private capital on their own. We don't expect them to remain DFI only funds, and that's when the conversation really starts, right?

When we really grill them about it. So there is a lot of interest in making sure we blend both private and DFI capital and a lot of action that we take on that.

Tsubasa Suruga (Moderator):

Do you have any thoughts on the question?

Soo Yar-Ping:

Yeah, I think the thing that I'll add is, clearly there's a lot more focus on ESG and actually with Adam Street, we are very happy whenever IFC is one of the LPs because they do have a very comprehensive checklist. And this is where, four or five managers, both DFI and private sector capital can be working together.

Tsubasa Suruga (Moderator):

Sure. Yeah.

Sarah Chen-Spellings:

May I jump on that? With a different angle. What we've seen actually in America, which I've been very encouraged by, so one of our key sponsors is Bank of America, for example, where they have actually a specific venture capital allocation program from their balance sheet. And I'm hoping to see more and more financial institutions in Asia do this, and part of that is for them, of course, it's a return strategy.

They're building that ecosystem. They're working with clientele that want these sort of products as well. And I think it's an interesting blend because once we get these sort of checks. So Bank America, they're writing checks that are a lot bigger. And one of the things that we talked about with institutional LPs is, the challenge is always, I can't be more than 30% of a fund and the smallest check size, $500 million for some, $100 million for some, which means that the emerging managers don't stand a chance at all.

But what they're doing, a lot of these financial institutions, foundations, endowments, and they're pretty big in the US right? And they are the investing VCs, so they've increased their allocations because I think it's clear that the alternative strategy is the way to go. I think that strong belief that with the bond rates and fixed income, things like that, this is alternative, is going to be something that will always be part of the portfolio and an important one, even with the denominated effects on so forth.

But increasingly we're seeing all these institutions play an active role in thinking about emerging manager programs, to think about how do we support these managers, even as they're just starting out, they're just getting going. We're seeing foundations that are even helping from the LP perspective, from the back office and things like that, which I think is an interesting blend of private and public sector as well, because of course, especially in the emerging market, you'll see the IFCs of the world, the DEGs, the institutional folks that care about, the development of these regions. But importantly as well, I think we're starting to see the financial institutions and big financial players really play a role, and I think that's gonna continue to be important.

Tsubasa Suruga (Moderator):

Dave, how about in terms of some of the sustainable side, how do you look at it in this region?

Dave Richards:

Yeah. Interestingly, we invest across a bunch of different regions, and so DFI have different roles, I would say, in different regions. Much more present in frontier markets as far as percentage of capital and activity. I think a lot of the DFI are late to the party here in Southeast Asia for VC, which is I guess okay but I think a lot of the private capital has come in. But I think in developing markets outside of the core markets.

Right now, The core markets being Singapore, Indonesia, Vietnam, little bit Philippines, but Philippines is really still developing. Obviously there's some other smaller markets or other markets in the region as well. But I think it's a great opportunity to be collaborative. IFC as an investor in our fund and we appreciate and have learned a lot from them on how to think best about ESG.

Also help them think more about ESG and applicability to venture, because it's a little different than applicability to private equity and other kinds of investments. So it's been a good two-way street.

Soo Yar-Ping:

I'll add for kind of impact and sustainable investing. Sometimes the challenge is balancing the impact and sustainability part of it with financial returns. Because ultimately the people who invest with us, they do want certain financial returns. And the other thing you do not want is you invest in a fund that dressed like an impact fund, but it actually, it's a lot of green washing.

So I was actually curious for IFC, do you do a tradeoffs between the financial returns and kind doing good?

Huai Fong Chew:

So that's a taboo question. No, I mean, the official pitch is there's no tradeoff, right? I think by now the ecosystem has already matured enough to know that ESG is not a by the way thing that you can do or impact is not a by the way thing. I think a lot of people are now self-starters down from the founders. The founders want to do good. They want to incorporate ESG, they want to incorporate impact. It goes up to the VCs or the PE funds, and the LPs also from top down wanted.

