Maureen Downey

Aoifinn Devitt: Maureen Downey has had a career that is the stuff of envy, at least for me. She’s worked all around the world, including fascinating stints in emerging markets. She has a love of learning and is now deeply embedded in the private markets arena, where she focuses on fashioning solutions for investors of all kinds. Hear more about her story.

Maureen Downey: Next.

Aoifinn Devitt: I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people and their stories. I’m joined today by Maureen Downey, who is a managing director in alternative assets at the Beneficient Company Group, as well as a venture partner at Digital DX Ventures. She has specialized in alternatives investing with a particular focus on secondary investments and ESG integration for over 15 years. Welcome, Maureen, thanks for joining me today.

Maureen Downey: Thank you, Lavinia, and thank you for having me.

Aoifinn Devitt: Well, let’s start with your career journey. Can you take us back to university days and where you grew up?

Maureen Downey: So I grew up in Northern California and centered around the Bay Area, and I attended Claremont McKenna College, which is a small liberal arts college in Southern California. Before though, I went to college, I spent a gap year living in Brazil, which definitely, I think, influenced my outlook and some of the career choices that I made later on. While I was at Claremont, I had the great opportunity to become part of a special group of students pursuing a major in philosophy, politics, and economics. And you might know that because the degree originally stems from Oxford. And two of my professors One was a Rhodes Scholar and the other one had also spent time at— I’ll have to redo this. So I had the privilege of being able to pursue a unique degree at Claremont McKenna College called PPE, or Philosophy, Politics, and Economics, which is an interdisciplinary major. And it is basically modeled after the major that was originally created at Oxford. And one of my professors, Gordon Bjork, had been a Rhodes Scholar and the idea came to him and two of my other professors, Ward Elliott and John Roth. That was a really unique major because it really showed me basically how everything kind of flows together inasmuch as that philosophy is how society derives its morals and values, politics is basically a system by where you try to translate those morals and values into a system for the greater good, and economics tells you whether or not you’re doing it efficiently. While I spent time studying the economics, that particular part of the major interested me the most. I became really fascinated with micro and macroeconomics, and in particular, given that I had spent the year prior to Claremont living in Brazil— when I lived in Brazil, they changed the money 3 times the year that I lived there, and there was so much inflation that it was intraday inflation, so the price in the morning would be the price in the afternoon. So coming from the United States and then having to live in a country where there was complete economic volatility, they were in their first presidency since being in a dictatorship for 20 years, it was really eye-opening. And so that experience and then being able to reflect upon it in doing the degree that I did was really interesting. And one of the key things about the degree, which I think was really helpful and has helped me throughout my career, is that it really helped me learn how to learn and learn how to synthesize my own thoughts and opinions based upon what I read, and then to articulate it in a written and in a verbal format. Because I used to have to read about 3 to 4 books per week and then produce a 10-page paper, and then that paper was read by my professor and one of my 10 colleagues, and then I would have to orally defend my paper and my opinions. So it was quite a hard major in a lot of respects because it required me to consume a lot of information and then come up with my own thoughts and then actually articulate. And I think it really prepared me for lifelong learning and also gave me confidence that I can continually learn as long as I apply myself. And I really learned to enjoy learning. So that’s basically my initial education. I was not actually planning on going into the financial field. I thought I would actually become a consultant and I was interviewing with a fairly big name consultant. And lo and behold, there was one organization that was interviewing on campus and it was Merrill Lynch. And I did the interview because I wanted to see if I could do math because I’d always had a little bit of a lack of confidence around doing math, even though I’d had some great professors at college encourage me to take more advanced classes in econometrics or linear algebra, et cetera. It was Professor Eyrich. Anyways, I did this interview and then lo and behold, they invited me to come to New York. And I remember walking into the World Trade Center— it was actually the World Financial Center— and it was a job on the trading floor and it was in capital markets. And to be honest with you, I didn’t even know what capital markets was. And I interviewed for the position even not knowing what it was, and I got the job. And ironically, they were the one company that would allow me to defer for a year taking the job because simultaneously I’d also gotten an international scholarship through Rotary to kind of study anywhere I wanted in the world. Provided there were some language requirements, graduate studies. And so I ended up taking that Rotary International graduate scholarship, which I was very grateful for, and I ended up pursuing an MBA at Erasmus Universiteit in the Netherlands, and it was called the Rotterdam School of Management, which also had an affiliation with the business school I eventually graduated from, which was the Wharton Business School. So after I spent a year in Holland, I went back to New York and I