This week on the podcast, Matt sits down with Chuck Bauer, partner and head of investor relations for EnCap Investments. The episode begins with Chuck walking through what EnCap does as a private investment firm focused on North American energy markets. Matt and Chuck then dive into what alternative investments are as well as the importance of establishing and maintaining relationships in this industry. The conversation concludes with Chuck discussing his journey from working for a Congressman, to going back to school for his MBA, to ultimately working in alternative investments.

People that are successful in this job are

people that go places. Simply you cannot do it behind the

desk. You can't do it through email. You can't do it. You have

to go sit down and get in somebody's face.

Excellence, professionalism, innovation and

collegiality. These are the values the Sam M. Walton College

of Business explores in education, business, and the

lives of people we meet every day. I'm Matt Waller, Dean of

the Walton College and welcome to the Be Epic Podcast. Today, I

have with me, Chuck Bauer, who is with EnCap Investments. And

he heads up fundraising, and also investor relations. Thank

you so much, Chuck for joining me today, appreciate it.

Great to be here. Great to be on campus as well.

Beautiful campus in Northwest Arkansas.

Isn't it? It's amazing. Although,

unfortunately, you came on a kind of a cloudy day, it's

usually sunny here and and perfect weather but,

I told my son who's touring here today that if you

can like it on a cold, windy and rainy day, those days when it's

75 degrees and sunny, it's gonna be the best place on Earth

Earth.

Absolutely. It really is. Well, Chuck, I'm

really thrilled to have you. You know, within most business

schools, there is less emphasis, I think on alternative

investments. First of all, there needs to be more, because it's

becoming more and more important in the financial system. But

even within the alternative investment category, and for

those listening, alternative investments include things like

seed funding, venture funding, private equity, these kinds of

things. But even within that, to the extent they are covered,

many times we don't cover fundraising. And that is a

critical part. And it's an area that you have expertise. And so

I want to talk to you about that today. But before I do. Would

you tell us a little bit about EnCap Investments?

Yes, certainly happy to do it. EnCaps is a 35

year old private investment firm focused on North American energy

markets, with offices in Houston, San Antonio, and

Oklahoma City. We have three verticals, three investment

verticals, three distinct teams that focus on three distinct

parts of the energy value chain. So we have a team that invests

in the upstream segment of the energy value chain, a team that

focuses on midstream, and a team that focuses on energy

transition, primarily around the decarbonisation of the power

grid, green field opportunities around wind, solar, and utility

scale energy storage. Midstream would be the pipeline systems

gathering, processing, treating compression, all those things

that after you capture the hydrocarbon at the wellhead,

you've got to move it and get it to a market to be sold or to the

end user. The upstream companies are the ones that are out there

drilling for natural gas or oil. And so we we back companies, so

we raise capital, create a fund and then those funds ultimately,

back portfolio companies that we build and grow and hopefully

become a strategic asset that someone else will want, we can

sell that business to them over time.

Does each time you each time you raise a fund, does

that fund focus on one of those three areas or a combination of?

They're three distinct funds that we have. And

so they don't, you know, there's there's not crossover. And so

the the individual investment teams within EnCap, are focused

on their own specific vertical. And so they're closed end funds,

they're typically 10 years in life. So there, they fit right

in the middle of that alternative investment category

that you referenced in there an illiquid asset for investors.

And it's, as you suggest, it's a growing area. The markets been a

growing area of the market over the last 17 years and an

important one for public pensions, for sovereign wealth

funds, for insurance companies, healthcare institutions, college

endowments and foundations, a lot of college, college

endowments and foundations actually, really were one of the

leaders in the alternative investment space, one of the

people that came out, following David Swensen at Yale in the

model that he put together, really, what's the endowment

model of investing? We're probably 30 to 40% of the

capital goes into illiquid investments. He was the one that

pioneered that, I think back in the 70s, maybe early 80s. I'm

not sure when he did it, but maybe the early 80s. And this

whole organization, whole industry has developed over

time.

So Chuck, since a key part of the purpose of this

recording is to fill in the gaps around fundraising, and

specifically with alternative investments. Would you talk to

us a little bit about how that process works and your

experience with it?

Yeah, certainly. Think that it's, it's really a

there's a I'm going to talk about two parts. One is the

personal relationship side or the or the relationship side of

that business. And then two's fundamentally the process of

that business, the actual fundraising that takes place.

