Dale Hunt is managing director of private equity at Ascension Investment Management. She leads the private equity portfolio of Ascension’s $32 billion investment pool.
Prior to joining Ascension Investment Management, she served as chief investment officer at the West Virginia University Foundation, managing director of global private placements at ABN AMRO and NatWest Markets. She had also held a number of senior investment banking positions at S.G. Warburg, Prudential Securities and Smith Barney. She began her career on Wall Street in 1978 and has spent over 20 years focusing on private markets. Hunt holds a B.A. in liberal arts from Boston College and an MBA from Pace University.
In this interview, she discusses the changing landscape of private equity, Ascension’s private equity allocation and why she favors an opportunistic strategy that focuses on small- to middle-sized funds over large brand name ones.
Ms. Hunt was recently named on Trusted Insight’s ranked list of Top 30 LPs Investing In Private Equity. She graciously spoke with the Trusted Insight on August 31, 2016. The following interview has been edited for clarity.
Trusted Insight: Your earlier career was in Investment banking. How did you transition into institutional investing?
Dale Hunt: Yes, I did investment banking for a very long time, but for the majority of my career, I was in the private market. Then, someone I had worked for in the past in investment banking had retired and had become the chief investment officer of the West Virginia University Foundation. When she was getting ready to retire from that position, she called and asked if I would have an interest in joining that organization. It was actually right after 9/11 and so I thought, "This is maybe a good time for a change."
So I moved to the West Virginia University Foundation to head up their alternatives investments, and then ultimately I became their chief investment officer. That's how I got introduced to our chief investment officer at Ascension Investment Management, David Erickson, because at that time he was still the chief investment officer at the University of Wisconsin Foundation.
Trusted Insight: We actually did an interview with him a few weeks ago.
Dale Hunt: David and I had known each other for several years. Not long after he left Wisconsin to join Ascension in 2009, he and I started talking for a couple months to see if I would join him at Ascension. I joined in April 2010.
Trusted Insight: Were you one of the earliest members on the Ascension investment team?
Dale Hunt: Yes. I was actually the third person. Another colleague, Josh Kaplan, who oversees our hedge fund strategies, was the chief investment officer at Drexel University in Philadelphia when David asked him to join.
Trusted Insight: It's been more than six years now. How has the team and your investment portfolio evolved since then?
Dale Hunt: Today we have 28 employees at Ascension Investment Management, split in two almost equal parts - half investment and half operations. We have our chief investment officer, a senior director of risk management and asset allocation, and five investment directors. Each investment director has analyst support. The analyst that has supported me was recently promoted to associate director. We continue to grow the business in connection with the growth in assets.
Trusted Insight: At $32 billion today, it's a really big pool of money to manage. When you were at West Virginia University Foundation, the AUM was $750 million. How is the decision making process different at Ascension than at the endowment?
Dale Hunt: It’s clearly different. First, the West Virginia University Foundation had a very small investment staff. In effect, I was a generalist and did a little bit of everything. We had an investment committee, which was comprised of board members of the foundation. At AIM, we make all our own investment decisions. We have an internal investment committee, which is made up of our CIO, the five investment directors and our senior director of risk and asset allocation. We meet monthly, or as needed on an interim basis, and review all investment recommendations and discuss the market environment overall.
Trusted Insight: You are in charge of manager selection. What makes an asset manager stand out?
Dale Hunt: Clearly we look, as everyone does, for experienced managers. For example, we will back an emerging firm, but only if the founders have experience in private equity and have spun out of other firms. For us it's very much a qualitative and quantitative decision process. We obviously look at performance, but not in isolation. We tend to be opportunistic and focus more on smaller funds. If you look at our strategy, the majority of the funds we’ve selected are sub-$1 billion in size. We prefer specialist firms, whether it be a specialist strategy or a sector specialist, or even a geographic specialist.
When I began managing the private equity strategy, I would say at least 80 percent of the private equity commitments were in U.S. funds and there was very little outside the United States. Today about 55 percent of private equity commitments are to U.S. funds.
