A Power Couple Talks Private Markets, Quarterly Earnings, and More | At Barron's
Summary
Private Markets Focus: Amy Falls and Hartley Rogers emphasize the importance of private investments, with Amy noting that Northwestern's endowment heavily invests in private equity and venture capital for long-term earnings growth.
Liquidity Challenges: Both guests discuss the current liquidity issues in private markets, highlighting the role of retail investors and the potential benefits of secondaries for price discovery and liquidity improvement.
Evergreen Funds: Hartley Rogers explains Hamilton Lane's strategy with evergreen funds, which offer shorter durations and access to secondary and co-investment markets, providing retail investors with opportunities typically reserved for institutional investors.
Market Outlook: Amy expresses caution about the macroeconomic environment, noting stable inflation and interest rates but concerns about AI's impact on employment and potential labor market softening.
Public vs. Private Companies: The discussion touches on the advantages of private ownership, such as greater control and expertise, and debates the merits of quarterly reporting for public companies.
Investment Strategy: Amy highlights the importance of understanding an institution's unique edge and liabilities when managing large endowments, while Hartley discusses Hamilton Lane's focus on middle-market private equity for alpha generation.
Philanthropy and Education: The couple's foundation focuses on education and equity, driven by a belief in the importance of civic engagement and access to opportunities for fulfilling the American promise.
Mentorship and Career Advice: Both Amy and Hartley share insights from mentors, emphasizing the importance of pursuing work one loves, which leads to fulfillment regardless of financial success.
Transcript
[Music] Hello everyone and welcome to At Barrens. I'm Andy Serwarter and welcome to our guests Amy Falls and Hartley Rogers, an accomplished married couple in the world of finance. Amy is the chief investment officer at Northwestern University and on a number of high-profile boards. and Hartley is the let me make sure I got this right Hartley executive co-chairman at Hamilton Lane which is an alternative investment manager. Welcome to both of you. >> Thank you. >> Thanks. Great to be here. >> Amy, let's start off with you. I want to ask you about the Northwestern Endowment and your job there. How big is it and how is it different maybe from other universities or how do you think about running it? >> So we are 15 billion in change. Uh we are different in that we provide a lot of budget support but not as much of some as some of our better capitalized peers. So we're about 25% of the budget and Princeton would be 60 5560. There's a wide spectrum. We're not at the lowest end of the spectrum but for the breadth and importance of the institution I feel we have to run it hard because we we're under capitalized relative to our mission. And Harley, tell us about Hamilton Lane. It's kind of got a really interesting backstory that you were involved in, but give us the sort of thumbnail. >> Sure. Uh, Hamilton Lane is a private markets asset manager, which means we work for investors all the way from small individuals to giant pension funds and sovereign wealth funds, helping them to access the private markets. And that means we manage money for some, we advise for some, although managing money is really the core really the core business today. And what about how much money is over there? >> Our aum is approximately $140 billion. Uh every year we put into newly raised private markets funds 25 to30 billion which makes us one of the largest allocators in the world in that space. >> And you there's a number of common denominators for you guys in your careers. One is the world of privates. Um you're an investor in privates. your company produces them or you have GP, you're the GP with LPS. Um, so I'm wondering Amy, maybe I'll start with you. What is the role of private investments for the endowment? And of course, it's there's a lot going on with that question. >> There's a lot going on. >> Well, it's important to the endowment. I mentioned we want to generate high returns uh in our equity portfolio in particular and we view that as really a function of earnings growth over time. I mean clearly markets go up and down but if you invest in companies that are growing their earnings I'm old-fashioned not a revenue person but purely revenue but um that that you will generate uh returns and uh we believe that privatelyowned firms often are a better long-term play on earnings growth both because there's control the investors have a bit more control and also it's a better representation of midcap companies it's hard to grow, you know, when you're ginormous. So, we really like both the traditional private equity and venture capital uh spaces. We're a little less in real estate and private credit, but they're there altogether. Private assets are about half of the assets of the endowment. >> There's a lot of questions about liquidity though these days. >> A lot of questions about liquidity. And I think on the good side, I think structurally, one of the themes that I know we both think about is the role of retail and and broadening out access to private markets, which might uh uh you might see the margin go down or the the opportunity set uh go uh shrink a little bit, but I think the liquidity would be a very strong offsetting positive rate now. liquidity hasn't been so super. So distributions have been at the lower end historically and that's a little bit um difficult to live with but um I think it's temporary given where the public markets have had >> and there's all these new things going on like secondaries which we can talk about. >> So price discovery is important and one thing about liquidity it's not just getting the money but it actually provides important price discovery. So you don't mind selling something if you think you're getting a reasonable price. >> And Harley let me ask you about Evergreen funds at Hamilton Lane. You guys have been sort of at the forefront of that which is producing something that is a vehicle