And so you'll have a firm that just has decided they're going

to raise capital to pursue to build a fund to pursue

investments in a specific sector, specific strategy, they

will need to go identify sources of capital, the sources of

capital are what I've talked about, historically, it could be

public pension plans, could be college foundations and

endowments, healthcare institutions, sovereign wealth

funds, insurance companies, high net worth individuals, who are

all looking to deploy a portion of their balance sheet or

portion of the assets that they have under management into

alternative investments. And so it's important that you have

someone within the firm or the leadership of the firm that

begins establishing relationships with these groups,

helping them understand and identify who you are, what you

do, why you're differentiated in the market, how what your

product is going to be different than other things that they

have, why you're better positioned in this market to

take advantage of the opportunity set, and create

value for your investors. You know, your what you're selling

to them, ultimately, is a 10 year illiquid investment, it's

not you're not selling them public equities that they can

trade in and out of, if you make it, they make a determination,

they don't want to be with you anymore, they can't trade out of

it the next day, there is a secondary market for it. But

that takes time to sell, sell at a discount. And sometimes it's

not an avid not a very advantageous exit for you. And

so these people want to earn your trust. And they want to

know that who they're investing with, they're going to be in

partnership with you for at least 10 years. And most of

these funds, even other 10 year funds, take 12 and 13 and 14

years to ultimately wind down. And so it's very important that

you you have one on one relationship time with those

individuals who are ultimately making the investment decision.

So what what begins with that, is you'll put together some type

of pitch book or deck, PowerPoint presentation that

kind of outlines some of those things I just talked about who

you, who you are, what your investment strategy is, what

differentiates you against your competition? Why, what is the

market opportunity? What are the types of investments you're

going to make? Maybe some case studies of what you've done. And

then most importantly, what is your track record? What have you

done in the history of your career, whether if this is the

first time you're creating a fund, or whether you've had

multiple funds, to go and demonstrate to that investor,

that you have the experience, you have the team that can go

deliver the type of returns that you're advertising in your in

your pitch book. And so you take that pitch book, and then you'll

begin calling investors going out seeing them, you have an

official legal document called a private private placement

memorandum, which outlines the investment thesis, and you have

legal documents surrounding it called a limited partnership

agreement and subscription documents. And then you have you

go meet with an investor the first time, they're likely going

to engage in some form of due diligence, and you have to

prepare, they will have a lot of questions, it will require

information, and you have to fulfill those data request and

help understand and shepherd them through the process. So at

the end of the day, they're going to have an investment

committee, they're going to have trustees likely they're going to

have to answer to and so from determining what is their

process, what does it take for them to get to a decision? But

also importantly, what is a timetable? How long does it take

someone to get from an introductory meeting, to

ultimately making a decision. That's vastly different from a

family office who has a sole decision maker, to a large

public pension who has, who doesn't move at the same rate

that a family office could move. It could be a six to nine month

process with the state of California and the state of

Florida and state of Arkansas, very different than dealing with

someone who invest money for the Walton family as an example.

Let's take a couple of examples, a University

Endowment Foundation, how do you contact the right people? How do

you find them? How do you develop a relationship with them

and approach them?

Certainly, yeah, it's definitely evolved over the

I've been doing this for 17 years now. So it's evolved over

17 years. Certainly technology has helped immensely. There are

databases that you can purchase, online databases that are

services that call the University of Arkansas and find

out what they're interested in who the people are that work

there who covers what asset classes. And so that's probably

the biggest help is to be able to go out and utilize a database

to figure out who's the right person to call. Secondarily

they're public. You know, anything that's public, a public

university, public pension plans, most of them are required

by state law to have a lot of that that information online.

And so you can go pull public records to determine who to

call.

And I would guess since you've been doing this for

17 years, you probably know a lot of these people.

Absolutely, yeah. So, you know, a big part of

business school, a big part of the education you gain not is

not just within the classroom, but it's learning how to

network, learning how to communicate, learning how to

build relationships with people within the business school

today, that will benefit you for life. And that is understanding

that a lot of the people that I talked to today, ultimately come

from referrals, or determining, hey, I need to get, I need to

find somebody at the University of Arkansas to talk to who might

I know that is connected to that person that could facilitate an

introduction for me. Because we know in our personal lives, if

your friend calls you and ask you, Hey, will you take a phone

call from my friend, you're much more willing to take accept that

phone call than if some someone cold calls you, you may likely

ignore it or never respond to it. So that's, that's a critical

networking, and building relationships that you can then

lean on throughout your career is a critical component of the

success in this role.

And in so many roles, I know many of our most

successful alumni, and I would think that almost all of them

are quite good at developing relationships and maintaining

relationships. And you know, it's more than just meeting

someone. It's learning how to relate to them, and then stay in

contact. It takes a lot of work, doesn't it?