took a job on the trading floor at Merrill Lynch on the debt trading floor. And at the time, there was like 1,000 people on that trading floor and it was at a time when there was a fair amount of volatility in the markets. And I remember the year that I was there, I started, interest rates went up 250 basis points and I kind of felt like the jinxed analyst. Like if you sat next to me, you got fired. I think there was 5 or 6 people that sat next to me over a 6-month period that ended up losing their job. And I remember the day that they let go of the entire mortgage-backed desk when interest rates went up quite a bit by the end of the year. So it was a really eye-opening experience. It was in the ’90s. The time when I joined, women were not allowed to wear pantsuits, if you can believe it. And I still remember the day, it was in the late ’90s, that there was a woman that was hired Morgan, at a VP, and she walked onto the trading floor in a pantsuit. Those of us who were younger were all really shocked and amazed. So I have a lot of great interesting stories from my time there on the trading floor. I worked in the international debt capital markets, and then later I moved to another desk, which was focused on private placements and structured solutions and credit derivatives and leverage finance. And that’s where I spent the last year and a half of my time at Merrill before I ended up deciding to take a space or slot at the Wharton Business School, which ended up being a great option for me. And Wharton was a really fantastic eye-opening experience because of the fact that I’d spent a year studying at Rotterdam and also I’d completed 2 years of the CFA training, I was able to actually waive a good portion of the first-year courses. So that allowed me to take even more electives and have a lot more interaction with the second-year class at Wharton. And Wharton, interestingly enough, has a fair amount of international students, which I don’t think people appreciate sometimes as much because I think they see more international students at Harvard or at Columbia. And I, I kind of know this because I’ve done a lot of recruiting at all the different MBA schools during my time in investment banking, but there’s a fair amount of students that come from Asia and also come from Latin America. So that was great. I ended up having a great time academically, and I also— instead of joining the private equity club or joining the finance club, I ended up actually becoming co-president of the Wharton Wine Tasting Club, which I have to say was had many other side benefits, I think. And that was what I focused on my second year from an extracurricular activity. But overall, it was a great experience. During my summer, I was very keen and I was keen going into Wharton that I wanted to do leveraged finance in Europe. And when I first started talking to people about it, and this was in 1998, folks were like, it’s not there. It hasn’t really come to fruition in Europe. But by the time my summer came, it was booming, leveraged finance, and I ended up getting a role at Goldman Sachs. And ironically, I turned them down the first time that they offered me a summer position. And this is an interesting story. I wanted to take a job instead at Morgan Stanley because I had known a former boss of mine. He moved over there and I just felt that I knew the firm and I knew he was there. In a very good marketing move, the individual who was running the Leveraged Finance desk at the time said, “Well, why don’t you come over here and get to know us better?” I was totally unprepared for that. Anyways, I remember talking to a woman who was an adjunct professor at Wharton at the time. She was Dutch. She spoke 6 languages, had 3 kids, and she was like, “Maureen, stop being such a woman.” She’s like, Call them back, get on a plane and call the other two banks and go make a plan to go visit all three of them within a two-day period. She’s like, “Do it.” And I kind of was like, “Well, I guess so.” So anyway, I did just that. And sure enough, Goldman put on a great marketing presentation. To be fair, the other bank that I was thinking about had an M&A offsite. So it was a little bit of an unfair advantage from Goldman’s perspective. But anyways, I ended up working for Goldman over the summer. It was great. Things were booming. Private equity firms, especially on the buyout side, were raising a lot of capital. There was a lot of deal flow, and I actually had a skillset that was really applicable and not many other folks had. So I actually, instead of going to all the dinners and musicals and shows, I actually ended up working quite a bit during that summer at Goldman. And I spent a couple of weeks post that summer traveling to visit a colleague of mine from business school in Russia. So I also got to have a first row seat because I arrived 2 days before the first devaluation that happened in Russia in 1998. And I left about 3 days after the second devaluation. I’m sure a lot of people don’t remember that, but there was quite a bit of fluctuation in you currencies, know, with the Thai baht. With the Russian ruble, and that caused a lot of uncertainty in the market. And sure enough, when the fall came and offers were made, there were colleagues of mine at Wharton who had had offers made to them that then got rescinded just because the banks had to think about their staffing. So I’ve ended up during my initial work years having a lot of exposure to how economic cycles can impact economies, can impact hiring trends, and It was a really good learning experience for me, and I’ve always spent, I would say, even though I’ve been back in the US for about, I would say, 18 years or so, I’ve spent still a great deal of my career working internationally, be it working with firms directly overseas, making investments overseas. So I’ve always kept a really big component of my career global, not just focused on the domestic US market.

