Goldman Sachs Petershill's Robert Hamilton Kelly - riding the waves of change in GP stakes

Welcome back to the Alt Goes Mainstream podcast. Today’s conversation dives into the current state of private markets through the lens of one of the leading GP stakes firms in the industry. We sat down with Partner and Global Co-Head of the Petershill Group at Goldman Sachs Robert Hamilton Kelly. Petershill takes minority equity stakes in established and newly-established alternative asset managers. Across its different investment vehicles, Petershill participates in the fee income from over 200 underlying funds from alternative asset management firms that are diversified across asset class, investment strategy, and investment lifecycle. Petershill’s Partner firms have well in excess of $340B in aggregate AUM and they’ve partnered with a number of the top firms and some of the industry's most recognizable names in the middle market and upper end of the market, including Clearlake, Francisco Partners, Permira, Accel-KKR, General Catalyst, Kayne Anderson Real Estate, Kennedy Lewis, and more. Rob and I had a fascinating conversation on GP stakes and the evolution of alternative asset management. We discussed:The what, why, and how of GP stakes.The benefits and drawbacks of GP stakes investing for GPs and LPs.What makes a great GP.The question of liquidity in GP stakes.Why Petershill has generally focused on middle-market alternative asset managers.How private markets will continue to evolve and the growing importance of the wealth channel in the evolution of asset management. Thanks Rob for coming on the show to share your wisdom and expertise in private markets and GP stakes. We hope you enjoy. A word from AGM podcast sponsor, Ultimus Fund Solutions This episode of Alt Goes Mainstream is brought to you by Ultimus Fund Solutions, a leading full-service fund administrator for asset managers in private and public markets. As private markets continue to move into the mainstream, the industry requires infrastructure solutions that help funds and investors keep pace. In an increasingly sophisticated financial marketplace, investment managers must navigate a growing array of challenges: elaborate fund structures, specialized strategies, evolving compliance requirements, a growing need for sophisticated reporting, and intensifying demands for transparency. To assist with these challenging opportunities, more and more fund sponsors and asset managers are turning to Ultimus, a leading service provider that blends high tech and high touch in unique and customized fund administration and middle office solutions for a diverse and growing universe of over 450 clients and 1,800 funds, representing $500 billion assets under administration, all handled by a team of over 1,000 professionals. Ultimus offers a wide range of capabilities across registered funds, private funds and public plans, as well as outsourced middle office services. Delivering operational excellence, Ultimus helps firms manage the ever-changing regulatory environment while meeting the needs of their institutional and retail investors. Ultimus provides comprehensive operational support and fund governance services to help managers successfully launch retail alternative products. Visit www.ultimusfundsolutions.com to learn more about Ultimus’ technology enhanced services and solutions or contact Ultimus Executive Vice President of Business Development Gary Harris on email at gharris@ultimusfundsolutions.com. We thank Ultimus for their support of alts going mainstream. Show Notes 00:00 Introduction and Sponsor Message 01:18 Podcast Opening and Theme 02:06 Guest Introduction: Robert Hamilton Kelly 03:32 Rob's Boat Racing Experience 03:45 Parallels Between Boat Racing and Private Markets 04:57 Current State of Private Markets 05:14 Impact of Policy Changes on Private Markets 06:53 Growth of the Private Markets Industry 07:09 Early Days of Petershill 07:26 Goldman's Role in Alternative Asset Management 09:26 Valuing GP Stakes and Alternative Asset Managers 10:01 Insights on Alternative Asset Managers 12:36 Valuing GP Stakes 13:22 Data-Driven Investment Strategies 15:34 Management Fees and Performance Fees 16:28 Growth and Evolution of Firms 23:16 Strategic Imperatives for Growth 26:15 Managerial Skills and Industry Dynamics 30:55 Commercialization in Platform Management 31:07 Challenges and Opportunities in Capital Raising 31:53 Industry Consolidation Predictions 32:29 Growth and Consolidation in Private Markets 33:31 The Role of Mid-Market Firms 34:15 GP Stakes and Wealth Channel Access 36:12 Goldman's Unique Platform and Services 37:57 The Importance of Strategic Advice 39:39 Common Challenges for GPs 40:33 Evolving LP and GP Stakes Dynamics 40:44 Why LPs Invest in GP Stakes 42:00 Income Generation and Capital Growth 42:49 Diversification in GP Stakes 43:05 Private Markets Exposure 44:01 Entry Points into Private Markets 45:07 Long-Term Exposure and Portfolio Construction 47:00 Investing in Private Credit 48:10 Evaluating GP Stakes Investments 49:38 Data and Performance in GP Stakes 52:04 Growth Path of Private Markets 52:23 Valuing Alternative Asset Managers 55:41 Liquidity in GP Stakes 57:09 Structural Changes in GP Stakes 57:35 The Evolution of Private Markets 58:11 Future of Venture and Growth Sectors 58:56 Private Credit Products and Market Share 59:29 Maturation of Private Markets 59:52 Conclusion and Final Thoughts