Yes. Takes a lot of work. One's, communications key,

following up on what you said, you're going to do, delivering

on what you said you're going to do is key if someone asks you

for information, and what you have to determine how do I

remember how to do that? Do I need to write that down? Can I

remember it in my head? When do I need to follow up? How often

do I follow up without becoming a pest to them? All of those

things are critical. And then over time, you'll learn that

it's, you'll learn things about that person, you'll want it then

the next time you communicate with them, ask them what was

important in that last meeting, talk about your family, talk

about their family, those things that can relate to you. And the

most important part of I've learned probably my 17 years, as

I've matured and my career's evolved, is to become a good

listener. And I will tell you, most of the times I meet

somebody for the first time 95%, if I'm going to talk about

EnCap, a meeting for EnCap. The first time I've met somebody, my

goal is for 95% of the conversation not to be about

EnCap. I want to learn about that I want to learn about their

program, I want to learn about the institution, I want to learn

about that person. So I can understand what their needs are,

what they're trying to come to accomplish within their end

their institution, and how we might complement that. And the

EnCap stuff can come like if I'm successful in that first

meeting, then I'm definitely gonna get the second meeting

where we can spend time talking about EnCap.

You know, that's true in all kinds of sales as

well. And even in interviewing for jobs. You know, a lot of

times I think, when people are interviewing for jobs, they want

to just spill everything out in terms of what they're good at

what they've accomplished. But, you know, a lot of times, you're

better off asking questions and learning about the person

interviewing you. Sometimes they will hire you based on they'll

talk themselves into it in some cases. So when you're raising

funds like this, from, say, a big pension, public pension,

versus a home office to your point, the processes take

different lengths of time. And I would imagine that you have to

do a lot of nurturing of the process for something like a

large pension fund that is has more bureaucracy to deal with

more policies and even state laws, in some cases,

regulations. So those are two very different situations. How

do you manage them differently? What do you do?

Yeah, part of it is, as you suggest, you really

have to understand their process. You can't you need to

understand, and I will tell you, in many cases when dealing with

an entity or an organization that's going to move slower or

has more bureaucracy has more steps that they have to get to

through an approval process. Many times it's let's go set a

date, a goal of when we're going to be finished. And then let's

work backwards and create some key milestones and I'm talking

about if you've gotten to the point where you know that that

individual that you're working with at that institution is

going to move forward, going to engage in diligence, they're

going to take this forward with a with a goal towards committing

capital to the fund you're raising, then let's go say that

you want to be finished by October the 15th. What are the

key milestones that we need to hit and so that we can make sure

that we're on target to hit October the 15th. And the reason

I say that is, you know, at some of these institutions, the legal

side, so you've gotten an official commitment out of a

board of trustees at a public pension plan, well some of

there, there may be a legal review, that takes three or four

months. So if you know, you have to have this by October, the

15th. And you know, you better be through committee by June the

30th, or July the 15th, or you're not going to hit that,

that target. Now, family office, as we just discussed, you could

go sit down with the principal, have a cup of coffee. And as you

even like you were talking about an end job, it's almost like a

job interview. Right? If that person trust you, they believe

in the sector you're investing in, they may, they may make a

commitment on the spot. And they could turn legal documents in,

in two days. You know, and so it's really, it's really the key

is understanding the process that the people that you're

working with have to go through. Also recognizing and something

that I that I have to continue to remind myself every day is

the stuff I'm calling them about isn't I'm not the only person

they're working on, I'm not the only person they're talking to.

And so they're being torn in 20, 30, 40 different directions on a

daily basis. So there's you need to learn to be patient, and

guide them and help them and determine what are some steps,

things that I can do to help alleviate any challenges you're

having getting the work accomplished. As an example, you

know, this person may have to write in an investment committee

memo. And they may be getting the time to dedicate to writing

the investment memo may be challenging for them. So maybe

you can send them some examples that they can cut and paste

certain portions of that will help them you know, make that an

easier process for them. So there's certain things that you

can help along the way, can't write it for him, obviously, but

you can help provide them some guidance on.

Back to the large public pension fund, in addition

to being a good relationship builder, a good listener, you've

got to be a good project manager in that case, it sounds like.

And there's lots of tools to help with project management,

you were talking about if they have a deadline and a certain

point, they may need to be through some other milestone

before they get to that point. You have to think about the

milestones and the key events that need to occur, and tasks

that need to be done. How long will those tasks take? That

sounds fairly complicated with some of these funds and I would

imagine many of them have different rules and regulations.

