Many take a straight line to the private equity business through Harvard or Stanford. But Anne-Maree Byworth took the long way around.
The journey began when Byworth, director of Asian fund investments for CDC, which manages nearly $2 billion for the British government, began studying Japanese in high school in New Zealand. Her language skills were good enough to earn her a scholarship that sent her to Japan in her senior year of high school.
When she returned home she attended the University of Auckland, where she studied Japanese and Russian with the thought of becoming an interpreter. By her third year of study, “I’d already decided that it would be more interesting doing the deals I was translating for others, instead of just translating,” she says.
Most PE fund professionals in Europe are attorneys or accountants who “come in through the front door,” but Byworth says she used the “back door.” “I came in through administration and portfolio monitoring roles, reporting to our clients, negotiating extensions to agreements after their 10-year life, conflicts of interest, working on key man clauses when they’re triggered. When you’ve had to deal with such issues, you’re a little more bullish about insisting on certain mechanisms or investor rights being part of the deal from the outset.”
After earning her bachelor’s degree, Byworth used her language skills as an entree to Nikko Securities. She worked for three years in administration at Nikko, picking up knowledge and exposure to the financial services industry. At the same time, she studied for and received her certification from what is today the U.K.’s Financial Services Administration, becoming a “registered representative,” and slowly easing into a career in finance.
With her FSA certification Byworth went to work for the private equity group of Eagle Star Asset Management, a wholly owned investment manager for British American Tobacco (BAT), one of the world’s largest tobacco and insurance companies. Byworth credits those five years as the time when she gained real hands on experience with monitoring and reporting on a portfolio of private equity funds and co-investments.
School of Hard Knocks
“There are no schools that you go to in order to learn private equity fund management,” she says. During her time at Eagle Star, which went through a number of mergers, Byworth tried her hand at direct investing but decided it wasn’t for her. “While that is invigorating when everything smells like roses and everyone is happy, the downside is that when there is a failure it can ruin a life. It’s not a great feeling when you have to fire someone or shut a firm down,” she says. She recalls very clearly how a company she invested in went out of business and how the marriage of the husband-and-wife management team marriage fell apart.
“As a manager selecting funds, you do significant amounts of due diligence into the GP up front, but you rarely need to foreclose on someone’s business or fire people short of an instance of actual fraud. And that happens sometimes, but the truth is that even in the case of really poor performance in the world of private equity you don’t end up firing someone at a [PE] firm, although you may need to replace one GP with another.”
In 1997, at the age of 30, Byworth decided she wanted a change in scenery, so she sold her house in England and moved to Australia, taking a job with Quentin Ayers, an advisory company for managers of pension assets. There she built alternative asset portfolios, performed due diligence and recommended PE firms to Quentin Ayers’ clients.
In 2000, Byworth took what sounded like a dream job with Hermes Management back in the United Kingdom. “I missed the sunny beaches of London,” she says mirthfully. Once again, she landed in a country with no job on offer but with a handful of contacts that led her to Hermes, a pension fund manager 100% owned by the British Telecom Pension fund. BT had decided to cease investment in private equity in 1995 due to poor performance, but it got back into PE in 1999. “You’ll have to decide on your own, whether the decision to stop in 1994 and get back into the market in 1999 was great timing or not,” says Byworth, preferring to avoid comments on whether Hermes will succeed in its second run at private equity. Her dream job turned out to be one of those chaotic, hellish and tremendously valuable learning experiences that one simultaneously appreciates and hates. “It was not the easiest place to work,” she says with a sardonic grin. And like her previous experience with a U.K. fund manager, Hermes underwent significant organization changes.
“The organization I joined, Granville (then partly owned by the BT Pension Scheme), was sold on the first day I started,” she says. Granville was sold to Robert Baird, which was owned by NorthWest Mutual of the United States.
In the span of one year, Byworth and a colleague made about a dozen fund commitments, exposing the duo to a large number of firms, people, sectors, stages and geographies of investing.
One year was plenty. In 2001 Byworth took a position at Morley Fund Management, one of the giant firms of the U.K. insurance industry, which invests about GBP110 billion across all asset classes. Byworth worked in fund selection, focusing on due diligence, fund selection and performance monitoring. She monitored from 20 to 30 funds at various stages of their life. “There are perhaps 80 funds at Morley, and the practice is that the investing manager also sits on the advisory committee for the funds in which he or she invests if a position is offered.”
Despite the enjoyment she felt working at Morley, Byworth says that one day she received a phone call from CDC, the private sector investment arm of the British government, which started a year-long conversation that eventually led her to join CDC in 2004.