Aoifinn Devitt: So much to unpack there, and I don’t think I really knew the extent of your international exposure throughout your education and early work. So, so interesting. Just getting back to that point about emerging markets and having the front row seat to whether it be inflation or devaluation and Brazil or Russia, how do you think that influenced your approach to risk and to maybe tolerance for volatility?

Maureen Downey: Yeah, well, It’s a good question. What I also didn’t mention is that while I was in college, I did spend a year in Holland, but I also lived for a while in my junior year in Austria for about 6 months. And while I was there, I ended up getting an internship with The Economist Intelligence Unit where I wrote freelance about what was happening on the privatization side in Eastern Europe. And in fact, I wrote my senior thesis about that. And I was also a fellow with the Lowe Institute of Political Economy at Claremont, where I wrote more specifically about the differences in privatization between what was happening in Hungary, what was happening in Czechoslovakia and Poland, and how that was affecting their economies. And specifically from that internship, I ended up getting a job— internship job this summer between my junior and senior year in Hungary working for a bank It was a former Austrian bank that had— Many times in Eastern Europe, a lot of the German and Austrian banks didn’t actually have their charters revoked. They just weren’t operational. So it was very easy for them to go back in and open up in Czechoslovakia or Hungary or Poland. So I ended up working for Kreditanstalt. That was just amazing for me to see basically a bank that the majority of the people were under 30 years of age. Many of them were under 26 years of age, and they were just essentially running a bank because Many of their counterparts who were like 35 to 55 had no experience basically running an organization that had a capitalistic orientation. So I would say that combined with my experience in Latin America as well as Russia gave me a pretty good grounding, I would say, in basically how different economies process the transition to a more capital-oriented economy, as well as also the impact that governments have on nurturing the transition to a more market economy and the impacts that they need to think about from a government perspective and a central bank perspective of how it impacts the population. So getting back to your question about risk, I think that there are different risks in developed markets versus emerging markets. Not to say that one is greater than the other, they’re just different risks that you need to weigh and you need to think about. For instance, in most emerging markets, you do not have a really well-developed capital market system. Therefore, it’s near impossible to get debt financing loan to get startup or early venture financing. So that’s where you see the development finance organizations come into play, be it the EBRD in Europe, the African Development Bank, the Asian Development Bank, the IFC. They come in and they play that role of providing capital to— debt capital or some equity capital to institutions in those countries, because there is no way to get leverage or financing. Whereas in developed markets, we have a much more established capital system, so you can get different types of leverage or financing. That means that many of the entities that you look at in developed markets have a different type of capital structure. They have more leverage, it’s usually more complex, and that actually has more risk. Whereas many times when you’re looking at making investments or looking at companies in emerging markets, there is no leverage. Really, you’re funding either growth equity many times. Many times you look at making an investment in quote-unquote a startup in say Latin America, and it would probably be considered a stage C series investment if you found that company, for instance, in the United States. So it’s different. The other thing I would say is foreign currency really plays a big role in risk in emerging markets and the ability to operationally hedge depending on where you get your cost of goods sold, where you sell to. It’s very nuanced. I think those countries which have more of a foreign exchange larger market are better able to hedge and at least have those options. Whereas in some markets, especially if they have a current account deficit, i.e., they are bringing in more than they’re exporting, there can be a lot of volatility, and that’s something from a risk perspective that you really need to think about when investing in markets. Because the other thing I would say is that someone might say, “Well, you can get a portfolio effect. Invest in a variety of different emerging markets and then you can