Andrea Auerbach, Head of Global Private Investments
As part of our executive leadership team and head of our dedicated business unit for discretionary private investments, Andrea is responsible for ensuring that Cambridge Associates continues to source, diligence, and underwrite best-in-class private investment opportunities around the globe and for overseeing the management of discretionary private investment mandates. In this Cambridge Conversations, we talk to her about what it takes to maintain a competitive edge in private investing.
Cambridge Associates has been a leader in private investments for decades. What does it take to sustain that leading edge?
People. It takes people. Our amazing private investments team gets up every day to source and underwrite high conviction investment opportunities for inclusion in client portfolios, working in conjunction with our great colleagues who work with clients on private investment portfolio construction. It’s that significant collective effort of those more than 100 private investment focused professionals I get to work with every day and in many cases, over decades, as well as the fantastic partnership we have with our clients, that accumulates into our industry leading position in private investments.
But to sustain the leading edge, you’ve got to be willing and able to explore and evolve. Our co-investment and secondaries practices are good examples of that. Several years ago, we took the view that co-investments would become a permanent part of the private investment landscape. Same with secondaries, the yin to the yang of primaries. So, around 2015 we created our dedicated co-investment and secondaries practices to harness the power of our platform to source, underwrite, and deliver that exposure to clients. We knew we could leverage our substantial private investment information advantage and relationships for the benefit of clients, and we built the structure to do that. That’s what we’ve always done.
What do you mean by “information advantage?” Why is that important in PI?
If there’s one thing I’ve learned in my 30 years of working in private investments, it’s that the private market indeed has its own rhythms and cycles, and investor sentiment and interest in various strategies and geographies waxes and wanes over time.
So it’s important to step back to look at the data—and we have A LOT of data!. Not just where the market has been, but more importantly, using all observable information to develop an informed view on where the market is going, and plot a steady, multi-year course to building programs that can sustainably earn competitive returns going forward.
Doing that well really does require a mountain of information. That’s why we track 20,000 funds in our database, we currently monitor about 5,000 GPs, we hold about 2,000 meetings every year (mostly on Zoom at present!). And we are about to celebrate 10 years of our private investment operating metric survey. It takes a lot of resources, but we’ve committed to investing in those resources because it’s really what it takes to be out in front of the private markets.
How does that data then translate into portfolios that outperform, especially in an asset class where dispersion is so significant?
Data isn’t all that useful without expertise and perspective, right? All this information funnels into insights forming our perspective on which private investment strategies offer the best return potential for the level of risk that a given mandate is prepared to take. Our private investment team has literally decades of knowledge in building private investment portfolios. They know how to manage private investment exposure and understand the interplay of different strategies in a program, the implications for illiquidity and cashflow. They bring all of that to bear in delivering competitive private investment performance for our clients.
Identifying great managers is the first step but getting access to them is critical. How is Cambridge able to maintain its access?
Year after year, Cambridge helps clients deploy upwards of $15 billion into private investment opportunities. funds. Because of the variety of our mandates, the private investment team sources and underwrites more funds, at least 200 a year-globally across all strategies, from emerging to developed managers, every year. The tenure of that team is substantial. I’ve been at CA doing this for over 20 years, developing deep relationships, and I’m not the only one! These longstanding relationships and networks in the private markets help us access to best-in-class funds, but also keep us out in front early with emerging managers who will be tomorrow’s best-in-class funds. Equally as important, best-in-class GPs know that Cambridge clients are sophisticated, high-quality LPs. It’s really about relationships, both with the managers and with our clients.
The firm announced earlier this year that it was launching a secondaries aggregation vehicle for clients. Why is that?
As we’ve launched our secondaries practice, which has been very successful in terms of proving the power of CA’s private investment platform, deploying nearly $600 million to date, the difficulty of executing secondary transactions efficiently and equitably for as many clients as possible has led us to form a dedicated secondaries aggregation vehicle for clients. A dedicated vehicle allows us and our clients to be even more credible buyers of secondaries, allows clients to participate pro-rata in transactions we source and execute, and very importantly allows us to negotiate as one entity, rather than individually on a client-by-client basis, which is problematic for so many reasons in the secondary arena. With a clients first mentality, we also designed the structure of the vehicle to have a significant discount to typical costs for secondaries funds. Again, it all comes from our primary business objective: delivering great investment opportunities to our clients.
You’ve been at CA for a long time—why have you chosen to make this your professional home?
Same answer as the first question! The people. CA is a special place, and I feel lucky to be here.