How we think about selecting top fund managers

I'm Mark Machin. I am the CEO. I was previously the president and CEO of the Canada Pension Plan Investment Board, CPPIB. And that was one of the biggest asset owners in the world at about $650 billion of deployed capital, invested in assets around the world, broadly diversified portfolio. Two-thirds of it was in alternative investments or illiquid investments. Hi, my name is Matt Malone. I'm head of Investment Management here at the firm. I spent nearly two decades doing research, diligence, product development, capital raising, portfolio management in the private market space across alternative asset classes. And I've been working in the space for a long, long time at the intersection of the high net worth channel and these assets. The advantage is the networks that we have. So, across family offices, across venture capital world, and across institutional owners, we have an enormous number of lenses into what people really think about what these people who are running these funds have achieved before and likely to achieve in the future. And that's really, really important because ultimately, you can do a lot of the standard due diligence. You can go through a hundred and well, thousand questions and lots and lots of analysis, but you also really want to find out what might be going on behind the scenes that you've missed. I think the big differentiator for the way we operate our platform is the fact that we have our own capital that we use to secure commitments. That means we're 100% aligned with our underlying clients. We succeed when these funds perform.

Like in any investment business, you want to have a very wide funnel. And I think that our network, our combination of network and data tools, the sort of the quantitative and the qualitative together when we're building our funnel. We have inbounds from our network; we're getting introductions from other managers to us and but then we're also trolling through data sources and looking for best performers within different sectors. And after managers, if they make it through the screening process, and it's somebody who we want to spend some more time with, then we go into a more formal diligence process. How I always learned diligence was kind of dividing it into three things the sponsor, which is the managing company or the GP, the strategy, which is the specific fund, and then the structure. Those are sort of the three pillars of diligence in my mind. You want a parent company that's strong, that's well-capitalized, that has a good team, that has a strong long term track record, then you want a strategy that makes sense that that team can execute on, and that makes sense for the time, and that has an edge. So you want to see, you know, that long-term track record we want to see an edge, whether it's in sourcing or structuring or adding operational value, depending on the sector, what's appropriate. In early-stage venture capital, really having an incredible network plus an ability to nurture companies that are super early stage and be able to keep them on the right track. That pattern recognition of seeing great management talent and keeping the management talent away from the mistakes that other people make at that stage. That's very different from a team that is buying mature infrastructure assets where you're really finely pricing long-term cash flows, for example, you know, regulatory risk and tax risk.

And then, of course, you have to look at the structure because the structure is where, you know, that's where you're putting your money into a structure, and you want to make sure that there's going to be no surprises with how your capital is being managed. If it's a drawdown fund, you want to understand what the draws are. You want to understand what the return stream will be like over time; cash flows over time. And you want to understand the fees and alignment and investment by the GP.

And then, at the same time as we're running through that process, you know, we do partner with some outsource firms as a second set of eyes on managers. So we have a few different firms that we work with that can support both investment and operational due diligence. But we take a lot of pride in doing a lot of work in-house. What I want to make sure of is anything that we put on this platform; if I was at CPPIB or one of the major asset owners, I would also have invested in. So, we are going to be very selective. This is going to be a very curated series of funds that goes on this platform. And that is both because we want to make this something that's exclusive and special. But most importantly, because it's what makes fundamental sense from an investment point of view.