1. How did you wind up at Pine Brook Road Partners, a firm founded in 2006 to invest in energy and financial services?
I spent 11 years at Capital Z Partners, where we had about $2 billion under management focused exclusively on investments in the financial services sector. I had in the past an opportunity to work with William Spiegel, who heads financial services at Pine Brook. William and I worked well together and when I found out earlier this month that Pine Brook was looking to find another partner in the financial services space I thought it was a great opportunity and jumped at it.
2. What drew you to Pine Brook?
I thought Pine Brook has a strategy in financial services that was uniquely suited to the opportunities that I predict will be occurring over the next several years. Obviously during the past two years the financial services market has been in an unprecedented state of turmoil. But dislocations created by that are going to create substantial opportunities to build financial services business that can take advantages of areas where capital has been destroyed or removed. The keys to success in doing that are the ability to come to the opportunity with a clean balance sheet and with a best-in-class management team. When I looked at Pine Brook, I thought its focus on business building, and its network of management talent, made it an ideal platform through which to pursue those opportunities.
3. Pine Brook has a unique strategy of working with start-ups. What are the advantages and disadvantages of that set-up in this environment?
What’s most important in finding investment opportunities in financial services in this market has been the ability to come at it with a clean balance sheet at a time when there is substantial dislocation in the market. So Pine Brook’s strategy of finding management teams and marrying them with a line-of-equity investment approach is a huge advantage in this market. We are business builders, and it does take time for our businesses to mature.
4. How do you feel about starting new companies as opposed to investing in existing ones?
We did a mix of investments at Capital Z, but I do have experience in doing startups centered around dislocation and I think that is something that consistently occurs in the financial services space. You have consistent dislocations where capital is removed or destroyed from the marketplace and opportunities for new entrants. The key is having a team at Pine Brook that is built and organized around finding good ideas, marrying them to good management teams, and helping those management teams execute the plan. I think Pine Brook has really built itself uniquely to do that.
5. Where do you personally see opportunities in the financial services sector?
We’re focused on areas undergoing the most significant dislocation, such as banking and specialty finance. We see banking as an overall good place to be given the trend of consolidation in the industry. We’re focused on core-deposit-driven rather than asset-driven areas of banking that have attractive demographic and economic growth factors. On the specialty finance side, our view is there’s going to be a role for independent, non-bank finance companies. But capital requirements for these businesses are going to be a lot higher than they once were. And only specialty niche finance products that require significant underwriting knowledge and unique origination capabilities are likely to generate the sort of returns necessary to make that model viable in the new world.