So you have to adjust your project, I'm calling it a

project, based on the funds. So that takes a lot more time. And

so I'm thinking about it from a ROI perspective. You know, if

you can get a family office and, you know, make a decision more

quickly, that could be a higher ROI on your time. But on the

other hand, the big public pension funds have more money usually.

Matter scale as well, right. So big public

pension could write 100 to $300 million commitment, family

office might write a five to $10 million commitment. So it's also

an allocation of time, allocation of resources. And

really, the what I love about what I do in the role that I

play is it really touches upon many of the disciplines within

the business school. We're not, we're not one discipline focus.

So there's a huge component of my job that's communications.

It's a huge component of sales and marketing. But there is

project management. There's, you've got to understand the

business, the law, in many cases, the regulations, the

rules, you have to operate by, back to your point you you know,

there are some people that want to be go have dinner, like they

would prefer to have that conversation in a social

setting, that initial conversation, in social setting

a family office or someone like that. They're comfortable in

that environment. Well, there are a lot of people that work

for a public university or a public pension, that have rules

that prohibit them from even accepting a bottle of water in

your office, or a cup of coffee. And so you have to understand

that regulation. You have to understand if you want to do

business in the State of California, you'd have to go

register as a lobbyist. If you want to do business in LA, you

have to go register as a lobbyist in the city of Los

Angeles. So there's there are just so many dynamics around

that entire role that it's really interesting. I'm

interesting to see how many portions of the business school

and what you learned in business school you actually now applying

in that role.

At what point did you realize this would be a

strength of yours to manage something like this?

Yeah, well, interestingly, I began my career

in politics. So I was a political science major,

graduated from TCU in 1994, immediately went to work for a

gentleman running for Congress, and knew that I, kind of my base

skill set was relationship development, I knew I could

communicate, I was pretty natural at developing

relationships with people. And so I became, spent 11 years

working for the Congressman, speaking at Rotary Clubs,

Chambers of Commerce on his behalf, cutting ribbons and

getting to know people in the district. But then I identified

that this was there was a role of raising capital, in financial

firms, that I didn't really at that, until that point, I didn't

realize the role existed. And so I put, I correlated the fact

that what I do for the congressman, and being his

person in the district, and and being out, kind of in front of

him being his flagbearer, I guess, carrying his story in the

district, and being the flagbearer for a financial firm

and telling their story, rather than but not in a congressional

district, but around the world, to just a different audience was

very similar actually, and the process of raising capital was

similar to the process of running for office. And so I put

those two together. And some people said, you know what, you

need to go back to business school. So I went back and got

my MBA, and then ultimately found a job with a firm in

Dallas. And I've been doing that for 17 years.

It's amazing how many people really pivot through

an MBA. MBAs are a great way to pivot into business. So it seems

to me, and I'm no expert on this, but it seems to me that

the number of family offices has increased dramatically over the

past 30 years. Is that, have you notice that, is that true?

Yes. Yeah, they're every day, we see more and more

family offices that are becoming interested in alternative

investments, particularly.

So there's probably is there a database out there

for family offices? Or how do you find them.

They're, they're trickier. That's a trickier

universe to uncover. A lot of them don't want to be

identified. A lot of them want to do direct deals, they don't

want to invest in funds. A lot of them if you think about the,

the genesis of their wealth in most cases, it's an entrepreneur

that took risk and built a business and sold it to someone

and created a generational amount of wealth that now he or

she needs to manage. And they want to create capital

preservation and then wealth, create continued wealth

creation. There is a database out there that you that we

utilize, that does a really nice job of uncovering family

offices. But typically, that is a place where networking and

word of mouth referrals is going to be the key to success.

Because once they, you know, if they've done business with you,

they like what you've done, then they'll they'll want to make

sure their friends have an opportunity to or people that

they've done deals with will have an opportunity to look at

what you're doing as well.

Well Chuck, thank you so much for taking time to

visit with us about fundraising for alternative investments. I'm

sure there's many students listening that have not really

thought about that as an option, but they're probably geared

towards that naturally, and others that might be interested

in it after listening to this. So I really appreciate you

explaining this.

Thanks, glad to be here. I think you're gonna be

stuck with me for four more years. So anytime you need me to

come to campus or our students or anybody that wants to learn

more about the role that investor relations and

fundraising plays within the business community, on the

private investment side, very happy to spend more time helping

the Walton School of Business.

On behalf of the Sam M. Walton College of

Business, I want to thank everyone for spending time with

us for another engaging conversation. You can subscribe

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