SCS Investment Partners’ Carlson On Private Equity Investing

Stephen Carlson, Managing Director for SCS Investment Partners joined Julie Cooling, Founder and CEO of RIA Channel, at the CAIS Alternative Investment Summit to discuss private equity and alternative investments in client portfolios.

SCS Investment Partners started in 2002 as an ultra-high-net-worth multifamily office serving investors worth over $100 million.  The firm now manages $30 billion, largely in alternative investments such as private equity, private credit, and hedge funds.  In 2021, SCS Investment Partners opened access to their alternative investment relationships to independent wealth managers.  Given their 20 years in allocating to alternative investments, SCS can assist advisors with building a new investment program.  Carlson believes that advisors will be left behind if they don’t have a strategy and the access to invest in alternatives, as 67% of advisor clients invest in alternatives held away from their advisor. A partnership with CAIS brings technology to streamline transactions, record keeping, transparency, and reporting.

While SCS invests across alternative investments, their focus is on private equity.  Carlson notes the attractiveness of private equity for client portfolios, as private equity has historically earned a return premium relative to public equity without taking more volatility or drawdown risk.  An increasing portion of equity investments in the US are available only through private equity and venture capital, as companies are staying private longer, with only 15% of US companies with over $100 million in revenue being publicly listed.

SCS believes in a diversified private equity portfolio and notes that it is important to have access to top-performing managers, given the wide performance dispersion across private equity funds. When building a PE portfolio, SCS takes half of its exposure in venture capital and growth equity and half in buyouts. Small buyout funds with sector specialists are preferred relative to mega-buyout generalist managers. In a hybrid approach, 70% to 80% of alternative investment capital is invested in managers and funds, while 20% to 30% is held in coinvestments, which can reduce overall fees.


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