that high net worth or even ordinary investors can get into. >> Absolutely. And it it kind of ties to what Amy was talking about which is in this environment where you've had some challenges with distributions and liquidity going back to institutional investors. It's created a pool of opportunities in the secondary market and in the co-investment markets that you can package and use as core parts of these evergreen funds because evergreen funds have to have a shorter duration since you're offering some limited liquidity in them to the investors. You need a duration of the portfolio to be shorter than your typical very longdated private equity fund. And so having secondaries, having some private credit and having some co-investments which generally are fee free from the underlying deal sponsor can make for a really interesting mix in these evergreen funds. >> You know, playing the devil's advocate though, a lot of people have suggested, oh well, now that the institutional space is saturated, you guys are going to the retail investor just at the wrong time. Well, I think the retail investors are seeing some of the best deals right now because the institutional investors, not all of them of course, but institutional investors are a little bit frozen because of the allocations they made in 2020 and 2021. They haven't had distributions back. And so, they're not really able to take advantage of the opportunities to invest with some of these mid-market managers, which is really kind of the bread and butter of private markets in the way that these evergreen funds can. I think the evergreen funds are getting tremendous deal flow today. >> And Amy, have you reduced your exposure to privates at this point or >> I would say we're edging off an edge. We haven't reduced it dramatically, but we um we want to hold here or possibly edge down a percent or two, but it wouldn't be significant, >> right? And what about the public markets right now? I mean, there's a lot of talk about an AI bubble. The public markets do seem a little frothy. And I think it's interesting to have a disconnect between pretty well fully priced public markets and yet you're still not seeing the IPO volume or the distribution. So that's a little bit of a disconnect that I think reflects narrowness. So the the indices are well priced but within that there's a lot of uh difference between the mag 7 and and everything else. So, I don't know. I we might have to see a broadening out of strong markets to really allow for uh exits. But I also think people don't want to be public. And that means uh I actually think one good thing about retail coming in is a problem with companies staying private is people don't participate in the democracy and in the capital markets in the same way. And I do think long term that's not good for society. So, I I think overall it's a good idea to have everybody have a piece of the pie. >> President Trump has suggested that companies shouldn't have to report quarterly. >> Um, is that a good idea, do you think? >> It's an interesting idea. I mean, I was just spent a week in Europe where they don't report quarterly and they would say, "Yeah, it's better. Keeps people focused on the long term." On the other hand, as an investor, I sort of like transparency. Um, I do think there's an enormous industry now that's a little overly focused on quarterly reporting and missing and um, that's probably noise. Um, so I'm intrigued with the idea. I would say I understand the thinking, but I think it's nice to get more data than less. >> Yeah. I mean, it's interesting the opakqueness versus the transparency. >> Yeah. >> You know, debate there. What about you? What's your take on that, Harley? Well, I think that um being public is hard and it's a little bit of an oxymoron for Hamilton Lane because we are public, but we're public because our business is is fairly easy for people to understand and to model. So, it's pretty easy for research analysts and stock analysts to understand what we do. Whereas for many companies, it's much harder. There's much more up and down in their results. Um, and I I do think to Amy's point before, in the private equity construct, the general partner really has control of the company, can bring expertise to bear, can put people on the board who have appropriate expertise, and can cause the management team to listen to the board members through incentive arrangements, and that can yield pretty attractive results. We have a lot of data at Hamilton Lane about the outperformance of privatelyowned companies over public companies of comparable size and scale, >> you know. Can you tell us a little bit about that background of Hamilton Lane that I alluded to? I mean, you've got French banks, an entrepreneur, Bill Gates's investment company were involved, I understand. >> Yeah. Well, the company was founded in Philadelphia in 1991 um by a very small group of people and came to prominence as an investment advisor in the private equity area, really helping big state pension funds choose managers. Kalpers was sort of the first franchise client of Hamilton Lane. When I was raising private equity funds in my earlier careers at Morgan Stanley and Credit Swiss, we we would go to Hamilton Lane in hopes of getting money from Kalpers. They were kind of the gatekeeper to Kalpers. They moved pretty quickly into asset management really outsourcing parts of the private markets investment function uh and and becoming more of a of a discretionary manager of assets. And so over time I it it grew to where today we have 22 offices about a thousand people around the world. Uh Bill Gates was an important investor when I came in. I came in about 22 years ago and I led an investment group that in effect did a management buyout of the founding group and and the cascade group was an important part of that um and really helped set us on the strategic course that led to where we are today which is the focus as I said before on things like secondaries co-investments global uh approach and very much focus across all the different asset classes data has been really important for us because with our reach in the industry and for how long we've done it we get a lot of data and