have them balance out.” One of the things that I found, and it’s an interesting question I posed to the gentleman at the time who was running the private equity fund of funds business at the IFC, his name was David Wilton, was I really wanted to know, because I was in charge of, with a colleague, of constructing my former firm’s first-ever global emerging markets fund, I wanted to know how correlated emerging market private equity was with developed market private equity. I went to them because I figured they would have the data. They didn’t share, unsurprisingly, but he did do the analysis himself and it came out that it was 0.5. So there was only a correlation of about 50% between developed market private equity and emerging market private equity. The problem is when you’re trying to construct a portfolio of emerging market private equity, maybe not so much on the primary side in terms of making just a primary investment or writing a manager a blank check, is that if you’re trying to balance it out with co-investments and in particular with secondaries, or secondaries where you’re trying to basically give someone liquidity for their assets about 4 to 5, 6, 7 years in, you can’t get enough flow to create that portfolio effect. That’s at least what I found, which was the challenge. And then also too, I do think there is merit to over time, be it the cycle of 7 years, 10 years, or 12 years, currencies do revert to the mean. But many times, you are also hampered by depending on when you made the investment, you may only hold it for a number of years and you may have bought in at the trough and it may not have enough time basically to revert to a better part of the FX cycle. So I would say that FX is probably one of the factors that you need to really think about risk-wise when you’re investing in emerging markets. The other thing I would say, which a lot of people don’t really focus on in emerging markets, is that when you are looking to make public market investments in emerging markets and you look at the actual stock exchanges and you look at the companies that are trading on those, you will find many times that about 10 or so companies make up about 50% of the trading volume on those exchanges. And then if you look at those 10 companies, many times they are commodity-related companies or financials. And many times those companies will have a predominant controlling shareholder, be it the government in some instances or maybe being large families. So you have still, I think, a limited amount of float and influence on those companies. Where I thought private equity played a great role in emerging markets is that if you looked at the sectors that were growing the fastest in emerging markets, be it logistics or healthcare or private education or technology, many of those sectors were growing much faster on the private side, and they were representing a greater portion of the country’s GDP, but if you looked at the public market exchange, you wouldn’t see the sector breakdown reflected there, because again, it was still predominantly controlled or dominated by a handful of companies still in the commodities or financial sectors. So I always thought to myself that if you really wanted to play the growth in emerging markets, a better way to play it and a more active way to play it was to invest in private equity growth or venture capital because you’re really getting exposure to the fastest-growing segments of GDP. Now, one of the big questions that I always got asked, it was probably the second question that I got asked by potential investors who were looking to make investments in the funds that we managed was, how do you know that you’re doing an adequate job on ESG due diligence? How do you know there’s not corruption or environmental issues or social issues. And I would say that you can use the, again, similar parameters what you use in developed markets, but you’re potentially looking for different things. And I would also say it’s a bit more nuanced because on the environmental side, there were times when I would look at companies that were constructing a power plant that was upstream from a city, and maybe there would be waste, or maybe there would be an impact on the environment, but yet that power plant was producing energy for a city that before was having to import at a very high cost energy from external sources. And so how do you weigh that against the benefit of the residents being able to have electricity to become more productive and not to have it be at such a high cost relative to what they had in the past? So there were nuances I think that I had to consider and that were probably maybe a little bit different sometimes than what I would have if I were looking just in the US or in Europe. And you can’t use necessarily a cookie-cutter approach.

