Having joined private debt firm Apera Capital at inception, CFO Rob Shaw has been able to develop a tech-led back office infrastructure for the fund, providing that ever elusive golden source of truth.
The Drawdown (TDD): Your career to dates spans across the private equity and hedge fund space – can you tell me about your journey to becoming CFO at Apera Capital? And what methods or practices did you learn while working within the hedge fund space that you have been able to apply into your current role?
Rob Shaw (RS): I’ve been involved in the private fund space for at least 10 years. I started in real estate, then private equity, then growth capital, and then I had a brief period in hedge.
Regardless of strategy, CFOs face the same challenges. Your focus is always around; where is the information, how long does it take to report, drawdowns and banking facilities. This is the same across all the asset classes.
But, there are nuances in private debt, so it’s been a learning curve since joining Apera. Yes, private funds can be lumped together, but my hedge fund learning has been vital – especially in terms of the operating model.
Private equity is based on a quarterly operating model because quarter to quarter there is only so much activity . At the other end of the spectrum is liquid hedge funds where there are daily NAVs. Debt fits in the middle. For example, within one month there can be two or three payments, a rollover, follow-on investments – a whole range of different things in each quarter, which make it less comparable to private equity.
In reality, the average PE fund (depending on size) does four to six deals a year. But at Apera we’re looking at eight to 12 new investments, and there might be realisations on top of that, so it’s very transactional.
That’s been the learning curve. And thinking about the infrastructure to support that. Taking my experience to Apera and tailoring that to debt.
TDD: What attracted you to joining Apera Capital, and how have you found it so far?
RS: The ability to build something from the ground up. I did that with the hedge fund and I really enjoyed it, so I was actively looking for opportunities with new funds.
It has been two years now since joining, which has been about getting the business to where it is now – it’s been about that journey: raising the fund, deploying capital, building up the team, developing the infrastructure. All of these things are coming to fruition.
Compared to joining a big fund, where the infrastructure and operations are in place – it would be business as usual. The routines are already in place around reporting, fundraising etc.
There are boring bits to the CFO role, but having been here from day one, along with the transactional nature of private debt makes this role more exciting.
TDD: Can you provide an overview of your current responsibilities?
RS: It covers everything; parts of fundraising, deal execution on the operational side, which means getting involved with HR, IT, general office management – even refilling the paper in the printer, all the way through to strategy. It’s the full spectrum and that’s the function of being a startup. And that goes for all of the management here, everyone is very hands on. That will change over time. But for example, for deal origination and execution – we’re all hands on deck.
TDD: How frequently are you interacting with other parts of the businesses – in particular the deal team and IR? Do you see interaction increasing?
RS: All the time!
I sit on the investment committee, which is a reflection of the importance Apera places on the CFO role. Having been in a transactional environment previously, that was very appealing to me. It keeps me close to the market and to new investments as well as monitoring existing investments. This is especially important when it comes to investor reporting; it enables me to speak with more credibility.
TDD: How much interaction do you have with LPs? Will this increase or decrease?
RS: It depends on the LP. There are two investors that will always call and ask about the drawdown notice. There’s also the quarterly reporting process, which generally triggers calls and questions. But some of the LPs prefer to speak to other members of the team.
We want active relationships with investors as they backed us as a first time fund, so it’s important to nurture that relationship. If they want more contact or clarity then we’re keen to provide it.
Also, I saw the investors coming in, whether that was working with them on the subscription agreement or doing the KYC checks, so I was able to strike up the LP relationships early on through involvement on the legals and document preparation.
TDD: How is technology supporting your role?
RS: Our platform development is driven by wanting absolute control over the data, as well as building a scalable platform, and using technology to drive that.
It comes from previous experiences where, for example, you might have five or six different funds but no infrastructure to carry out reporting, and then you end up using excel to bring all the information together.
At Apera, we had a blank sheet of paper. We knew what didn’t work and how painful it could be, and we knew what we wanted and what the LP expectations were.
With Black Mountain we have a tailored cloud platform. And with SEI as our administrator, the interaction between the two systems is seamless.
Black Mountain is cloud-based so we can all logon from anywhere and see the portfolio. This is really important for us – we started in London, with the whole team based here, but as we have grown the team has expanded to France and Germany – so it’s vital for us to be able to interact with each other wherever we are.
Black Mountain, for us, manages deal origination, execution, currency hedging, reporting and portfolio analytics. Most importantly, it reconciles all investment related information with the information SEI has.
SEI runs a daily operating model, which is used for the reconciliation process. We reconcile ‘our information’ (data from Black Mountain) to SEI’s information on a weekly basis. This makes the reporting process and everyone’s lives much easier.
What makes Black Mountain work for us is K2 – the loan accounting engine, which didn’t exist 18 months ago – that enables reconciliation. The technology is now available for funds like us. We were the first or second adopter of K2.
TDD: How much of your function do you outsource? Do you see this increasing or decreasing?
RS: We had long conversations at the start about the outsourcing / insourcing model. I come from an outsourcing background, while Klaus comes from an insourcing background. So, we’ve landed on outsourced option with full visibility.
We can logon and look into bank level transactions in the fund, through to the manager dashboard. This means we can run our own reports and can schedule them to match our timelines. SEI’s platform enables that visibility and control. However, most important for us is that we have our own database with Black Mountain that is reconciled with SEI’s information such that at the end of the day we are completely in control of the data.
The interplay between Black Mountain and SEI – entering loan information to Black Mountain, but also SEI entering fund information (cash flows) – gives us that golden source of truth.
TDD: What are the main challenges you are currently facing?
RS: It has taken a lot of resource to get everything set up. We had a clear idea of what we wanted and that has evolved, meaning there have been additional costs because of that.
We’re not 100% there, there are still tweaks to be made, but that will always be the case. There’s always room for improvement.
TDD: What are your key priorities over the coming year?
RS: Reaching final close on the fundraise. And we’re keen to deploy more capital, and ensure the infrastructure is capable of supporting that.
Some of the team are moving back to their respective offices across Europe. It has been great all of us being together, but now the operational model is changing as we have more people working out of our offices on the continent..
Aside from building the business, there’s also a team element – integrating new people; ensuring culture is properly communicated, especially when people are operating in different countries.
TDD: How do you see your role changing as Apera grows and the industry continues to mature?
RS: I have a colleague in Luxembourg, and we recently hired more support in London, so the administrative responsibility is moving to these people. For me, it’s about continuing to refine the infrastructure, and looking at how we build out the business over time.
For now, the focus is on the first fund. It’s slightly premature to think any further than that. We need to do continue to do well on this fund, through good deals and exits, then the rest looks after itself.
TDD: What do you think are the industry’s biggest challenges over the coming year?
RS: We’re still fairly new as an industry. Lots of managers in Europe are on their first fund, and there are more funds coming to market. We need to be clear on what differentiates us. Yes, we will do that through good returns, strong covenants and quality investors.
But there’s lots of talk in the market about where the cycle is. If it does turn, we want to still have our shirts on in the end. We need to be disciplined. Which could mean we lose certain opportunities because we insist on strong covenants and correct pricing. That means generic auctions are probably not for us, and we have to work harder for interesting deals with a clear financing needs.
TDD: What are you most hopeful / optimistic about over the coming year?
RS: Completing a successful fundraise and continuing to deploy within the return targets of the fund so we can build a long-lasting business.