data in the private markets is very valuable. >> Can I add something? >> Yeah. >> I remember when you were talking about it that one of the thesis was it could be the merchant bank for private equity >> and I think that's actually coming to play that um creating market making creating deal flow does allow more transparency in this space and in the long run of the problems are zombie funds. you know, if a fund gets off track, there's not much accountability legally. But I think if you had a secondary market that was more transparent, it's going to provide a little bit of discipline in the uh the weaker for the weaker players, which I kind of like that idea. >> Interesting. Shifting gears a little bit, can I ask you Amy about the macro environment, your economic outlook, and those sorts of things? >> Yeah, I think it's a tough macroeconomic environment to forecast right now. Uh I feel that on the one hand uh this the market's giving you a positive signal. Um and I think some of the macro variables are stable. Inflation seems to be tame. Interest rates I think likely on a downward path although I wouldn't subscribe to an aggressively downward path. um but the long end of the market a little less clear where so I think um I think there's uncertainty around uh AI that is really hard to handicap what that means for long-term employment and I'm concerned about some indications of softening in um perhaps the labor market which ultimately could feed through into demand more generally. So I'm probably on the cautious side particularly visav pretty robust markets. >> What about opportunities? >> Well, we just spent a week in Europe and I I do feel like Europe has been this sort of uh shrinking uh player in the global economy. Um if you look over a 20-year period, their share of global GDP and global market cap has been cut in half. Um and I I just feel I'm not ready to count Europe out. We talked about a former colleague, I think it was Byron or Barton, who said they should just put a red rope around. It's like a museum. But I think in fact there's a lot of dynamic companies. I think there is >> potential to remove some of the regulation and rigidity. Um so I I think there's an opportunity there. Valuations are lower. Uh we we stayed invested in China despite some uncertainty and that that's come back a little bit. AI is tricky. I think there's opportunity and enormous risk and a lot of disintermediation. Um so we are cautious there but trying to understand the impact. I want to ask you another question about Hamilton Lane and that is how do you compete with some of these bigger maybe better known companies like KKR and Blackstone Apollo? Um is the culture different in Hamilton Lane or what are you looking to do there? So, we're first of all, we're all kind of fremies because we all invest in a lot of the same things and um check references with each other and uh share insights and things. Um they really focus at the big end of the market. Uh and we are very much a conduit to the middle part of the private equity market. So, if you look back over the years, middle market deals tend to have a wider range of outcomes than big deals. Big deals will be this range. Middle market deals will be like this. So if you really want to access alpha in the asset class, you want to get into this part of that middle market area. And because it's risky, it's got this part too, you need someone that can help you figure that out. And that's what we do. And so we measure ourselves by are we able to get our clients into that upper part of that middle market and lower middle market return area in the private markets. And that's what we offer compared to them. Oftentimes investors will have us complimentary. So we'll be next to if you go to a a wirehouse that markets some of our products and markets a Blackstone or KKR type product, they'll often in the same account put the two together because they're creating that diversity in the in the in the in the area. >> Amy, I want to ask you about your investment style and what you've learned over the years. I mean, you ran the endowment at Andover, at Rockefeller University, and now Northwestern, which I guess is your biggest pot of money. >> Biggest pot. Yes. So, how does that how's that evolved? Change your thinking? >> The size matters. I think you have to know where your edge is. And you have a different edge at $2 billion than at 15 billion. So, it's easier to do small funds at two billion. It's easier to um to to do a broader range of things with a larger team. Um so, I think it's important to know your edge. I think the other thing that's critical and very much changing now is what is your real liability that you're financing and your operating institution. So it used to be all universities were kind of the same more or less. Size was the differentiating factor. But now some people are being taxed at 8% some people are not being taxed at all. Some people have more pressure on their operating model because of challenges with funding. So I feel the sectors being um split apart in certain ways which I think is both an opportunity but it it just means we're not we're more dissimilar than I think we have been historically. >> I mentioned you serve on a number of highprofile boards >> Ford MacArthur Harvard uh the board chair at Andover. >> Yes. >> Yeah. God love you for that. >> Yeah. That one's hard. >> So what do you think are the most critical issues? Are there common denominators there? >> Absolutely. And I think serving on boards is one of the greatest gifts. I mean you you you give your time but you learn so much and there's so much leverage I think from understanding um some of the bigger issues that are that these foundations are trying to address or at Harvard I'm on the management company company board so that's more about managing the endowment but I feel um for me what I've really learned especially at the Ford Foundation board is the importance um of many things that prevent people from realizing their full potential. I've always believed that education is critical particularly in a democracy and also we want people to be able to fully contribute to our society and if you aren't educated that's hard but what