Aoifinn Devitt: That’s fascinating. Well, that’s a great segue to the world of secondary investing. Since secondary investing tends to involve venture capital interests being sold on the secondary market, can you tell us a little bit about the solutions that you’re seeking to provide at The Beneficient Company?

Maureen Downey: So I’ve been working in the secondaries market for quite some time, over 15 years. The secondary market has been, I would say, active since the late ’80s and has really transformed from a market where people are essentially trading LP stakes in funds to something quite different. We have direct secondaries, which is basically a collection of assets that you take out of a company, corporate, or nowadays a fund. They call it a GP restructuring. To single asset secondaries, which has become more prevalent in the last couple years, to also selling stakes of founders and employees in late-stage private equity-backed companies, which is what I did for a couple years. I was a portfolio manager at a late-stage growth fund for— it was a 40-act fund. So that is also an area where it’s growing quite tremendously just because we have so many companies that have remained private and the time to exit is now— it used to be, I think, 4 years in 1999 for a private company. Now it’s up to 13 or 14 years. So that will continue to be a pressure point. And then the other thing is, and this is kind of where Beneficient Company Group focuses, is on the growing segment of high net worth, ultra high net worth, and small to mid-sized institutions that have less than a billion of AUM who may not have 5 years ago been very active in investing in alternatives, but what you’re seeing now is that given our choices in this very low interest rate environment, which may change soon, you don’t really have that many opportunities for real yield other than the public stock market. So people have been turning more and more to different types of alternatives, whether that is the traditional PE growth venture, or real estate. Now it’s private debt and real assets. Beneficient aims to provide a suite of liquidity services to our target market, which is ultra-high net worth, high net worth, small to midsize institutions, that can provide them with liquidity in a suite of products, combination of cash and securities, relatively fast, within 30 to 45 days, in a very cost-efficient manner because we have a very simplified I would call it a sale and purchase agreement. We call it an exalt plan. That is something that’s very differentiated from now how secondaries are done in the market. About, I would say, 80% of all institutional secondary volume is done by about 16 firms. It’s relatively efficient. There are a number of intermediaries who many of them came out of investment banks, who service the LPs and the sellers, and there are some very professional secondary firms. But that usually is a process that can take anywhere from 6 months to 18 months. You have to have lawyers on the other side. There’s a lot of paperwork in terms of the sale and purchase agreement, the GP transfers agreements. There’s a lot of confidentiality letters that need to be signed. And so it’s quite a long process. I’ve been both a buyer and I’ve been a seller. So I’ve bought many stakes, many direct assets, many shares directly in companies, and I’ve also sold probably over 150 funds. So I know that market quite well. What Beneficient is really trying to do is trying to say to a smaller or midsize investor, if you want a solution, we’ll provide you a solution. It’ll be very efficient. You can get it done within 30 to 45 days. We’ll provide you a range of options and you basically in 30 to 45 days, once you sign the agreement, you walk away with your consideration and you’re done. And Beneficient, because of the infrastructure that we’ve built, will take care of all of the transfers and other interactions with the asset managers. So that’s pretty unique. And the other thing that we’re doing is we’re doing it online. So our interface to the market is an online portal. Which allows individuals or their advisors to come there, input their assets, and be able to get feedback real-time as to what potentially the range they would get for their assets. And in our market research, we found that one, the segment of the market that’s growing the quickest for alternatives is the high net worth and ultra high net worth. And I know from just personal experience looking at the institutional market, The more liquidity providers, secondary funds that you have in the market, the more the market grows because those investors become more comfortable putting more money in because they know that there’s a way for them to get their money out and there’s a way for them to do portfolio rebalancing. It was kind of a dirty word back 20 years ago to say secondaries because GPs didn’t want to know that their LPs were getting out. They thought it was kind of taboo. But over time, both GPs recognize that the secondary market can be quite an interesting tool for them because they can say, okay, I have an LP or two LPs that won’t support me in my next fund. Let me take their positions and let me try to utilize those and package it with a primary commitment to my next fund. And therefore, I can probably get capital from maybe other LPs that I wouldn’t have in the past. And then LPs know that Not only can they sell and they can sell efficiently and get a good price, but they can constantly do this if they want to do portfolio rebalancing. That is not available currently now to smaller investors. And I’m sure if any, you could probably talk to some of your clients who might have gotten into a non-traded REIT or a debt fund and they’re just holding it for 15 years. So Beneficient is really trying to provide that liquidity solution, not only to LPs, but also helping GPs who are raising funds, we have a preferred liquidity partnership program where they can go to their prospective LPs and say, “Look, we’re raising capital. We also have this partner who will be able to back this fund and will be able to provide you with a liquidity bid if you need it over time.” The other thing to note too is that unlike institutional investors, high net worth investors have a different tax profile. And also too, they are subject to unfortunately, I’ll call them the 3 Ds: death, demise, and divorce. So death is obviously death, and demise is what happens if your family business craters or you go through a period of COVID and you have a big liquidity crisis. And then divorce is obviously divorce, you have to split assets. So many times they have a different set of challenges than institutional investors will have.

Aoifinn Devitt: That’s so interesting that it’s the exit that will drive perhaps the demand. I suppose one question around the exit is one thing to be able to exit in I theory, suppose the other is any liquidity or illiquidity in that market and how much of a discount one might be willing to take. If you were to look forward for the next 5 years in terms of the liquidity and just general transaction volume and perhaps the price gap, the discounts in the secondary market, how do you see that evolving?

