‘Volunteer to take on new responsibilities whenever you see them’

April Evans, partner, chief financial officer and chief compliance officer of Monitor Clipper Partners, was given the pfm Leadership Award at the PEI CFOs and CCOs Forum in January. Ahead of the presentation, pfm discussed her outlook for the industry, how things have changed since she started out and how women can put themselves in the driving seat for a career in private funds management.

Q How has the industry changed since you started out?

AE: Industry-wide, one of the things we take for granted now is the specialization of firms in investment strategies. The industry has always been stratified in terms of investment focus – healthcare services, medical devices, and so on. We’ve evolved to a place where there is a set of firms that specialize in each size sector. For example, size stratification in venture capital runs from incubating to start-up to late-stage venture, and everything in between. Growth equity is the transition point from VC to private equity – which has stratified in a similar way – lower mid-market, mid-market, all the way up to mega-deals.

This evolution is because we have learnt over time that portfolio company needs differ at different stages of development.

Secondly, the secondaries market has established itself as yet another component of the private funds space – a response that addresses limited partners’ needs for liquidity. Secondaries transactions used to be seen as a pockmark on a firm – LPs selling their interests was either the result of their poor liquidity planning or a reflection on a firm’s performance. We increasingly now understand the secondaries market as a normal option for liquidity.

Another change is that we now recognize our own firms as businesses to be managed effectively.

For CFOs and COOs, the industry has professionalized. We think in terms of best practices. The structures we create through which we invest are so much more complicated – the willingness to invest in flow-throughs is but one example of that.

And, finally, we can’t overlook the impact of now being a regulated industry on private funds management as a whole.

There are ways in which the industry hasn’t changed; we still run our waterfalls in Excel and the average life of a 10-year fund is still approximately 15 years.

Q What is the biggest challenge the industry faces over the next 12 months?

AE: Internalizing the impact of the new tax law. While some aspects of it are clear, there are many more that will impact us where ambiguity is going to exist for some time.

We’re also at a point where economists are telling us to expect a recession sometime in the near- to medium-term. We should all be thinking about that in terms of supporting our portfolio companies.

 

Q How has your firm prepared for the changes to tax law, and what do you predict will be the impact on the industry?

AE: I am guessing we’re no different than any other firm: we are analysing each portfolio company’s structure to determine whether there are any adjustments we need to make. As we look at new deals, we’re doing the same thing.

The one obvious impact may well occur in the PE world, where taking really high amounts of debt to make an investment will modulate down, given the limitations on deductibility of interest expense. The other impact we may begin to see is a reduction in the use of LLCs for investing purposes, as the value of the resulting step up in basis shrinks.

Q What keeps you awake at night?

AE: The ever-increasing complexity of deal structures and their implications for fund structures – which are becoming increasingly complex on their own.

Q What advice would you give to junior staff looking to make it to the CCO/CFO seat?

AE: Volunteer to take on new responsibilities whenever and wherever you see them – and always be on the lookout for them. Train those below you to do your current job so that you can continually take on more and more higher-level work. Recognize that your “customers” are both internal and external – that is, treat both your limited partners and your deal team with the same level of attention and care. Learn about every aspect of the business that you can – from the infrastructure dynamics of management company activity to fund accounting to tax. Read and understand your funds’ limited partnership agreements. Learn all you can about your firm’s investment strategy and process. Pitch in to support the fundraising effort.

Q You do a lot of work with women looking to get into the industry. What do you see as the biggest obstacles to their success?

AE: As we all know, this is a very difficult industry to enter. The obstacles begin with gaining access to the industry. Finding ways to offer internships to young women to learn about it is a good start to overcoming this one.

People are typically more comfortable working with people like themselves, so naturally lean in the direction of someone who looks like they do, making it even harder to break in. My hope is that the industry follows corporate America in beginning to realize that having diverse perspectives at the table improves performance consistently. Fortunately, the National Venture Capital Association is addressing this challenge directly.

Once in, it is important for women to speak up, voice their opinions and take positions in discussions. Learn the culture of your firm so you can figure out how to be most effective within that culture. Finally, those of us already in industry have a responsibility to mentor younger, newer women.

Q What is the best thing about your job, and working in private fund management in general?

AE: First, my partners see me as a peer who just happens to have a different set of expertise than they do. Second, I am fortunate to have tremendous autonomy, which has enabled me to be very active in the industry as a whole. The best thing about working in private funds management is the privilege I have had to participate in and contribute to its development and maturation as an industry in its own right – both through involvement with numerous industry groups and through mentoring, supporting and sharing with compatriots.