I learned at Ford was that if you don't have stable housing if you don't have um access to good nutrition potentially if you're uh struggling with the mass incarceration uh problems you know the that that the education becomes comes impossible. So you you have to have a certain amount of social stability in a family or a community in order for education to be the pathway that we want it to be to lift everybody to their highest and best potential. Um so I think it's broadened my perspective and obviously both MacArthur and Ford are global institutions so you get to see things in a broader context. >> Right. You mentioned Harvard, you went to the Kennedy School Harley, you went to the college and the business school. What about the challenges that Harvard and Northwestern face? Heartley starting with you in terms of well Washington DC for one thing but myriad issues. >> Well, I think that um it is a it's a tricky environment right now for higher education institutions and Harvard because of its role and and sort of prominence obviously is right in the middle of a lot of that. Um I think they by and large are acknowledging the the issues that are out there are addressing them. Um they're really committed to continue their mission of being a leading academic and research institution in the world. Um and are recognizing that the pressures are there that they face and that they have to address them head on. >> You mentioned um your passion I guess for education, your foundation. And the two of you have a foundation that's focused on education and equity. What was the catalyst, Amy, for choosing those as your pillars? And um how do you select and manage the philanthropy then? >> Yeah, that's a again a great question. I think I think we we spend a lot of time talking about our philanthropy. I think early on in life, you just give to the institutions that gave to you. That's a natural thing. But as we began to think more broadly, we tried to think about what things felt important. And I think we're both pretty patriotic. Um, and I do love this country. My mother was a first generation immigrant family. And um, I for her education was critical. And I think that's the American story that uh, people we're a democracy. People need to be informed. um and they need to be able to access opportunity in order for us to make good on the promises that we are so proud of uh in my opinion in this country. So I think we care a lot about civic engagement. We care a lot about opportunity and removing impediments. Um, and I think as I said, education is critical and we, I think, can still do a better job of making sure that every child has the best possible education. >> Hardly your father was a famous, I guess, mathematician as far as famous mathematicians go. Um, super accomplished. Um, I want to ask you about maybe the best advice he ever gave you or maybe another mentor in your life in terms of helping you uh as you walk the path. >> Yeah, I think they uh I think of a couple of mentors. My father was certainly one of them. Uh and another one who kind of said the same thing, which is when I was heading to business, heading to Wall Street. Uh they both said to me, "Make sure you find something you like to do that if you just do this because you want to make money. Um and you succeed, that's great. And if you don't succeed, then you won't have done something that you really loved. So you have to do something that you really love because then you'll be happy whether or not you've succeeded or not because you got to do what you loved." And I really have followed that advice. I think it's really true. It happens that I do love what I do. Um I, you know, I love love watching the business of private equity as it's grown and changed over the decades that I've been involved in it. It's endlessly fascinating. >> And how about you Amy? >> Mentors. I've had a lot of mentors. David Swenson was definitely a mentor from Yale. Um, but I think in general what I think is funny about financial markets is I did not wake up in fourth grade and say I want to be in the financial markets. Um, but over time I found it's just a great place to uh think about the big questions in the world. I mean allocating capital is thinking about where are opportunities and risks and how would I know and what's the information. So it's kind of a great big puzzle solving exercise. And I do feel Morgan Stanley in the old uh days there was great research, great thinking, great collaboration, people really asking questions about where should we be putting clients money, putting our own money. So I think it's a it's really a fun business. It's a lifelong learner kind of business. And final question, I have to ask you this, which is how much do you talk about work and share and bounce ideas off each other or do you just leave it in the office? >> I know we talk about >> Not at all. >> Well, that's a different answer. Wait, so we >> No, we No, we don't leave it in the office at all. >> We talk about it a lot all the time. Um, and I think it's probably why none of our kids wants to go into >> None of our kids are trying to do finance. >> They've had enough. >> They're they wanted one daughter said, "I want to do something that help important in the world. not like not a money people like you and dad. So um we have but I think it's been fun. I mean I think we are not the same in how we approach financial questions. We're very different kinds of thinkers. So I think we >> how how are you different? >> Um I think Amy is a very good top- down thinker. Sort of you know as she thinks about the world you can hear in the way she talks. I tend to be more rifle shot sort of here's where I see the opportunity. here's where I think we need to go. Here's what we should do. So, I I think I'm a little more bottom up and she's a little more top down. I don't know if you agree with that. >> No, I do agree with that. And I think over time we've learned how to uh celebrate those differences as opposed to fight about them. So, that's good. >> I guess it's worked. >> Amy Falls, Harley Rogers, thank you both so much for joining us. >> Thanks for having us. >> This is at Barrens. I'm Andy Sir. We'll catch you next time.