Maureen Downey: Now you have a lot of competition on the institutional side. I think you have a lot of firms that are bidding up what I would call some of the better fund positions or fund positions that I would call the flow names, basically funds that you see over and over again. Mean, I as you know, there are some large megabuyout managers, even the large managers that have $10, $15, $20 billion funds, and so there’s constantly a lot of flow in the market. I think the price there will be very, very efficient. How many of these secondary funds have been able to incrementally, I would say, juice up their returns is that they’ve added They’ve leverage. Added leverage at the fund level, they’ve added leverage at the deal level. So you have also a different risk profile. So one thing I would say to those institutional LPs that are looking at secondary funds is not only look at their deals that they’ve done, and look at their IRRs and their multiples, but really ask them what degree of leverage do you have on these deals, on these assets, or at the fund level, because that obviously increases the risk profile. I think that’s something that people don’t always appreciate. Second, I would say that the type of deals that are happening now on the secondary market are becoming a little bit like direct GPs. I mean, you’re seeing a lot of what we call direct secondaries where Secondary firms are coming in and buying 1 or 2 assets, doing a fund extension with the GP itself. So there’s a lot of restructuring. The market is evolving quite a bit. At the end though, I think what it’s doing is it’s probably increasing the risk profile a bit with secondary funds in order to get a bit more return. So I think as an institution, because of the type of funds that are traded and also the size, that pricing has gotten much more efficient. There’s a lot more capital structuring, and the risk profile has probably increased in order to get the equivalent return. On the smaller end of the market, it’s a different type of product because many times those products are sold through registered investment advisors, the wirehouses, the big banks. They have different fee structures. They may have a different type of profile where they’re catering more toward coupons or current income. I’m thinking about REITs, I’m thinking about debt. And so those will probably command a bit more of a discount just because they have a higher fee load. Second, I think that some of them probably will transact in a smaller size. So there might be more of a discount involved there because of the fact that it takes the same amount of time and effort to do a $1 million transaction as it does to do a $20 million transaction or a $200 million transaction. So I would anticipate that there’s still going to be a bit of a discount, a greater discount at the smaller end of the market, just because of the different type of products, the size. And also, I think that as these businesses scale, not only Beneficent, but I assume that there will be competition. The more deals you do though, because of the way Beneficent is structured. So Beneficent is not a secondary fund. It is an operating company. It is structured as a trust bank institution. It has a cost of capital. And as the company scales, the cost of capital will go down, and that will allow or enable Beneficient to offer better pricing to the market as it scales. And frankly, as we collect more and more data on the market, we’ll become more and more efficient at pricing, and the discount between NAV and the pricing will decrease over time. Another thing that makes Beneficient unique is that it is the recent recipient of a new law that was just passed by the state of Kansas called the TEFI Act, which stands for the Technology-Enabled Fiduciary Financial Institutions Act, which allows BEN to be structured as a trust bank, and therefore it is regulated by the Kansas State Bank Commissioner and the State Banking Board. And it permits, via these organizations, to commence operations as a regulated fiduciary versus many other secondary liquidity providers in the market are regulated by the SEC. And this opens us up to address more efficiently and effectively a wider part of the market, which we think is growing faster, which is the high net worth, ultra high net worth, and the small to midsize institutions that are increasingly growing their allocation to alternatives.

Aoifinn Devitt: So you’re talking about data here. Traditionally, private equity has been much slower to incorporate data in its analysis. Perhaps it’s been more of a, perhaps a network-driven or an art versus a science type of an industry. Do you see more integration of big data and the solutions it can provide across the private equity sector now?

Maureen Downey: Oh, absolutely. So I sit out in San Francisco, and so I feel like I’m surrounded by a lot of folks who are very data-focused, how to use data, whether it’s— I think the term big data was out a few years ago. We now have artificial intelligence, machine learning. I think data is going to be the key to becoming the best of breed in frankly any industry, but certainly investing in private equity. So one of the key things that Beneficient has done is to invest really heavily in data and models and the capturing of data so that we can use it to become better at what we do, which is providing liquidity solutions and providing efficient and accurate pricing. So different from, I think, many secondary funds, we are bifurcated into two groups that work frankly simultaneously. I can’t do my job unless my colleagues on the quant side do their jobs. But on the underwriting side, for the team that I’m part of, we do a lot of the asset characterization, we do a lot of the bottoms-up modeling, cash flow forecasting, analysis of growth rates, et cetera. Simultaneously, there is a group of quant/PhDs who basically take a lot of the analysis that we do, asset characterization, and then build models. Based upon it to construct what we call a top-down analysis. And effectively, what they’re trying to discern is what is the discount rate that should be applied to a set of cash flows, be it one fund, one asset, or a portfolio of assets and/or funds. And it takes into account a variety of things, not only the location, stage, sectors, subsectors, but also whether it’s a foreign currency, duration of cash flows, Importantly, because we are not a fund, we’re not raising funds episodically, we’re doing this off of our balance sheet, it takes into account what we already hold in our portfolio and then applies it to what the discount rate should be on a prospective new deal because we don’t want to be overweight a particular stage or sector and we have essentially an optimization model. In fact, there are 7 different patent-pending models that we have at Beneficient, that allow us to do our work.

Aoifinn Devitt: You touched already on ESG and how it applies to private investments. To what extent is ESG factoring into your thinking today, and is it on the minds of your clients?

