Raelan Lambert, John Jackson, and Erik Sebusch – Inside Mercer Consulting (EP.345)
Oct 23, 2023
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Mercer Alternatives leaders Raelan Lambert, John Jackson, and Erik Sebusch discuss the firm's hedge fund research, blind pool assets, building relationships with managers, concerns about vesting schedules for hedge funds, client needs, team empowerment, and the importance of hard work.
Mercer Alternatives prioritizes a wide network of professionals to offer a systematic yet flexible approach to serving clients.
Mercer Alternatives maintains a high level of quality, risk management, and diversification in their hedge fund research process.
Mercer's venture capital team focuses on building relationships with managers, prioritizing cultural fit, alignment of interests, and face-to-face due diligence.
Deep dives
Mercer Alternatives: A Global Perspective on Capital Allocation
Mercer Alternatives is the alternative investment arm of the consulting company Mercer, which advises on $16.5 trillion of assets and manages $400 billion. They prioritize having a wide network of professionals who specialize in various client segments. They aim to provide a systematic approach to serving clients while still offering flexibility and customization. Growth through acquisition has been a part of their strategy, but they also focus on organic growth and constantly improving their approved list of managers. They prioritize quality, risk management, and diversification in their hedge fund research process. In venture capital, they prioritize relationships, targeted manager selection, and a focus on early-stage and growth-stage opportunities. Overall, Mercer Alternatives emphasizes being a trusted partner to their clients and maintaining a high level of professional integrity.
Hedge Funds and the Shift in Opportunity Set
The hedge fund team at Mercer focuses on sourcing, due diligence, and selecting managers. They cast a wide net, attending industry events and engaging in extensive meetings to identify the best talent. They prioritize structural and cyclical inefficiencies, strong pedigree, opportunistic mandates, and robust risk management. They consider risk management crucial in a volatile market and believe that macro and credit strategies will offer attractive opportunities in the future. While they have a large approved list of hedge funds, they aim to keep it as small as possible to maintain quality and conviction in their top ideas. Additionally, they highlight the growth of multi-strategy platforms and emphasize the need for diversification and a cautious approach in accessing these platforms.
Venture Capital Dynamics and Manager Selection
Mercer's venture capital team focuses on building relationships with managers, especially in the early-stage and growth-stage areas. They leverage their global reach and use a targeted approach to identify promising managers. Cultural fit and alignment of interests are important considerations for partnerships. They prefer investments in managers with longer vesting schedules to ensure alignment over the fund's duration. They prioritize diversity in their portfolio and believe in the importance of face-to-face due diligence and reference checks. They aim to maintain long-term relationships with managers and consider every manager for re-up decisions on a case-by-case basis. The team is currently focusing on early-stage and growth-stage opportunities while being cautious about mid-stage and late-stage companies given valuation concerns and fundraising risks.
The Mercer Approach: Integrity, Hard Work, and Client-centric Focus
Mercer emphasizes professional integrity, hard work, and a client-centric approach across their alternative investment teams. They aim to be responsive, maintain strong relationships, and prioritize the needs of their clients. Empowering their teams and developing professional talent are essential aspects of their culture. They strive to be at the forefront of data tools and technology and constantly innovate to meet evolving market demands. Mercer also values their partnerships with external managers and focuses on extensive due diligence, both in hedge funds and venture capital. Their goal is to be a trusted partner in capital allocation and provide customized solutions to meet client objectives.
Words of Wisdom: Never Say Never, Overpreparation, and Playing Chess
The professionals at Mercer share some valuable advice. They emphasize being open-minded and avoiding absolutes when evaluating opportunities. They encourage overpreparation and taking the time to thoroughly analyze situations. They stress the importance of thinking several steps ahead and being strategic, like playing chess. They also highlight the significance of hard work, perseverance, and building strong relationships for long-term success in the investment industry.
Raelan Lambert, John Jackson, and Erik Sebusch are three of the leaders at Mercer Alternatives, the alternative investment arm of the consulting juggernaut. Mercer advises on $16.5 trillion of assets and manages $400 billion, of which $160 billion under advisement and $25 billion under management is under the Mercer Alternatives umbrella. Raelan is Mercer’s Global Alternatives leader, John is the Head of Diversifying Alternatives, its hedge fund group, and Erik is the Global Strategy Leader in Venture Capital. Our conversation provides a glimpse inside Mercer. Raelan shares an overview of the alternatives business, John delves into the hedge fund research process that informs its approved list, and Erik does the same for venture capital. Learn More Follow Ted on Twitter at @tseides or LinkedIn Subscribe to the mailing list Access Transcript with Premium Membership
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