A Power Couple Talks Private Markets, Quarterly Earnings, and More | At Barron's
Summary
Transcript
[Music] Hello everyone and welcome to At Barrens. I'm Andy Serwarter and welcome to our guests Amy Falls and Hartley Rogers, an accomplished married couple in the world of finance. Amy is the chief investment officer at Northwestern University and on a number of high-profile boards. and Hartley is the let me make sure I got this right Hartley executive co-chairman at Hamilton Lane which is an alternative investment manager. Welcome to both of you. >> Thank you. >> Thanks. Great to be here. >> Amy, let's start off with you. I want to ask you about the Northwestern Endowment and your job there. How big is it and how is it different maybe from other universities or how do you think about running it? >> So we are 15 billion in change. Uh we are different in that we provide a lot of budget support but not as much of some as some of our better capitalized peers. So we're about 25% of the budget and Princeton would be 60 5560. There's a wide spectrum. We're not at the lowest end of the spectrum but for the breadth and importance of the institution I feel we have to run it hard because we we're under capitalized relative to our mission. And Harley, tell us about Hamilton Lane. It's kind of got a really interesting backstory that you were involved in, but give us the sort of thumbnail. >> Sure. Uh, Hamilton Lane is a private markets asset manager, which means we work for investors all the way from small individuals to giant pension funds and sovereign wealth funds, helping them to access the private markets. And that means we manage money for some, we advise for some, although managing money is really the core really the core business today. And what about how much money is over there? >> Our aum is approximately $140 billion. Uh every year we put into newly raised private markets funds 25 to30 billion which makes us one of the largest allocators in the world in that space. >> And you there's a number of common denominators for you guys in your careers. One is the world of privates. Um you're an investor in privates. your company produces them or you have GP, you're the GP with LPS. Um, so I'm wondering Amy, maybe I'll start with you. What is the role of private investments for the endowment? And of course, it's there's a lot going on with that question. >> There's a lot going on. >> Well, it's important to the endowment. I mentioned we want to generate high returns uh in our equity portfolio in particular and we view that as really a function of earnings growth over time. I mean clearly markets go up and down but if you invest in companies that are growing their earnings I'm old-fashioned not a revenue person but purely revenue but um that that you will generate uh returns and uh we believe that privatelyowned firms often are a better long-term play on earnings growth both because there's control the investors have a bit more control and also it's a better representation of midcap companies it's hard to grow, you know, when you're ginormous. So, we really like both the traditional private equity and venture capital uh spaces. We're a little less in real estate and private credit, but they're there altogether. Private assets are about half of the assets of the endowment. >> There's a lot of questions about liquidity though these days. >> A lot of questions about liquidity. And I think on the good side, I think structurally, one of the themes that I know we both think about is the role of retail and and broadening out access to private markets, which might uh uh you might see the margin go down or the the opportunity set uh go uh shrink a little bit, but I think the liquidity would be a very strong offsetting positive rate now. liquidity hasn't been so super. So distributions have been at the lower end historically and that's a little bit um difficult to live with but um I think it's temporary given where the public markets have had >> and there's all these new things going on like secondaries which we can talk about. >> So price discovery is important and one thing about liquidity it's not just getting the money but it actually provides important price discovery. So you don't mind selling something if you think you're getting a reasonable price. >> And Harley let me ask you about Evergreen funds at Hamilton Lane. You guys have been sort of at the forefront of that which is producing something that is a vehicle that high net worth or even ordinary investors can get into. >> Absolutely. And it it kind of ties to what Amy was talking about which is in this environment where you've had some challenges with distributions and liquidity going back to institutional investors. It's created a pool of opportunities in the secondary market and in the co-investment markets that you can package and use as core parts of these evergreen funds because evergreen funds have to have a shorter duration since you're offering some limited liquidity in them to the investors. You need a duration of the portfolio to be shorter than your typical very longdated private equity fund. And so having secondaries, having some private credit and having some co-investments which generally are fee free from the underlying deal sponsor can make for a really interesting mix in these evergreen funds. >> You know, playing the devil's advocate though, a lot of people have suggested, oh well, now that the institutional space is saturated, you guys are going to the retail investor just at the wrong time. Well, I think the retail investors are seeing some of the best deals right now because the institutional investors, not all of them of course, but institutional investors are a little bit frozen because of the allocations they made in 2020 and 2021. They