Combining public and private markets is the culmination of a career of sourcing hedge fund talent and venture capital opportunities for Natalie Hwang, founding managing partner at Apeira Capital.
She is now able to apply her own views on disruptive technology with her new offering, which she took the time to discuss at length exclusively with Alternatives Watch.
Prior to founding Apeira, she founded and managed all the aspects of investments as sole managing director and head of Simon Ventures. She served on boards of companies such as Foursquare and FabFitFn, and he has supported a number of other companies scale up, including Bird, Bustle Digital Group, Grailed, Verishop, MeUndies and Brud. Before becoming a venture capitalist, she was work in the hedge fund seeding unit at The Blackstone Group.
In this interview, we explore what a mash-up of venture capital know-how and hedge fund strategy offers to the alternative investors.
Why did you decide to build your own firm/strategy?
There has been very limited innovation in private markets investing and I saw an opportunity to launch a firm that could occupy a unique position across the value chain of venture capital providers. For as long as it has been practiced, venture capital has existed as an illiquid, long-only asset class and I was inspired to apply well worn-public market strategies as adapted through our unique long/short approach to private market investing to evolve it to something that is far more liquid and multi-directional in design. As I thought about how best to position ourselves to develop this differentiated value proposition in market, it seemed critical to establish our independence at the outset so that we could operate without the limits of legacy conditioning. A new firm seemed like the optimal vehicle for embarking on this mission.
Your strategy tactically marries the long/short methodology that is traditionally found in hedge funds with venture capital. What is it about this approach that is so important right now?
We are operating in a market environment of unprecedented volatility, creating headwinds for traditional tech investing and high risk of repricing for private companies that have taken on significant valuation risk. The long/short methodology augments the traditional venture capital approach by creating opportunities for investors to profit from falling as well as rising prices to capture both positive and negative value across the broader venture ecosystem to generate a broader span of return outcomes than has historically been possible to achieve. These advantages could not be more important today because I think that now more than ever, there is a tremendous need for strategies that can protect as well as capitalize upon pricing volatility to position investors to access durable, uncorrelated returns.
As the IPO market continues to be dicey and the secondary market is really picking up steam, what should investors expect from their venture capital investment today that is different from previous years?
We’ve seen market sentiment shift quite rapidly in the last few months from general exuberance for all things tech to a more selective bias for fundamentally driven technology models. As a result of this shift, we would expect to see more disciplined valuation practices across the sector in the coming year. As some investors may retrench, we actually see significant opportunity for Apeira to lean in the current environment as pricing rationalizes to buy in at competitive prices to position ourselves for attractive liquidity options at the next wave of market highs. Investors should also expect to resort to a broader range of realization strategies to best position their portfolios for the most optimal outcomes.
The duration in your strategy is relatively short compared to traditional venture capital strategies. How are you able to rely on technology to manage duration risk in your portfolio?
Yes, our predominant focus is to invest long-only in later stage companies that are primed to achieve a liquidity event in the near term, so the broader portfolio operates with a shorter duration to begin with. We have also looked to derivative technology to manufacture our own synthetic liquidity options to expand the range of available liquidity to us beyond what secondary markets can offer or companies can achieve on a timeline that aligns with our own needs, which is key to managing for duration risk.