How the Outsourcing of Fund Manager and Co-Investment Selection is Evolving

Idyllic Partners founder and chief investment officer David Chiang on how he is now synthesizing his experiences and global network into a compelling new business.

By Nancy Vailakis

August 24, 2020

A New Chapter in Alternative Asset Leadership

David Chiang’s new firm, Idyllic Partners, builds on his dynamic career in alternative asset management on both the fund and direct investment sides of the industry.

Chiang started out in the financial sponsors group at DLJ and held roles with ever-increasing seniority at consumer-focused private equity firm L Catterton, the sovereign wealth fund GIC, PE fund of funds Wilshire Private Markets, and, most recently, as senior managing director, head of external funds at Soros Fund Management.

In aggregate, his 23 years of experience have given him a well-honed and unique perspective on investment selection. Chiang’s entire career has been fully engaged in private markets from many more perspectives than most, and he is now synthesizing his experiences and global network into a compelling new business.

Insights on Evolving Outsourced Investment Models

Q: Thank you, David, for agreeing to share your insights with the Worth community.

A: Thank you for having me, Nancy.

To start out, given your multifaceted experience with alternative asset management selection and allocation, please speak to the ever-evolving models for outsourced investment selection and perhaps how the three main categories cross over with each other.

We’re speaking about the classic consulting model, the fund of funds model, and the outsourced CIO (OCIO) model, which has evolved to include many more options since 2008 to 2009.

Please speak to how your understanding of these outsourced models led you to create Idyllic Partners.

All three of the outsourced investment models you list have their benefits and their drawbacks. Consultants can provide guidance across multiple asset classes and act as gatekeepers but typically do not have discretion, so investment decisions require more time; also, most are not incentivized to take calculated risks to back emerging managers and first-time funds. Typical funds of funds provide asset class specialization, but many have struggled to outperform their peers and thus have not justified their incremental layer of fees, which leads to challenged fundraises. Given that funds of funds are paid more for co-investments and secondaries, they are also often less incentivized to generate outsized returns on the fund's side. The growth of the OCIO model has been driven by demand for a total portfolio management solution, combining a holistic portfolio approach with asset management. However, there has been a proliferation of OCIOs with unclear differentiation, which makes it more challenging to find the best fit.

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Podcasts

February 9, 2022

Our guest for today's podcast is David Chiang, Chief Investment Officer of Pritzker Family Foundations, where he leads Ganesh Investments, the company that provides investment advisory services to the Funds and Partnerships group of PSP Partners and its affiliates. Ganesh Investments also provides investment advisory services to multiple Pritzker families and their foundations.

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