haven't had distributions back. And so, they're not really able to take advantage of the opportunities to invest with some of these mid-market managers, which is really kind of the bread and butter of private markets in the way that these evergreen funds can. I think the evergreen funds are getting tremendous deal flow today. >> And Amy, have you reduced your exposure to privates at this point or >> I would say we're edging off an edge. We haven't reduced it dramatically, but we um we want to hold here or possibly edge down a percent or two, but it wouldn't be significant, >> right? And what about the public markets right now? I mean, there's a lot of talk about an AI bubble. The public markets do seem a little frothy. And I think it's interesting to have a disconnect between pretty well fully priced public markets and yet you're still not seeing the IPO volume or the distribution. So that's a little bit of a disconnect that I think reflects narrowness. So the the indices are well priced but within that there's a lot of uh difference between the mag 7 and and everything else. So, I don't know. I we might have to see a broadening out of strong markets to really allow for uh exits. But I also think people don't want to be public. And that means uh I actually think one good thing about retail coming in is a problem with companies staying private is people don't participate in the democracy and in the capital markets in the same way. And I do think long term that's not good for society. So, I I think overall it's a good idea to have everybody have a piece of the pie. >> President Trump has suggested that companies shouldn't have to report quarterly. >> Um, is that a good idea, do you think? >> It's an interesting idea. I mean, I was just spent a week in Europe where they don't report quarterly and they would say, "Yeah, it's better. Keeps people focused on the long term." On the other hand, as an investor, I sort of like transparency. Um, I do think there's an enormous industry now that's a little overly focused on quarterly reporting and missing and um, that's probably noise. Um, so I'm intrigued with the idea. I would say I understand the thinking, but I think it's nice to get more data than less. >> Yeah. I mean, it's interesting the opakqueness versus the transparency. >> Yeah. >> You know, debate there. What about you? What's your take on that, Harley? Well, I think that um being public is hard and it's a little bit of an oxymoron for Hamilton Lane because we are public, but we're public because our business is is fairly easy for people to understand and to model. So, it's pretty easy for research analysts and stock analysts to understand what we do. Whereas for many companies, it's much harder. There's much more up and down in their results. Um, and I I do think to Amy's point before, in the private equity construct, the general partner really has control of the company, can bring expertise to bear, can put people on the board who have appropriate expertise, and can cause the management team to listen to the board members through incentive arrangements, and that can yield pretty attractive results. We have a lot of data at Hamilton Lane about the outperformance of privatelyowned companies over public companies of comparable size and scale, >> you know. Can you tell us a little bit about that background of Hamilton Lane that I alluded to? I mean, you've got French banks, an entrepreneur, Bill Gates's investment company were involved, I understand. >> Yeah. Well, the company was founded in Philadelphia in 1991 um by a very small group of people and came to prominence as an investment advisor in the private equity area, really helping big state pension funds choose managers. Kalpers was sort of the first franchise client of Hamilton Lane. When I was raising private equity funds in my earlier careers at Morgan Stanley and Credit Swiss, we we would go to Hamilton Lane in hopes of getting money from Kalpers. They were kind of the gatekeeper to Kalpers. They moved pretty quickly into asset management really outsourcing parts of the private markets investment function uh and and becoming more of a of a discretionary manager of assets. And so over time I it it grew to where today we have 22 offices about a thousand people around the world. Uh Bill Gates was an important investor when I came in. I came in about 22 years ago and I led an investment group that in effect did a management buyout of the founding group and and the cascade group was an important part of that um and really helped set us on the strategic course that led to where we are today which is the focus as I said before on things like secondaries co-investments global uh approach and very much focus across all the different asset classes data has been really important for us because with our reach in the industry and for how long we've done it we get a lot of data and data in the private markets is very valuable. >> Can I add something? >> Yeah. >> I remember when you were talking about it that one of the thesis was it could be the merchant bank for private equity >> and I think that's actually coming to play that um creating market making creating deal flow does allow more transparency in this space and in the long run of the problems are zombie funds. you know, if a fund gets off track, there's not much accountability legally. But I think if you had a secondary market that was more transparent, it's going to provide a little bit of discipline in the uh the weaker for the weaker players, which I kind of like that idea. >> Interesting. Shifting gears a little bit, can I ask you Amy about the macro environment, your economic outlook, and those sorts of things? >> Yeah, I think it's a tough macroeconomic environment to forecast right