Ascension Investment Management has continued to invest and build out its private equity strategy on an annual basis. We're mindful that we don't want to have too many managers. We're trying to consolidate and concentrate manager exposure in our client’s portfolios. When we select a fund, it's typically with the hope that we'll be able to approve follow on investments in subsequent funds. It doesn't always happen, but that's our preference.
Trusted Insight: What overseas markets are the 45 percent non-U.S. allocated in?
Dale Hunt: Today it's really split almost equally between developed markets, which is really just Europe, and emerging markets.
Trusted Insight: Private equity managers have been in the news lately, since the SEC settled a few fraud cases regarding management fees with some big name private equity firms two years ago. Have you had any similar experience? What’s your strategy in avoiding such fraudulent actions as a LP?
Dale Hunt: The SEC has been reviewing particularly the larger brand name PE firms. As you know, several firms have settled with the SEC. It is something that we are mindful of, but we haven’t typically invested with these larger firms, so it's been less of an issue for us. For other institutional investors that have to make very large commitments to these large funds, it's something that I'm sure they're considering.
Dale Hunt: Technology is an area that we have been active in as well, particularly in growth equity.
One area that we're focusing a little bit more on today is direct secondary investments in portfolio companies that are within late-stage funds that need to see an exit. We think that there's an opportunity to still pick up some very good companies that are in the later stages. We've been spending a fair bit of our time looking at some of those opportunities.
We generally don't recommend funds of funds or in secondary funds that buy portfolios. We are a wholly owned subsidiary of a Catholic sponsored organization. As a result, we won't recommend a fund that's going to buy somebody's portfolio that could own portfolio companies that violate our Catholic-based socially responsible investment guidelines.
Trusted Insight: What are the challenges facing the private equity sector now?
Dale Hunt: I think the amount of money that's available to invest is a challenge. Institutional Investors are increasing their private equity allocations at the expense of some other asset classes. In addition, LPs have received sizable distributions.
Particularly, the very large LPs have to write bigger and bigger checks to redeploy the capital. I think we're seeing a lot of money chasing transactions today, which is why the multiples are so high. That's another reason why we're trying to focus on smaller funds, because we think it's a lot easier for investors to get a nice multiple on a company that's maybe $300 million dollars to $500 million dollars, as opposed to someone who needs to generate billions of dollars in order to meet return expectations. I think returns will be muted going forward overall. That said, I still think private equity is probably going to be the principal driver of absolute returns for institutional investors going forward. I think we're going to be in a low public equity return environment for some time.
Trusted Insight: You’ve been in the industry for a really long time. What career device would you give to the next generation of institutional investors?
Dale Hunt: It's interesting because I just spoke to a young person not too long ago who was thinking about focusing on a specific niche within the investment market. My recommendation was to be patient. I think the current generation in general, not just in investments, is in a “hurry up mode.” I'm afraid that we might be sacrificing some experience and skills because of that. I think it's good to have non-investment experience in advance of building a career in finance. I believe developing a broad perspective can give a person an edge when evaluating investment opportunities.
I was very fortunate. I worked for some European firms and lived and studied in Europe. I believe that has helped my career. You gain a different perspective and a different comfort level, which I think is really invaluable. I'm a big proponent of people studying and working abroad. Today’s market requires a global perspective, and the experience should allow your resume to stand out.
Trusted Insight: Tell me about your experience in Europe. Is the work culture any different in Europe than in America?
Dale Hunt: I can really only speak predominantly about the U.K. I worked for S.G. Warburg, NatWest and ABN AMRO and spent a lot time in their London offices. I don’t think the work ethic differs between London and the U.S. However, Europe is a little bit more “contained.” I think Europeans developed a work-life balance a lot sooner than U.S and remain ahead of the curve.
To learn more about private equity investing, view the full list of Top 30 LPs Investing In Private Equity.
