Marcus Simpson leaves Australia's QIC to pursue advisory work

Simpson served as head of private equity at Virginia Retirement System and North America CEO at Altius Associates before joining the Australia-based investment manager in 2005. While QIC is controlled by the Queensland government, most of its A$80 billion ($56 billion) in assets are held on behalf of third-party clients. Simpson constructed the private equity program from scratch, creating what is now a A$7 billion portfolio covering funds, co-investment, directs and secondaries.

The program has generated an annualized return of 17% over the past 15 years, net of all costs. Simpson identifies direct investment, venture capital and small buyouts – where QIC would typically invest alongside the portfolio GP – as the key contributors. He plans to put this experience to use helping other LPs that want something different from their alternatives exposure.

“Institutions want to do more in alternatives, and they look at their boards and investment committees and they are light on people who have alternatives experience. You also have institutions saying, ‘I know what a normalized private equity program looks like: I hire a consultant and I end up in mega buyout funds, with some co-invest and secondaries. Are there other ways I can invest as well?’ They want a more modern way of investing,” Simpson told AVCJ.

When QIC launched its program, 97% of private equity exposure among institutional investors was through funds and fund-of-funds commitments. The landscape has since changed dramatically. For example, 26% of that exposure is now in the form of shadow capital that invests alongside managers, Simpson noted.

He believes QIC benefited from being quick to take advantage of new levers that appeared after the global financial crisis. The group became a big buyer and seller of secondary interests, it developed a co-underwriting ability for co-investments, and it created a very international funds program – there are currently around 30 GP relationships, with barely a handful in Australia – by trying to be a value-added partner to managers. This sometimes took unexpected turns.

“We got into one US VC fund, which was highly oversubscribed, so we contacted the managing director, said thank you, and asked if there was anything we could do for them. He said he wanted to give his grandchild a toy koala, so we went down to the shop in Brisbane, bought a toy and sent it off to him,” Simpson recalls. “We’ve always had that ‘How can we support you?’ attitude.”

QIC got into venture capital at a time when it wasn’t so popular. The vertical has since reclaimed the mainstream, while more money is going into secondaries and co-investment. Asked what he expects to define the next evolution of PE, Simpson points to a breakdown in the traditional asset allocation silos. Some groups are already following a thematic model – they decide what they want to invest in healthcare, for example, then figure out the best way to access it – and he expects more to follow.

“Maybe not five years from now but 10 years from now, the way that CIOs allocate capital is going to change from silos – public equity, private equity, fixed income, cash – to a system based on returns, duration of investment, and an ESG [environment, social and governance] factor,” he said.

In addition to advisory work, Simpson has identified two more areas of activity. The first is teaching and mentoring: he recently did a stint at Macquarie University in Melbourne and he is helping the founders of a couple of healthcare and wellness-related start-ups. The second is rediscovering the satisfaction of manual labor. He previously dabbled in handcrafted furniture and plans to do so once again.

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