now. Uh I feel that on the one hand uh this the market's giving you a positive signal. Um and I think some of the macro variables are stable. Inflation seems to be tame. Interest rates I think likely on a downward path although I wouldn't subscribe to an aggressively downward path. um but the long end of the market a little less clear where so I think um I think there's uncertainty around uh AI that is really hard to handicap what that means for long-term employment and I'm concerned about some indications of softening in um perhaps the labor market which ultimately could feed through into demand more generally. So I'm probably on the cautious side particularly visav pretty robust markets. >> What about opportunities? >> Well, we just spent a week in Europe and I I do feel like Europe has been this sort of uh shrinking uh player in the global economy. Um if you look over a 20-year period, their share of global GDP and global market cap has been cut in half. Um and I I just feel I'm not ready to count Europe out. We talked about a former colleague, I think it was Byron or Barton, who said they should just put a red rope around. It's like a museum. But I think in fact there's a lot of dynamic companies. I think there is >> potential to remove some of the regulation and rigidity. Um so I I think there's an opportunity there. Valuations are lower. Uh we we stayed invested in China despite some uncertainty and that that's come back a little bit. AI is tricky. I think there's opportunity and enormous risk and a lot of disintermediation. Um so we are cautious there but trying to understand the impact. I want to ask you another question about Hamilton Lane and that is how do you compete with some of these bigger maybe better known companies like KKR and Blackstone Apollo? Um is the culture different in Hamilton Lane or what are you looking to do there? So, we're first of all, we're all kind of fremies because we all invest in a lot of the same things and um check references with each other and uh share insights and things. Um they really focus at the big end of the market. Uh and we are very much a conduit to the middle part of the private equity market. So, if you look back over the years, middle market deals tend to have a wider range of outcomes than big deals. Big deals will be this range. Middle market deals will be like this. So if you really want to access alpha in the asset class, you want to get into this part of that middle market area. And because it's risky, it's got this part too, you need someone that can help you figure that out. And that's what we do. And so we measure ourselves by are we able to get our clients into that upper part of that middle market and lower middle market return area in the private markets. And that's what we offer compared to them. Oftentimes investors will have us complimentary. So we'll be next to if you go to a a wirehouse that markets some of our products and markets a Blackstone or KKR type product, they'll often in the same account put the two together because they're creating that diversity in the in the in the in the area. >> Amy, I want to ask you about your investment style and what you've learned over the years. I mean, you ran the endowment at Andover, at Rockefeller University, and now Northwestern, which I guess is your biggest pot of money. >> Biggest pot. Yes. So, how does that how's that evolved? Change your thinking? >> The size matters. I think you have to know where your edge is. And you have a different edge at $2 billion than at 15 billion. So, it's easier to do small funds at two billion. It's easier to um to to do a broader range of things with a larger team. Um so, I think it's important to know your edge. I think the other thing that's critical and very much changing now is what is your real liability that you're financing and your operating institution. So it used to be all universities were kind of the same more or less. Size was the differentiating factor. But now some people are being taxed at 8% some people are not being taxed at all. Some people have more pressure on their operating model because of challenges with funding. So I feel the sectors being um split apart in certain ways which I think is both an opportunity but it it just means we're not we're more dissimilar than I think we have been historically. >> I mentioned you serve on a number of highprofile boards >> Ford MacArthur Harvard uh the board chair at Andover. >> Yes. >> Yeah. God love you for that. >> Yeah. That one's hard. >> So what do you think are the most critical issues? Are there common denominators there? >> Absolutely. And I think serving on boards is one of the greatest gifts. I mean you you you give your time but you learn so much and there's so much leverage I think from understanding um some of the bigger issues that are that these foundations are trying to address or at Harvard I'm on the management company company board so that's more about managing the endowment but I feel um for me what I've really learned especially at the Ford Foundation board is the importance um of many things that prevent people from realizing their full potential. I've always believed that education is critical particularly in a democracy and also we want people to be able to fully contribute to our society and if you aren't educated that's hard but what I learned at Ford was that if you don't have stable housing if you don't have um access to good nutrition potentially if you're uh struggling with the mass incarceration uh problems you know the that that the education becomes comes impossible. So you you have to have a certain amount of social stability in a family or a community in order for education to be the pathway that we want it to be to lift everybody to their highest and best