Summary of "Ep.8 – Building Portfolio Resiliency Through Private Markets with Venus Phillips"
Summary of Ep.8 – Building Portfolio Resiliency Through private markets with Venus Phillips
This episode of The Institutional Edge podcast features Venus Phillips, Managing Director at the Kresky Foundation, discussing how she builds portfolio resiliency through private markets. The conversation covers private market exposures, investment strategies, partnership dynamics with general partners (GPs), and emerging trends such as secondaries and ESG integration.
Main Financial Strategies and Business Trends
- Portfolio Resiliency Definition and Construction
Resiliency is defined as a portfolio’s ability to withstand shocks and adapt to changing environments while generating attractive long-term returns. To achieve this, Kresky’s private markets portfolio is diversified across:
- Different strategies (buyout, venture capital, real estate, natural resources)
- Geographies (with a higher weight to international strategies than many peers)
- Vintage years (to avoid timing risk and smooth out entry points)
- Private Market Exposure and Evolution Kresky’s private markets portfolio has evolved from traditional leveraged buyout and core real estate investments to include more niche and smaller managers such as venture capital and opportunistic real estate, aiming for a balanced, resilient portfolio.
- Real Estate Strategy Focus on GPs who invest across multiple property types (office, industrial, multifamily, retail) or multi-use properties, with the ability to pivot based on market demand. Emphasis on managers with competitive advantages like strong net worth or leasing capabilities.
- Buyout Strategy Preference for managers with disciplined operational value creation rather than financial engineering or excessive leverage, which can be vulnerable in rising interest rate environments. Diligence focuses on understanding true return drivers.
- Partnership Approach with GPs
- Viewing GPs as strategic partners, not just capital recipients.
- Emphasis on transparency around exposures, fees, fund structures, and valuation methodologies.
- Active engagement and accountability, especially on valuation marks, to ensure trust and accurate risk management.
- Initial and ongoing diligence heavily focuses on people and alignment of vision, including firm size, fund size consistency, and strategic intent.
- Regular, frank conversations with GPs to understand portfolio performance and valuations.
- Co-Investment Kresky has co-invested in the past but currently prefers not to pursue individual co-investment deals due to resource constraints and agency issues. They participate in co-investment exposure embedded within GP funds.
- Team and Resources The private markets team consists of four people managing a ~$2 billion portfolio with over 70 relationships (many tail-end). The team relies heavily on qualitative due diligence and is exploring the use of artificial intelligence tools cautiously due to data privacy concerns.
- secondaries market
- Kresky has experience both buying and selling in secondaries but remains opportunistic.
- Challenges include limited availability of attractive secondary deals, especially for high-quality GPs.
- Recognizes the growth of continuation vehicles and secondary sales as companies stay private longer.
- Emphasizes understanding when it makes sense to roll into continuation vehicles versus crystallizing returns.
- Anticipates the secondary market will continue to grow due to liquidity needs and longer private company lifetimes.
- Peer Networking and Information Sharing Venus highlights the importance of maintaining communication with like-minded peers and broader networks to avoid groupthink and share insights, particularly given the opaque nature of private markets.
- Emerging Managers
- Kresky actively invests in small firms and first-time funds, integrating emerging managers as part of its core strategy.
- Emphasizes alignment and partnership benefits with emerging managers, who often provide greater access and collaboration opportunities.
- Believes early-stage investments in emerging managers can capture outsized returns.
- ESG and Energy Transition
- Kresky aligns its private market investments with its foundation’s broader environmental mission.
- Focuses on energy transition investments, such as power, battery storage, and resilient grid infrastructure.
- Though not formally labeled ESG, these investments support climate change mitigation and portfolio resiliency.
- Emphasizes alignment between investment activities and the foundation’s grant-making priorities to avoid conflicting impacts.
Methodology / Step-by-Step Approach to Private Market Investing at Kresky
- Initial Diligence
- People first: Assess GP team quality, alignment, and vision.
- Understand firm strategy, fund size consistency, and growth plans.
- Conduct in-person meetings and office visits when possible.
- Ongoing Monitoring
- Maintain transparency and open dialogue with GPs.
- Regularly review valuations, exposures, and fund performance.
- Hold GPs accountable for valuation marks and strategic execution.
- Portfolio Construction
- Diversify across strategies, geographies, and vintage years.
- Select managers with operational value creation focus and flexibility to pivot.
- Avoid over-leveraged strategies vulnerable
Category
Business and Finance