Prior to joining Ascension Investment Management, she served as chief investment officer at the West Virginia University Foundation, managing director of global private placements at ABN AMRO and NatWest Markets. She had also held a number of senior investment banking positions at S.G. Warburg, Prudential Securities and Smith Barney. She began her career on Wall Street in 1978 and has spent over 20 years focusing on private markets. Hunt holds a B.A. in liberal arts from Boston College and an MBA from Pace University.
In this interview, she discusses the changing landscape of private equity, Ascension’s private equity allocation and why she favors an opportunistic strategy that focuses on small- to middle-sized funds over large brand name ones.
Ms. Hunt was recently named on Trusted Insight’s ranked list of Top 30 LPs Investing In Private Equity. She graciously spoke with the Trusted Insight on August 31, 2016. The following interview has been edited for clarity.
Trusted Insight: Your earlier career was in Investment banking. How did you transition into institutional investing?
Dale Hunt: Yes, I did investment banking for a very long time, but for the majority of my career, I was in the private market. Then, someone I had worked for in the past in investment banking had retired and had become the chief investment officer of the West Virginia University Foundation. When she was getting ready to retire from that position, she called and asked if I would have an interest in joining that organization. It was actually right after 9/11 and so I thought, "This is maybe a good time for a change."
So I moved to the West Virginia University Foundation to head up their alternatives investments, and then ultimately I became their chief investment officer. That's how I got introduced to our chief investment officer at Ascension Investment Management, David Erickson, because at that time he was still the chief investment officer at the University of Wisconsin Foundation.
Trusted Insight: We actually did an interview with him a few weeks ago.
Dale Hunt: David and I had known each other for several years. Not long after he left Wisconsin to join Ascension in 2009, he and I started talking for a couple months to see if I would join him at Ascension. I joined in April 2010.
Trusted Insight: Were you one of the earliest members on the Ascension investment team?
Dale Hunt: Yes. I was actually the third person. Another colleague, Josh Kaplan, who oversees our hedge fund strategies, was the chief investment officer at Drexel University in Philadelphia when David asked him to join.
Trusted Insight: It's been more than six years now. How has the team and your investment portfolio evolved since then?
Dale Hunt: Today we have 28 employees at Ascension Investment Management, split in two almost equal parts - half investment and half operations. We have our chief investment officer, a senior director of risk management and asset allocation, and five investment directors. Each investment director has analyst support. The analyst that has supported me was recently promoted to associate director. We continue to grow the business in connection with the growth in assets.
Trusted Insight: At $32 billion today, it's a really big pool of money to manage. When you were at West Virginia University Foundation, the AUM was $750 million. How is the decision making process different at Ascension than at the endowment?
Dale Hunt: It’s clearly different. First, the West Virginia University Foundation had a very small investment staff. In effect, I was a generalist and did a little bit of everything. We had an investment committee, which was comprised of board members of the foundation. At AIM, we make all our own investment decisions. We have an internal investment committee, which is made up of our CIO, the five investment directors and our senior director of risk and asset allocation. We meet monthly, or as needed on an interim basis, and review all investment recommendations and discuss the market environment overall.
Trusted Insight: You are in charge of manager selection. What makes an asset manager stand out?
Dale Hunt: Clearly we look, as everyone does, for experienced managers. For example, we will back an emerging firm, but only if the founders have experience in private equity and have spun out of other firms. For us it's very much a qualitative and quantitative decision process. We obviously look at performance, but not in isolation. We tend to be opportunistic and focus more on smaller funds. If you look at our strategy, the majority of the funds we’ve selected are sub-$1 billion in size. We prefer specialist firms, whether it be a specialist strategy or a sector specialist, or even a geographic specialist.
When I began managing the private equity strategy, I would say at least 80 percent of the private equity commitments were in U.S. funds and there was very little outside the United States. Today about 55 percent of private equity commitments are to U.S. funds.