potential. Um so I think it's broadened my perspective and obviously both MacArthur and Ford are global institutions so you get to see things in a broader context. >> Right. You mentioned Harvard, you went to the Kennedy School Harley, you went to the college and the business school. What about the challenges that Harvard and Northwestern face? Heartley starting with you in terms of well Washington DC for one thing but myriad issues. >> Well, I think that um it is a it's a tricky environment right now for higher education institutions and Harvard because of its role and and sort of prominence obviously is right in the middle of a lot of that. Um I think they by and large are acknowledging the the issues that are out there are addressing them. Um they're really committed to continue their mission of being a leading academic and research institution in the world. Um and are recognizing that the pressures are there that they face and that they have to address them head on. >> You mentioned um your passion I guess for education, your foundation. And the two of you have a foundation that's focused on education and equity. What was the catalyst, Amy, for choosing those as your pillars? And um how do you select and manage the philanthropy then? >> Yeah, that's a again a great question. I think I think we we spend a lot of time talking about our philanthropy. I think early on in life, you just give to the institutions that gave to you. That's a natural thing. But as we began to think more broadly, we tried to think about what things felt important. And I think we're both pretty patriotic. Um, and I do love this country. My mother was a first generation immigrant family. And um, I for her education was critical. And I think that's the American story that uh, people we're a democracy. People need to be informed. um and they need to be able to access opportunity in order for us to make good on the promises that we are so proud of uh in my opinion in this country. So I think we care a lot about civic engagement. We care a lot about opportunity and removing impediments. Um, and I think as I said, education is critical and we, I think, can still do a better job of making sure that every child has the best possible education. >> Hardly your father was a famous, I guess, mathematician as far as famous mathematicians go. Um, super accomplished. Um, I want to ask you about maybe the best advice he ever gave you or maybe another mentor in your life in terms of helping you uh as you walk the path. >> Yeah, I think they uh I think of a couple of mentors. My father was certainly one of them. Uh and another one who kind of said the same thing, which is when I was heading to business, heading to Wall Street. Uh they both said to me, "Make sure you find something you like to do that if you just do this because you want to make money. Um and you succeed, that's great. And if you don't succeed, then you won't have done something that you really loved. So you have to do something that you really love because then you'll be happy whether or not you've succeeded or not because you got to do what you loved." And I really have followed that advice. I think it's really true. It happens that I do love what I do. Um I, you know, I love love watching the business of private equity as it's grown and changed over the decades that I've been involved in it. It's endlessly fascinating. >> And how about you Amy? >> Mentors. I've had a lot of mentors. David Swenson was definitely a mentor from Yale. Um, but I think in general what I think is funny about financial markets is I did not wake up in fourth grade and say I want to be in the financial markets. Um, but over time I found it's just a great place to uh think about the big questions in the world. I mean allocating capital is thinking about where are opportunities and risks and how would I know and what's the information. So it's kind of a great big puzzle solving exercise. And I do feel Morgan Stanley in the old uh days there was great research, great thinking, great collaboration, people really asking questions about where should we be putting clients money, putting our own money. So I think it's a it's really a fun business. It's a lifelong learner kind of business. And final question, I have to ask you this, which is how much do you talk about work and share and bounce ideas off each other or do you just leave it in the office? >> I know we talk about >> Not at all. >> Well, that's a different answer. Wait, so we >> No, we No, we don't leave it in the office at all. >> We talk about it a lot all the time. Um, and I think it's probably why none of our kids wants to go into >> None of our kids are trying to do finance. >> They've had enough. >> They're they wanted one daughter said, "I want to do something that help important in the world. not like not a money people like you and dad. So um we have but I think it's been fun. I mean I think we are not the same in how we approach financial questions. We're very different kinds of thinkers. So I think we >> how how are you different? >> Um I think Amy is a very good top- down thinker. Sort of you know as she thinks about the world you can hear in the way she talks. I tend to be more rifle shot sort of here's where I see the opportunity. here's where I think we need to go. Here's what we should do. So, I I think I'm a little more bottom up and she's a little more top down. I don't know if you agree with that. >> No, I do agree with that. And I think over time we've learned how to uh celebrate those differences as opposed to fight about them. So, that's good. >> I guess it's worked. >> Amy Falls, Harley Rogers, thank you both so much for joining us. >> Thanks for having us. >> This is at Barrens. I'm Andy Sir. We'll catch you next time.