Cresset’s Conners: there’s a lot of ‘white space’ in the HNWI market

Scott Conners, former co-manager of Landmark's private equity team, discusses the role that tempted him out of retirement.

Three senior alumni of Landmark Partners joined an upstart investment manager, Secondaries Investor reported in mid-May.

Scott Conners

Scott Conners, Michael Carrano and Jason Neal are establishing the primary, secondaries and co-investment offerings at Cresset Partners, a Chicago-headquartered firm aiming to give high-net-worth-individuals access to the same private market opportunities as institutional investors.

The firm was formed less than a year ago by Eric Becker and Avy Stein, founder members of private equity firms Sterling Partners and Willis Stein Partners, respectively.

Scott Conners is a former partner and co-manager of Landmark’s private equity team who came out of retirement to take the lead role in Cresset’s sponsor products team. He discusses the new venture with Secondaries Investor.

You were in retirement. What convinced you to come out of it to join Cresset in December?

I retired from Landmark in June 2015 so had been happily not doing anything for nearly three years. I knew Avy Stein and Eric Becker from when I was at Landmark and kept in touch with them on a regular basis, even through my short-lived retirement.

They talked to me about coming on to build out a fund of funds business that would be oriented towards the high-net-worth market as well as smaller family offices. It was a project I had researched in a prior life and thought there was a lot of white space in the market.

And doing it in a de novo environment as well… The ability to come in and have responsibility for building a platform from the ground up was appealing to me, as opposed to going to work for someone else’s platform and just being another cog in the wheel.

Why was the market underserved up?

Private equity as an asset class has always been institutionally oriented. And they’ve had a lot of success, so to go through the gymnastics of building a business that is reoriented  towards the high-net-worth market is a lot of work that they probably don’t feel they need to do in order to raise capital.

There are a few forward thinking groups like Pantheon, Partners Group and Pomona that have recognised the multi-trillion-dollar high-net-worth market has almost no exposure to private equity or alternative assets and there is a real desire for it.

What proportion of the platform will secondaries account for?

That’s going to be in a [1940 Investment Advisers Act] fund structure. It’s more comfortable for individual investor and their advisors than a private partnership, where you’re locked up and can only invest in the fund when that manager happens to be raising capital. Also, private partnerships issue K-1s. Individual investors don’t like that because it impedes their ability to file a tax return in April. Our entity will be a 1099 issuing entity, which is more compatible with the individual investor.

Every quarter investors will have the opportunity to make investments in the fund at much smaller dollar amounts than you would be able to in a larger fund [the minimum investment as yet to be decided, but is likely to be around $100,000]. There will also be a limited redemption feature every quarter so if investors need to get liquidity they can do so.

What type of deals are you interested in?

We are establishing a fund of funds that will primarily do secondaries deals but will also do some primary deals and limited co-investing. Small portfolios and individual fund interests with high quality managers will be targets of ours. Because of the sophistication of the team we will also look to compete in single asset transactions or GP restructurings.

While those transactions have become a much bigger piece of the transaction universe on the large end, there is a need for these deals on the small end and no-one’s really doing it.

Is Cresset set to add more teams in the near term?

One of the founding principles of Cresset is that we want to bring the return profile, the diversification and risk profile of the entire spectrum of private equity and alternatives investment to the high-net-worth market. That might mean private credit, infrastructure, natural resources – there are a lot of ways we can expand this platform.