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Vanderbilt University Confident About Venture Exposure Over Next 5-7 Years | Priti Mody, Investment Manager | Q&A

by trusted insight posted 7months ago 2264 views
Priti Mody is an investment manager at Vanderbilt University. She has over 15 years of investing experience in private markets including venture capital, growth, buyouts, real estate, and energy and spanning across directs, co-investments, primary and secondary funds. 

In this interview, she discussed when she was part of Vanderbilt's new team tasked with revamping the investment program; why they have made some inroads in building out their China venture portfolio; and the measures that have a tremendous impact on women in finance.

Mody was named to Trusted Insight's 2020 Top Institutional Investing Rising Stars.

Trusted Insight: Tell us about Vanderbilt University and your role there at its investment office.

Priti Mody: Vanderbilt University was founded in 1873 with the gift of $1 million that was endowed by Cornelius Vanderbilt. The university is a private research institution with 10 colleges that foster a residential-based educational experience to over 13,000 undergraduate and graduate students, and it employs over 9,000 faculty members. Our office of investments is committed to growing and protecting the university's endowment especially for the benefit of research and scholarship.
 

"We were tasked with revamping our program and reconstructing the portfolio almost entirely, especially our private equity, natural resources, and real estate portfolios."


I work on the team at Vanderbilt that manages and constructs our private markets portfolio, which includes our venture capital, private equity, and real asset investments. My role entails managing our privates portfolio overall, setting the strategic direction of privates, and fostering relationships with existing and prospective managers. Today the endowment is over $8.0 billion and a little over 30% of the endowment is invested in privates.

Trusted Insight: Walk us through how Vanderbilt’s PE/VC program has evolved since you joined 6 years ago.

Priti Mody: I was hired as part of a new team here at Vanderbilt. We were tasked with revamping our program and reconstructing the portfolio almost entirely, especially our private equity, natural resources, and real estate portfolios. We’ve also added a growth equity strategy to the portfolio. It's been a tremendous effort, so suffice to say it's been really busy. Overall, we’ve selectively added managers to our privates portfolio that tend to be early in their lifecycle and with whom we enjoy a deeper and more aligned partnership. Our approach has entailed a significant learning curve to map markets globally and build networks. Part of this effort also involved establishing and refining an institutional-grade diligence process that accounts for our investment philosophy.  It’s taken about five years to rebuild a core group of manager relationships and we are happy with what we’ve accomplished.

Trusted Insight: What venture capital opportunities are you most excited about today in the next 5-7 years?

Priti Mody: The venture market and asset class will continue to be a large driver of performance for the endowment and the market overall. Our venture portfolio has been the best performing asset class at the endowment. The market is very dynamic and changing. For example, the opportunities to compound returns in mid and late-stage venture today are different than they were previously. There's just more capital dedicated to the asset class and companies are staying private longer. That's really exciting from the perspective of having opportunities for compounding of growth within an asset class where we have a long history and a mature portfolio.
 

"We have made some inroads in building out our Chinese venture portfolio, which is still nascent and admittedly harder to accomplish in the current environment, which is not conducive to travel."


As long-term investors, our competitive advantage is the time horizon over which we invest, so we'll always have a natural bias towards investing in the earlier stages. It's a daunting environment that we're in right now but we feel really good about our venture exposure in over the next 5-7 years.

Trusted Insight: What markets outside of the U.S. are you most interested in? The two countries leading in promise seem to be China and India.

Priti Mody: It's very difficult not to acknowledge the amount of capital and value creation that will continue in Asian markets generally and China in particular. The globalization of the venture market is not a new phenomenon but we are seeing it accelerate especially in China and India. We have made some inroads in building out our Chinese venture portfolio, which is still nascent and admittedly harder to accomplish in the current environment, which is not conducive to travel. Again, we're long-term investors so we're committed to it over time. India certainly has attracted a tremendous amount of capital. It's to be seen if India can truly be competitive on a relative basis in private markets. The other market that is very attractive is Europe. I’ve spent a significant amount of time developing relationships in the private markets overall in Europe where we’ve found hidden gems in the buyouts and special situations strategies, and where the venture landscape has become more attractive.

With regards to recent scrutiny over Chinese investments, as an investment office, we do not make governance decisions and we take the lead from our governing board when it comes to topics such as divestments.

Trusted Insight: How has your previous experience in a non-endowment/foundation role influenced your current investment approach?

Priti Mody: Every single thing I have done in my career has come together in my role as an LP. I started my career at Prudential, where I made direct investments in mostly middle-market companies across the capital stack. My training and experiences there are what really anchor my investment style. I am a long-term oriented, bottoms-up, fundamental investor that believes in making data-supported decisions while having the unique ability to appreciate the qualitative elements of assessing a manager given my first-hand experience working as a principle investor. I have a tendency to deconstruct how a manager thinks about risk and return of their holdings.
 

"About a year ago our board added Adena Friedman (President and CEO of Nasdaq) to our investment committee. These measures have a tremendous impact on women and it is meaningful that leadership put action behind their stated values."


My background as a direct investor also helps me appreciate the qualitative elements of a partnership. I have stayed at the office until 3:00 a.m. putting pitch decks together. I’ve hosted management meetings. I've been part of a cold calling program. All of these experiences help me assess the investment processes, culture, and personalities leading the organizations we seek to partner with. Lastly, I’ve been able to build great relationships having been part of the finance community for over 15 years that is coupled with my business school network.

Trusted Insight: What are your thoughts on the LP world’s push for more diversity and inclusion? Does Vanderbilt or yourself emphasize the movement?

Priti Mody: About a year ago our board added Adena Friedman (President and CEO of Nasdaq) to our investment committee. It’s very encouraging for somebody like me and generations to come. These measures have a tremendous impact on women and it is meaningful that leadership put action behind their stated values.

Our investment office does not have a formal policy or investment target as it relates to diversity and inclusion. It's an important topic for the university and one that leadership is spending time on. Personally, I make any investment decision based on merit and performance potential, and ultimately how it will add to the mission of our endowment. That being said, as a woman in finance, my networks are different from those of my colleagues, and therefore my funnel of opportunities and those that I am open to naturally lends itself to a more diverse manager set.

Trusted Insight: What are some issues or ideas that your team is trying to better grasp on at Vanderbilt?

Priti Mody: Given the uncertainty that 2020 brought with it, we’ve spent a good amount of time looking inward and diving deeply into our privates portfolio to seek out potential vulnerabilities. In monitoring the portfolio, we generally tend to be manager-focused but we took the opportunity to review the portfolio at a position-level. It was a tremendous effort that brought with it a good deal of insights which I presented to our board. We have growing concentrations in our privates portfolio which is largely being led by a small number of public positions that originated from our venture holdings. Large public holdings in our privates portfolio understates the value of the endowment given the lag in private markets reporting and has a lot of implications. Additionally, there is a convergence of public and private markets overall that is especially apparent in our venture portfolio and holdings. We are monitoring and thinking through the implications of these dynamics at the endowment, asset class, and position-level.

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