Private investments is traditionally a sector that is more insulated from volatility than most verticals of the asset management industry. This sector has seen a very different impact than what has been seen by more of the economy, and nowhere is this truer than in the Texas landscape. Much was made of the exclusion of PE-sponsored business from PPP eligibility, and the Energy sector took serious punches while supply chains across the world saw unprecedented disruption. Through all of this, however, one thing has remained constant – the resilience provided by long term capital and intelligent deployment by managers have saved off what we hope is the worst of the economic impact.
Regional Talent Trends
It is no secret a diaspora of energy talent is well underway. While there are those that plan to hold out and realize value as hydrocarbons will certainly remain an essential industrial commodity for the next century, the opportunity set perceived by most won’t ever be what it once was. Therefore, many pedigreed investors have begun the search for orthogonal career paths including new industries, niches such as energy tech or power, or even corporate finance. Giving bulge bracket or megafund talent a chance to clear the hurdle of assimilating into a new industry will represent a unique opportunity for smaller middle market shops and family offices that may not always get a look at this talent. Meanwhile the stalwart energy investors remain firm that they are still well positioned to generate promising returns out of a potential recovery in oil & gas.
Real estate, another mainstay of investment activity in Texas, has seen its own dislocation. Retail was an asset class already feeling some pain before global lockdowns and supply disruptions. The question of office utilization in a world of “work-from-home” has been raised and calls into question it’s viability even in a post-COVID world, though most agree that some office presence or availability will be required even for those firms demonstrating the most flexibility for talent. Multifamily remains an area of strong investment, while Industrial property development and acquisition have become so popular that some question the viability of focusing on the strategy. Certain niche sectors such as data center investment and proptech have begun to pop up and represent the bleeding edge of an industry that has traditionally been slower to modernize. Ultimately, there are still plenty of capital inflows from LPs and hiring remains aggressive across nearly every strategy, and the pent up demand for hiring that was paused during the summer has already started to surface.
The Growing Appeal of Texas
Elsewhere, the region has become a nascent foothold for other strategies that are flying high, such as Technology & VC firms enjoying the quirky culture of Austin, Distressed investors looking to buy the proverbial dip, and Corporate Credit funds providing all manner of companies the capital they need to weather the storm or retool. Many are watching the stream of companies from Goldman Sachs, Charles Schwab, and CBRE either relocate their headquarters to Texas or massively expand their presence, following the lead of hundreds of other groups. Dallas alone is now home to 11 Fortune 500 companies. While COVID-19 may have been a catalyst, the argument for Texas is very clear – a low-cost, business friendly environment with a strong economy and ever strengthening base of top-educated labor.
The shift is visible from the talent side as well – there is a quickly expanding number of candidates from the world’s top firms based in New York, Chicago and San Francisco, whose love affair with core markets is being cut short by high taxes and cloistered environments, and this talent is seeking greener pastures. All this means that in sum, the Texas market and economy will likely net a great benefit in coming years from the overall trends and impacts of the past year, and Selby Jennings is poised to facilitate and accelerate this impact.
If you’re interested in discussing the trends and opportunities that are arising in the Texas alternative investment ecosystem, or if you need support in hiring for your team, reach out to the Selby Jennings Dallas Team today.