In conversation with Hanneke Smits

The private equity veteran discusses her transformative time at Adams Street Partners where she co-established its secondaries business, her move to Newton Investment Management and establishing non-profit Level 20.

After 17 years at Adams Street Partners where she co-established the firm’s secondaries business and was most recently CIO, Hanneke Smits joined London-based Newton Investment Management as chief executive officer in August 2016.

How did you get started in private equity?

My father was one of the first people in the Netherlands to go from a career in industry into venture capital. That was in the 80s.

Hanneke Smits
Hanneke Smits

I took a course in entrepreneurship at London Business School when I was doing my MBA. As part of that course you had to do some research, and I ended up doing [a study] on behalf of Pantheon. After that Pantheon offered me a job. It was a small firm at the time, there were about 15 people. It was very entrepreneurial.

The difference between then and today is private equity was not a career. There was no ‘private equity club’ at London Business School the way there is today. You stumbled into it. My classmates really didn’t understand what I went off to do because everyone went into banking or consulting. There were times in the first couple of years when I scratched my head myself as to whether I’d made the right decision because the industry was so small.

How did Adams Street change during your time there?

It was a Chicago-based team investing on a discretionary basis on behalf of US clients in US funds and companies. I was hired in ’97 to build a European investment portfolio, team and presence, and then asked in ’99 to think about a strategy for Asia. I hired PV Wang and together we built out the Asia investment strategy. [I also co-led] the creation of the secondaries business, [which] started with the hire of Jason Gull.

I became CIO in 2008, and chaired the primary and secondary investment committees. I was also chair of the portfolio construction committee, which dealt with risk management and asset allocation.

From a portfolio that was 100 percent invested in the US for a US client-base and was mostly a primary business, by the time I left Adams Street was, from an investment mandate perspective, 60-40 US-non-US, and the clients were about two-thirds to one-third US-non-US. The mix of strategies had changed from 95 percent primaries to around 60 percent primaries, 25 percent secondaries, and the balance was co-investment and direct venture. So it was, in multiple dimensions, very different, and quite frankly in line with the changes in the industry.

What was behind your move to Newton Investment Management?

I’d taken my career [at Adams Street] as far as I could. I’d had some time off and concluded I didn’t really want to do something similar but rather I wanted to do something that would build on my skills and experiences.

I’d built a strong personal investment track record, but really the last 10 years of my career at Adams Street were about managing and leading teams, and leading growth in new markets and strategies. It’s the last two areas that I’ve taken across to Newton. I’m the CEO here not the CIO, so that is different, and that was deliberate.

Are there cultural differences between Adams Street and Newton Investment Management?

[Adams Street] is a Midwest, very respectful culture. It always puts the client at the heart of what it does. It grew in a measured way. Bon French, who was the chief executive when I was there and is now chair, used to say that Adams Street were settlers not pioneers. I think that was very much the ethos of the firm when I was there, and I think that has served it well.

Very similarly, [Newton is] very much a culture that focuses on putting the clients front and centre in everything it does. People have been here a long time, which is very similar to Adams Street. There’s a strong identity in Newton. It’s an investment-led organisation, which is also true for Adams Street. That’s very, very important, to think about creating investment performance first and then the rest will follow. For me, as I moved across, it was important that some of these things were actually similar.

Have the demands on your time changed?

These are all-consuming roles. You can’t just squash them into nine-to-five. That’s also not really who I am. Now I constantly worry about resource allocation, performance, the clients, but I worried about those things at Adams Street as well. I would say the only thing that’s different is I don’t necessarily have a Singapore office to call early in the morning or a Menlo Park office to speak to late at night.

In 2015 you launched Level 20, a non-profit aiming to ensure women account for 20 percent of senior professionals across the European private equity industry by 2020. How do you fit that in?

I put a great deal of energy into Level 20 in 2015 and half of 2016 when I had time off. It was wonderful to have the time to actually do it in a proper way. I was very much an executive chair because the other 11 founders were in full-time roles. They did a fantastic job juggling their responsibilities.

I knew I wanted to go back into a full-time role, and also that to deliver on Level 20’s objectives we had to staff the organisation properly. I spent most of my time in the first half of 2016 on ensuring Level 20 would get funding and would be recognised by key GPs in the industry, which is what it has achieved. We now have 36 firms committed to fund the budget on a three-year term basis, and we hired Jeryl Andrew as CEO.

My role changed to non-executive chair. I stepped down at the end of 2016 and handed over to Jennifer Dunstan, but I am staying on the steering committee. The role will continue to evolve. It’s about communication, it’s a little bit about campaigning, it’s engagement. So how you fit it in, I just think you have to be very, very disciplined.

Have you seen gender diversity within the private equity industry change during your career?

I wish it had. The creation of Level 20 means that it didn’t change all that much. I would say private equity is the least diverse industry of all, with women comprising just around 5 percent of senior roles. What I have been encouraged by when I look through the Level 20 data is how many young women we have as members. Around 40 percent of 600 individual members are under 30 years old.

Why are there so many fewer women in private equity than, say, investment banking?

What makes it structurally difficult for PE firms to change is that the funds have a 10 to 12-year life, they often have strong key man provisions that are linked to the investment periods of the fund, and those last six years. Therefore, it is not in the interest of management teams to change whoever’s in the key man because it can trip the key man provisions and lead to difficult conversations with investors.

There’s not been a lot of change in private equity firms full-stop. At points it’s also been hard for younger men to get to the top just because it’s a young industry and it’s maybe gone through one generational change. For women it’s just been that much harder.

What advice would you offer to a young woman thinking of a career in private equity?

I would actively encourage her to consider it and not be discouraged by looking at websites that will show management committees that are predominantly comprised of men. Don’t let that put you off. I have heard that younger women tend to self-select out because they worry that there is the glass ceiling, therefore the problem perpetuates. If there’s not enough women coming in, they’ll never make it to the top. It is a career that from an intellectual perspective is very rewarding.