Ascension Investment Management has continued to invest and build out its private equity strategy on an annual basis. We're mindful that we don't want to have too many managers. We're trying to consolidate and concentrate manager exposure in our client’s portfolios. When we select a fund, it's typically with the hope that we'll be able to approve follow on investments in subsequent funds. It doesn't always happen, but that's our preference.
Trusted Insight: What overseas markets are the 45 percent non-U.S. allocated in?
Dale Hunt: Today it's really split almost equally between developed markets, which is really just Europe, and emerging markets.
Trusted Insight: Private equity managers have been in the news lately, since the SEC settled a few fraud cases regarding management fees with some big name private equity firms two years ago. Have you had any similar experience? What’s your strategy in avoiding such fraudulent actions as a LP?
Dale Hunt: The SEC has been reviewing particularly the larger brand name PE firms. As you know, several firms have settled with the SEC. It is something that we are mindful of, but we haven’t typically invested with these larger firms, so it's been less of an issue for us. For other institutional investors that have to make very large commitments to these large funds, it's something that I'm sure they're considering.
One area that we're focusing a little bit more on today is direct secondary investments in portfolio companies that are within late-stage funds that need to see an exit. We think that there's an opportunity to still pick up some very good companies that are in the later stages.Trusted Insight: Where do you see the opportunity in private equity in today's market?
Dale Hunt: Technology is an area that we have been active in as well, particularly in growth equity.
One area that we're focusing a little bit more on today is direct secondary investments in portfolio companies that are within late-stage funds that need to see an exit. We think that there's an opportunity to still pick up some very good companies that are in the later stages. We've been spending a fair bit of our time looking at some of those opportunities.
We generally don't recommend funds of funds or in secondary funds that buy portfolios. We are a wholly owned subsidiary of a Catholic sponsored organization. As a result, we won't recommend a fund that's going to buy somebody's portfolio that could own portfolio companies that violate our Catholic-based socially responsible investment guidelines.
Trusted Insight: What are the challenges facing the private equity sector now?
Dale Hunt: I think the amount of money that's available to invest is a challenge. Institutional Investors are increasing their private equity allocations at the expense of some other asset classes. In addition, LPs have received sizable distributions.
Particularly, the very large LPs have to write bigger and bigger checks to redeploy the capital. I think we're seeing a lot of money chasing transactions today, which is why the multiples are so high. That's another reason why we're trying to focus on smaller funds, because we think it's a lot easier for investors to get a nice multiple on a company that's maybe $300 million dollars to $500 million dollars, as opposed to someone who needs to generate billions of dollars in order to meet return expectations. I think returns will be muted going forward overall. That said, I still think private equity is probably going to be the principal driver of absolute returns for institutional investors going forward. I think we're going to be in a low public equity return environment for some time.
Trusted Insight: You’ve been in the industry for a really long time. What career device would you give to the next generation of institutional investors?
Dale Hunt: It's interesting because I just spoke to a young person not too long ago who was thinking about focusing on a specific niche within the investment market. My recommendation was to be patient. I think the current generation in general, not just in investments, is in a “hurry up mode.” I'm afraid that we might be sacrificing some experience and skills because of that. I think it's good to have non-investment experience in advance of building a career in finance. I believe developing a broad perspective can give a person an edge when evaluating investment opportunities.
I was very fortunate. I worked for some European firms and lived and studied in Europe. I believe that has helped my career. You gain a different perspective and a different comfort level, which I think is really invaluable. I'm a big proponent of people studying and working abroad. Today’s market requires a global perspective, and the experience should allow your resume to stand out.
Trusted Insight: Tell me about your experience in Europe. Is the work culture any different in Europe than in America?
Dale Hunt: I can really only speak predominantly about the U.K. I worked for S.G. Warburg, NatWest and ABN AMRO and spent a lot time in their London offices. I don’t think the work ethic differs between London and the U.S. However, Europe is a little bit more “contained.” I think Europeans developed a work-life balance a lot sooner than U.S and remain ahead of the curve.
To learn more about private equity investing, view the full list of Top 30 LPs Investing In Private Equity.