So I don't think that is a question now, that is a good thing. For us all along, we had already requested for it, and it is a deal breaker for us if we don't incorporate in these two elements right from the beginning. So we started investing over 50 years ago, we've always had these two lens in mind.

I don't think there is a tradeoff. It depends on at what point in time you take measures. If there's a fund or a company that goes all out ignores all ESG elements or impact elements and gets the best returns, yeah, at that point in time it might be the best and the strongest winner, but it might not last 10 years. So it depends on what point in time you take measure as well.

Tsubasa Suruga (Moderator):

Just on the previous questions that I asked, just on the competitive landscape I'd like to hear some of your thoughts as well - How GPs can have an edge over some of the other new funds and how they can differentiate themselves in this environment?

Soo Yar-Ping:

Yeah, I think some of the points I've already said first building the relationship even before your fundraising. And the other is for the GPs to look around them if there are another kind of lower mid-market buyout fund targeting the same sector.

What really are your strengths? What difference do you bring to the table? I think as the kind of private equity gets more mature in the region there's just more players around right? Before I think getting access to use, riding out the market is the way to go, but increasingly, portfolio companies have choices as well - why should I? it's a weird competition; you're trying to give up cash and people are being selective. So what do you bring to the table?

I think some GPs differentiate from the people they have or maybe tagging into a very strong strategic, which they bring that strategic and how that add values to their other portfolio companies.

So I think Sarah mentioned it before too, right? In the good old days, sometimes it's ah, this is really hard to say why this GP is special. Maybe he's just a very good tennis player. No unforced errors, right? I think it's just getting harder. So you need to have an edge now.

Are you a very good, server or good at defense, et cetera. One thing I would say is LPs are always looking for a perfect, well-rounded gp. It doesn't exist. It doesn't exist even in, in a pan-regional team. It doesn't exist in a human being. Right? And therefore, how do you compliment, your shortcoming or how you're make the best use of what you have.

Tsubasa Suruga (Moderator):

I like to hear some of the US view back home, how are they seeing this market this year? Some people say, it’s still strong growth, obviously long term, a lot of strong potential, but compared to the last few years how has the interest been lately?

Sarah Chen-Spellings:

Yeah, thanks for asking that. As I mentioned a little bit earlier I think the market is nuanced, right? I think the news all around this with inflationary pressures, things like that stock market crashing and all that is weighing heavy on a lot of people. So where they can, and in fact, I think it's also helpful as we think about the LP view to also go further down of the supply chain or top of the supply chain, depending on how you think about it.

But a lot of the portfolio companies, those that are thinking ahead, are already raising quietly and quickly with people that they know to ensure that they have enough runway. So doing bridge rounds, things like that to be able to carry them through, so they don't have to discount their evaluations.

Which is where a lot of actually LPs, a lot of GPs are scouring round for deals that they think will have outsize return returns. So from a vintage perspective, I'm confident and I'm optimistic that this year would be one of the best vintage years with the good deals that we will continue to find.

But for some of the best deals, there will be a little bit of a waiting out that we're seeing. So next year for example, I'm actually seeing that growth stage investing will make a bit of a comeback. So a lot of those growth stage return type portfolio companies are actually holding it out for now, right?

But they can't hold out forever if they wanna build for growth. So we'll start to see that hopefully next year. But I think, from a fundraising perspective, again, it's sort of nuance in the sense that there will be the winners.

I think, as I said, there will be a return dispersion. There will be winners that will emerge from this that will be able to pull through. But there will be those that will just be wiped out and say, I can't fundraise in this environment. I can't carry through. And I think for GPS in the room, this is a lifestyle choice, right? Remember, you only get your management fees when you have capital under management.

So plan early and the key thing, if there's a key takeaway is, everybody that I've worked with from a fund manager perspective, whether they're the top brands or not, fundraising will always be a lot harder than you think, and it'll take a lot longer than you think.

So be prepared for that, and especially during market downturn. Sure, there's a lot of opportunities. We'll see winners and there will be some pain along the way and I think we're really starting to see that. So yeah, hopefully that gives a little flavor there.

Tsubasa Suruga (Moderator):

Great. Thank you so much. I think that brings us to the end of the session.