Maureen Downey: ESG really rose to prominence from institutions in Europe, and I think first from Scandinavian institutions, and it’s really evolved over the course of the last 15 years. How ESG plays into how I think about investments is a couple of ways. I think one is it helps give institutions and individuals a framework of how they should look at how their investing can have implications on the environment, on social, and on governance. And I think it helps provide that framework. And depending on where institutions invest, how they should kind of think about different areas of diligence that they want to focus on. For me though, because I know that there are quite a few institutions that have made ESG quite prominent in their marketing and in their communications to investors, either individuals or other institutional stakeholders, for me, ESG from an investment standpoint really kind of comes down to how I think about risk. So whether that is economic risk, whether that is reputational risk, I really look at ESG also as how I try to incorporate risk into my valuation decisions.

Aoifinn Devitt: And let’s go back to some personal reflections now. So you’ve had a long, illustrious career, which I really enjoyed following and getting to hear about more detail here. Were there any setbacks in there and any challenges maybe that you learned from?

Maureen Downey: Yes, there’s always setbacks. That’s what provides character, or enables you to get character as you try to overcome those setbacks. I would say that when I transitioned from London and moved back to the Bay Area with Goldman, I decided to work in healthcare rather than where I had been previously focused. And that was a real challenging stint for me inasmuch as that going from basically an industry focus where I used a lot of my debt leverage finance structuring derivative M&A skills to effectively a market, at least out here in the Bay Area, where most of the companies were biotech, early med device. There was a few specialty pharma companies. Many of these companies, they didn’t have any debt, let alone any cash flow. So one, with no cash flow, you can’t do any accretion dilution, and with no ability to put debt because you have no cash flows, you’re really just subject to doing equity offerings or rights offerings or convertible bonds. And so it was a skill set that I needed to learn more of the equity side of the balance sheet. But more importantly, a lot of the conversations revolved around trying to figure out which of the earlier stage companies were prospects to be bought by some of the big biotech or pharma companies, and having dialogue with the chief CMO, which in this case means chief medical officer rather than chief marketing officer, and just being really able to understand their lingo and their knowledge about what exactly their drug or their biotech molecule was trying to target. And so it was a lot more medical training, I would say, knowledge of biology, pharmacology, that frankly I didn’t have, right? I had really come through on the more politics, economics, finance. I did have an entrepreneurial management major coming out of business school, but I had nothing really to do with healthcare. I happen to come from a family family of 4 doctors, I am the black sheep. I am the only one who’s not really in the healthcare industry. So I was doing a lot of phone calls basically to family, but that was a real struggle because frankly, I worked with a couple of folks that were actually older than I was that were associates, and I was a VP, and they knew far more about the industry than I did. They had either PhDs or master’s in biology or pharmacology, and they could really have a really credible discussion with a lot of these senior folks at these smaller to midsize growing biotech companies, and I couldn’t. So that was really daunting. And so it made me really appreciate how much you really need to understand and know, and frankly, how vast the healthcare sector is. I mean, there’s probably about 9 or 10 different subsectors, and it was quite humbling. So I’ve always kept, and I’ve always kept doing by my involvement with Digital DX, in the healthcare space, because I think it is so important, the work that people do in that space, and frankly folks to be able to finance that work. But I think now, I think I know the questions to ask, but I don’t always necessarily know the answers, and that’s kind of what I lived firsthand by. The second setback is that having spent a lot of time living and working in emerging markets and investing in emerging markets, I became very aware of not only the differences between what was going on in emerging markets versus developed markets, but also the importance that technology could have to many emerging markets and how it was taking time for sometimes that technology to come to an emerging market, or sometimes when it did, how disruptive in an adverse way it was to a particular market. A good example would be there was a company in Brazil called Peixe Urbano, which you means, know, urban fish in Portuguese. That was doing quite a good job, and it was similar to Groupon. And when Groupon came into Brazil, it effectively destroyed the market, and Peixe Urbano actually went out of business. And I really wanted to do something impact-oriented or sustainability-oriented, and I think I came out of that and was focused on it a little bit too early in the marketing phase because I had hoped to basically do a little bit more focus and work around impact sustainability and That effort that I put out there was probably a little bit too early to where the market was evolving. It’s in quite a different place today than it was, say, 7 years ago. So that was a disappointment for me. I think I was just a little bit too early. And it’s not that it’s grown exactly in the linear fashion that I thought it would be, but it’s certainly much more evolved and much more diverse than it was, say, 7 years ago.

Aoifinn Devitt: Over the course of your career, were there any key people who left a particular impression on you or who maybe were mentors throughout?

