Lecture Notes: Interview with Andrea Auerbach, Partner at Cambridge Associates
Overview
Guest: Andrea Auerbach, Partner and Head of Global Private Investments at Cambridge Associates
Host: RJ Lumba, Managing Partner of GrowthCap and Executive Chairman of Market Insight Media
Topics Covered: Growth equity, private investments, firm culture, ESG, AI, and family offices.
Key Points
Cambridge Associates
Role: Works with endowments, foundations, healthcare systems, pension plans, and private clients.
Experience: 50 years of institutional investing.
Services: Includes Outsource CIO, non-discretionary portfolio management, and asset class mandates.
Andrea Auerbach’s Role
Team: Leads a 50-person team in private equity, growth equity, distressed and venture capital funds.
Investment Volume: Over $10 billion invested annually.
Leadership: Member of the firm's leadership team, leads discretionary private investments.
Growth Equity Discussion
Definition: Initially defined by Andrea's team about a decade ago.
Founder-owned businesses with no prior institutional investment.
Proven business model with clear unit economics.
Substantial organic revenue growth.
EBITDA positive or expected within 18 months.
Current Market: Growth equity has become more common and may require deeper analysis to ensure authenticity.
Characteristics of a Great Growth Equity Firm
Sourcing: Crucial to find investment opportunities.
Partnership: Typically a minority investor in companies; need to demonstrate value add.
Value Add: Help companies scale successfully; repeat success across the portfolio.
Culture: Strong, cohesive firm culture is critical; observed spinouts when culture is lacking.
Character and Integrity: Essential for long-term success and building trust.
ESG and Investment Strategy
Importance: Growth equity firms should consider ESG factors including governance and social elements.
Approach: Encouraging diverse workforces and good governance.
AI and Investment Potential
Emerging Theme: The application of AI across various industries.
Impact: AI's potential in healthcare and growth equity space.
Family Offices
Interest: Increasing interest in growth equity strategies.
Co-investment: Families looking at co-investment opportunities.
Career Insights
Building a Career: Importance of short, deep immersions in work.
Character of Successful Firms: Run by trustworthy, good people.
Personal Influence and Giving Back
Influence: Experiences and conversations with industry leaders.
Charity: Active involvement with Smith College as a trustee and educator.
Conclusion
Final Thoughts: The discussion highlighted the evolving dynamics of growth equity and investment strategies. Andrea shared insights into industry trends and personal experiences that shape her investment philosophy.