Institutional Investor is proud to recognize leaders within the allocator community for their outstanding contributions to portfolio development at the second annual AlphaEdge Recognition Dinner. Prior to the event, we sat down with Ngoc Can, CFA, recognized in the category of Alpha Generation – Private Equity Investing.
Ngoc began her career in investment banking at Houlihan Lokey in Los Angeles and held analyst roles at manufacturing firm General Plasma and venture investment group the Desert Angels. Subsequently, she spent a decade as an asset owner at Diamond Ventures, where she led their private equity portfolio buildout across venture and growth while investing alongside their real estate business.
Ngoc currently served as Senior Director, Co-investments at Texas Municipal Retirement System (TMRS). At the $40 billion public pension fund in Austin, Ngoc oversees the $2 billion direct co-investment portfolio and led the underwriting of $900 million in private equity, private credit and co-investment commitments. Private Equity International recently named Ngoc one of the “40 under 40: Future Leaders of Private Equity.”
The following has been edited for length and clarity.
What do you think is the biggest challenge facing the industry today?
The biggest challenge facing the institutional investors today is the lack of distributions. Private market investment often locks up capital, making illiquidity a persistent issue, so portfolio companies may be valued at paper marks for an extended period of time.
Today, institutional investors are forced to look long and hard for alternative funding sources to sustain their investment pacing in the private market. If the private market does not innovate to deliver liquidity to LPs, it will face significant challenges. The absence of a mechanism for liquidity can leave an indelible mark on the industry, and the crunch could deter future investment, impacting the growth of the private market.
Is this crunch going to continue?
After the Global Financial Crisis, the market went through a period of low distribution and then distribution came roaring back. What will determine the rate and velocity of the return of distribution is the pace of continued economic recovery and the interest rate environment. Post-GFC, the Federal Reserve dropped interest rates. Today, the economy is still robust, so I’m treading more on being vigilant and continuing to monitor the rate of distribution coming back. If rates continue to stay longer, we could be scratching the surface of slow distributions coming back.
In this environment, GPs put up for sale assets that can be sellable. Typically, they are the gems of the portfolio, when all the good assets are sold off, it begs the question, “What’s left in the portfolio, and how long will it take to sell those remaining assets?”.
Too many of the deals that are happening are PE-to-PE firm. Is that the new business model today?
Definitely, the share of sponsor-to-sponsor is increasing as a percentage of the overall M&A activity. When I started out in the industry, sponsor-to-sponsor deals were very rare, they are definitely a bigger percentage of the private markets activities now.
The private market has also evolved: Companies stay private for longer, there is more abundant capital source allowing companies to remain private, there are continuation vehicles to let sponsors hold onto their private assets, and there are secondary vehicles. The private market is more dynamic today than it has ever been.
What of your portfolio are you most excited about?
I am most excited about the co-investments book in my portfolio. Co-investments offer a unique opportunity to directly engage in select investment opportunities alongside GPs, allowing for greater control on sectors we want to put capital behind. TMRS has executed co-investments on a bespoke basis, more recently the institutionalization of the program marks a significant milestone for my plan.
In today’s market, GPs are asked to write larger equity checks due to the tightening debt market. They have shown strong desire to offer co-investments. This aligns with our strategy and allows us to leverage capital more effectively. By participating in co-investments, we’re able to capitalize on opportunities that otherwise would be unavailable. The institutionalization of our co-investment program strengthens our investment team’s capability, and our market position.
You mention you have gatekeepers to continuation funds. Are you good at due diligence for institutional funds, and you can turn around an asset very quickly?
In our portfolio, we haven’t seen a lot of requests for actions on continuation funds. The process of underwriting continuation vehicles is not dissimilar to underwriting co-investments. The two processes are synonymous, in terms of time and speed requirement.
What made you go into your current job?
My first job in investment banking really sparked my interest to go further into the investment industry. My favorite part of the job was interacting with founders and management teams: I loved listening to their visions and how they built their businesses, and seeing their visions come to fruition and emerge as leading companies in their respective industries.
Although most people only see the successful financial outcomes, I had the rare opportunity to witness the founders' journeys – the mountains they climbed and the crucible moments that defined their success. Seeing firsthand that one can achieve their dreams through hard work and perseverance is what initially attracted me to the private equity industry. This industry allows me to continue working closely with visionary leaders and support their efforts to transform their ambitions into reality.
If you weren’t an allocator in PE, what would you be doing today?
I would be a book writer.
If you could change one thing about the industry, what would it be?
Enhanced transparency and data accessibility: I operate in the private markets, and the private markets information is harder to obtain than in public markets, so getting comprehensive information would be my priority, as well as transparency around fees, performance metrics, and investment strategies.
If we can leverage technology to provide real-time data analytics, it could improve transparency and enhance trust building with the institutional community.
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