Maureen Downey: Yes, I kind of smile as I think about this. I would probably say going back to my college days, my 3 professors had a profound impact on me, and one in particular. I was asked to collaborate with a couple of my fellow colleagues in my course of study to produce a paper on what we thought the good society is or composed of, and at the time there was riots in LA not so different but similar genre about what happened with George Floyd. This was the Rodney King riots in Los Angeles, and they happened— these riots— the night before we were supposed to turn our paper in. And I just remember us coming to class the next day with our papers in hand and all of us being extremely disillusioned and dejected and thinking that there wasn’t such a thing as a good society. And the professor that I had, John Roth, he looked at all of us and he ended up having tears come to his eyes. And, you know, he was an interesting man. He is an ordained Protestant minister and he spent his life’s work writing books about the American dream as well as the Holocaust. And he used to do a lot of mediation between the Irish Catholics and the Irish Protestants also during the ’80s and ’90s. So very interesting man. And he said to us, he said, you know what, if you don’t care and if you don’t see that there’s hope, then how will there be hope? Because you are essentially the next generation, and haven’t you learned how interconnected you are with your communities? And communities are concentric. It starts with the people in this class, your families, your communities, your colleges. And for me, I learned one is that we truly are really interconnected, and as such, we have a responsibility to act, to do, and to give back to our communities. And that really stuck with me. It has stuck with me all through my, my life. And although I was analyst and associate earlier on in my career and had no time to necessarily do my laundry, let alone try to join a nonprofit. That has always been in the back of my mind, and I have always thought about it because I do see us as individuals very connected to our communities, and we have definitely a responsibility to give back. The second person who probably influenced me was someone who’d grown up in the Deep South, a person of color who had achieved a law degree and a medical degree. And I remember one time I was really whinging about something to do with my career and how unfair it was. And he turned to me and said, Maureen, life is unfair. And I was like, but, but— he’s like, no, Maureen, life is unfair. And so what? What are you going to do about it? And it kind of really made me realize that, yes, despite what you may think or want to think, life is unfair sometimes, and it’s up to you to decide how you want to address that challenge. And that comes to, I guess, another key piece of advice that I got from another former colleague of mine, which was you need to learn how to reframe. And again, it’s kind of a combination of the advice I got from this former mentor and this current mentor, is that do you want to be a victim? Do you want to have something happen to you, or do you want to have something happen by you? And I decided early on I wanted to have things happen by me. And so not everything is necessarily by you, but you have the ability to reframe situations, experiences, so that at a minimum you can take away from it, what have I learned? What have I gained? The last thing I would say kind of circles back to my first point, and that is you need to have the ability to actively listen and to have empathy. Because if you don’t actively listen, you’re not learning. And then if you don’t have empathy, you can’t really effectively sometimes hear what the other person is saying because you have to put yourself in their shoes so that you can get a really big picture. And I think that— I think it is a key thing is the ability to actively listen enables you to learn. And again, going back to what really drew me to my area of study in college, I love learning and I love learning because I’d like to see what I can do. And there have been times in my life— most of the time, I think I am oriented towards seeing what my potential is, so I love to try new things and learn new things. There have been periods of my life and my career, especially when I was in investment banking, where I think I shifted my mentality from having a growth mentality where I wasn’t afraid to try because I wasn’t afraid to fail, to other times where I stopped trying and I was very concerned about failing and not keeping up with the pack. And what happens if I didn’t make this promotion or the other promotion? And so I’ve kind of circled a couple times, I would say, within my life to have to come back to what I think is a better mentality, which is the growth mentality, which is saying, try, you’re going to fail. Okay, what did you learn? Now try again. Because at the end of the day, you can’t stop. You have to keep going.

Aoifinn Devitt: Well, that was wonderful, Maureen. You’ve always been a role model of mine, and you may not have known it, but when I joined Goldman Sachs— and that’s of course where we met— you were a few years ahead of me, and I always looked to you as a person of tremendous breadth, but also you are extremely approachable. And as someone myself who loves travel, as well as the world of finance, I have thoroughly enjoyed this tour through your career and the really dazzling aspects it has. So thank you so much for coming and for sharing your wisdom with us.

Maureen Downey: Thank you, David. I really appreciate you having me today.

Aoifinn Devitt: I’m Aoifinn and David, thank you for listening to the 50 Faces Podcast. If you liked what you heard and would like to tune in to hear more inspiring investors and their personal journeys, Please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice, and all views are personal and should not be attributed to the organizations and affiliations of the host or any guest.