Formerly known as the Commonwealth Development Corp., CDC manages $1.8 billion in assets. (See “A Brief History of CDC,” page 23.)
Typical of Byworth’s work experience, CDC was in the midst of changing when she joined it. It was just spinning out its direct investment work into Actis. The result was that there were few people left at CDC with the experience that they needed and that Byworth had in abundance: portfolio construction, qualitative and quantitative due diligence, fund selection, management and monitoring. Also typical of her life and career, Byworth discovered on her first day on the job that the new CEO of CDC, Richard Laing, wanted her to work in Asia, as the organization was about to adopt a geography-based investment strategy.
And that is where Byworth is today.
A Day in the Life
A typical day, “depends upon whether I’m in the office or in the field,” says Byworth. “I could be meeting with an Indian GP or having lunch with a fellow LP; there are lots of us” in London’s St. James’s area in the West End, London’s fashionable shopping district.
Byworth typically has four to five GP meetings per week. But because CDC has just started its new funds manager selection process in earnest-with plans to invest in 15 new managers over the next three years-Byworth and fellow Portfolio Director Roderick Evison are trying to “find out who’s who in the zoo.” Byworth oversees Asia, while Evison handles Africa. She’s already met with 40 to 50 GPs in Asia, occasionally joining Rod to evaluate interesting managers in Africa.
CDC’s typical commitment to a fund from existing fund manager Actis ranges from the $75 million it’s just committed to Actis’s second China fund to the $250 million it has in Actis’s African and South Asian funds. At present 95% of CDC’s funds are in the hands of Actis, part of the history of the organization and “appropriate given that Actis and Aureos are among the best of the managers in the countries where we want to invest,” says Byworth.
In four more years CDC’s requirement to invest primarily through Actis ends, and CDC will likely put larger commitments to work with an enlarged group of fund managers, which means a lot of preparation work now. Byworth notes “5% of our assets that go to new managers is quite a bit of money, given the countries where we invest.”
ShoreCap, underwritten by Shore Bank of Chicago Illinois, is the first of its new managers. ShoreCap invests in micro-finance and SME lending bank institutions in developing economies.
And while Byworth’s portfolio responsibilities extend from Pakistan to Southern India to Fiji, “CDC’s core focus in Asia is on investment in South Asia, and 80% of South Asia’s GDP is generated in India.” Which again, is appropriate given CDC’s mandate and the simple fact that private equity in emerging Asia is the most mature in India. It’s also where CDC has the bulk of its Asian investments.
As part of her work in reviewing fund managers, Byworth meets with a selection of portfolio companies. “I have to see that the companies that our managers are funding are appropriate to the goals we have. “We want to see portfolio company employees earning a fair wage in safe working environments, with access to training, knowledge and skills transfer, so that they can improve their lives,” Byworth says.
She also talks to portfolio companies to get “a first-hand description from their management teams as to how their relationship with the GP works.”
What sort of due diligence did the GP do? How do they add value? What’s sort of exit planning has taken place?
That translates into a lot of duck meat, tractors, pharmaceuticals, port facilities or auto parts facilities visits. It also means that she gets to learn new languages. As far as she’s gone from that high school in New Zealand, Byworth is still on a familiar path.
Portfolio Director, Asia
Education: BA, University of Auckland, 1988; MA, London Metropolitan University, 2001. Earned certificate to be a Registered Representative from the Financial Services Administration in 1992.
Work History: Nikko Secutiries, 1989-1992; Eagle Star Asset Management (Part of BAT) 1992-1997; Quentin Ayers, 1998-1999; Hermes Fund Managers, 1999-2001. Morley Fund Management, 2001-2004; CDC, 2004-present.
Best Investment: “My cottage in the Cotswolds. I’ve never bought a stock.”
Worst Investment: “My cottage in the Cotswolds: the money pit, the cottage that money can’t buy.”
Last Book Read: Holy Cow, Sarah MacDonald.
Favorite Book: Hitchhikers Guide To the Galaxy.
Favorite Film: Life of Brian.
Hobbies: Travel, late night chats with friends, reading.
Advice To Fund Managers: “Please don’t tell me what market or best practice terms are. Don’t tell me that 2% is the accepted standard management fee. Two percent is standard to what? To the size of your firm, or to your best mate in the industry down the road, or the regions where you’re investing or what? We have privileged access to hundreds of fund documents, so we’re in a much better position to decide.”
If I Weren’t in Private Equity I’d Probably Be: “doing my Ph.D. in women’s history, with the idea of working as a freelance historian.”