How We Invest

We seek to preserve and grow multigenerational capital by building diversified portfolios of high-quality assets through partnership with premier private and alternative asset managers.

 

Investment Philosophy

We seek to preserve and grow our clients’ capital over a long time horizon by maintaining a disciplined investment approach.

Our commingled investment vehicle structure ensures alignment with and across our client base while also allowing our investment team to focus on investing a single pool of capital. Investing in alternative assets – sourcing, due diligence, and manager selection – is a core competitive advantage of Makena’s experienced investment team. The investment vehicles we offer are thoughtfully diversified across high-quality alternative assets in order to mitigate risk and preserve and grow capital for the next generation.

To ensure unwavering focus on achieving our investment goal, we have developed six principles which permeate our investment process:

Maintain a Long-Term Focus

Maintaining a long-term focus is key to building high-quality, durable portfolios. Being a long-term investor requires the consistency, patience and discipline to weather short-term market volatility without shifting strategy or portfolio positioning.

Being a long-term investor also allows Makena to build strong partnerships with extraordinary investment managers who demonstrate a sustainable edge in security selection and adding value to their portfolio companies and assets over full market cycles.

Play to Our Strengths

Elite performance in any field requires an understanding of one’s own strengths and vulnerabilities. Our investment philosophy is uncompromisingly bound to this understanding. Makena’s core strength is our manager selection and access. Due to our industry network and reputation as a sought-after investment partner, we have a track record of accessing high-performing, capacity-constrained managers. This access is available through a variety of avenues, including co-investments.

Equally beneficial to our LPs is Makena’s ability to identify and seed the next generation of investment talent, what we refer to as “emerging managers.” By seeding emerging managers, Makena can both negotiate preferential economics and earmark scale capacity in future funds.

We also remind ourselves where we have no edge: market timing. While we actively look for investment themes that are based on market dislocations, these themes must demonstrate sound fundamentals and longer duration potential—far from what we would call “market timing,” which has a short-term connotation.

Understand that Markets are Efficient

Capital markets have become increasingly efficient over time, and we expect this trend to continue, meaning it will be increasingly difficult to generate outperformance.

While we acknowledge this trend, our scale and expertise allows us to identify opportunities and allocate capital to less efficient (and often uncorrelated) investment opportunities, which complement our bottom-up approach in order to outperform.

We firmly believe that extraordinary managers can outperform the market through private investment strategies (private equity, venture capital, private real estate and private natural resources) as well as complex credit, arbitrage and activist investment strategies.

Maintain Balanced Diversification

Diversification is key to successfully managing the inherent risks of managing long-term capital.

To Makena, diversification means thoughtfully allocating to a variety of asset classes, strategies, sectors, and geographies, to build a portfolio that balances both short-term risk (market volatility) and long-term risk (failing to meet our investment goals). Critically, while diversifying our sources of risk, we must not “over-diversify,” which could dilute our returns; we are seeking balanced diversification.

Therefore, given the scarcity of managers that meet our strict investment criteria, we exercise the conviction to concentrate capital with the 180+ extraordinary managers in our portfolio.

Maintain a Value Discipline

A benefit to investing with a long-term focus is the ability to maintain conviction throughout market cycles. This conviction underlies our value discipline: seeking to own high-quality assets at opportunistic valuations given our fundamental, bottom-up analysis. While we acknowledge that we can’t time markets, we do believe that price matters. There are times when markets overreact to market variables, causing asset prices to disconnect from their fundamental value. These periods of overexuberance or overcorrection can be short episodes of market volatility or can sometimes persist longer than expected.

When markets overreact on the upside, we look to our managers to focus on intrinsic value and avoid following market momentum that inevitably corrects and leaves investors to capitulate just at the wrong time. Alternatively, mispricing on the downside and other special situations at the security or asset level create opportunities for us to invest in strong companies, real assets and securities that have strong fundamental characteristics and provide real levers for growth. By positioning the portfolio to be able to take advantage of these opportunities and partnering with managers who can nimbly spot and execute at these times, we are often able to secure great assets at attractive pricing. This is a key component of our ability to create more favorable returns while maintaining comfortable risk levels.

People Matter

Our most important core principle is that people matter; we focus on building a team of the right people and investing with the right people. We seek team members who are collaborative, intellectually curious, humble, ethical and passionate. Most importantly, we seek to build a team of diverse backgrounds and perspectives, which we believe leads to the best investment decisions for our LPs.

Our manager selection process is no different; underwriting the quality of the team and each individual who constitutes the team is our most important investment criterion. We believe that when faced with a tough decision, if we have chosen the right people, the right decision will be made on behalf of our LPs and their capital.

Asset Class Expertise

Our alternative investing experience spans decades. Invest in our asset class portfolios on a stand-alone basis, as a holistic, endowment-style portfolio, or we can build you a custom portfolio as part of our Outsourced CIO service.

Private Equity

The Private Equity asset class pursues an opportunistic strategy that invests globally across a range of primary, secondary and co-investment opportunities. The portfolio has an emphasis on mid-cap and small-cap managers, which are complemented with select large-cap exposures. Managers are a mix of tenured, difficult-to-access firms that are balanced by talented, newer firms. The Private Equity asset class seeks to deliver a measurable illiquidity premium to investors above public equities.

Venture Capital

The Venture Capital asset class pursues an opportunistic strategy that invests globally. The portfolio has an emphasis on U.S. seed and early-stage technology managers, which are complemented with select growth equity, life sciences and international managers. We have developed relationships by leveraging our network and Silicon Valley presence, and our managers are a mix of top-tier, difficult-to-access firms that are balanced by talented, newer firms. The Venture Capital asset class seeks to deliver a measurable illiquidity premium to investors above public equities by capitalizing on new and disruptive technologies.

Listed Equity

The Listed Equity asset class invests in long-only managers in both developed markets and emerging markets, and also invests in long/short equity managers using a bottom-up approach. Recognizing the fact that most public markets are fairly efficient, we emphasize areas of inefficiency where competitive advantages exist, leveraging our long time horizon to invest in concentrated portfolios rooted in deep fundamental analysis. We seek to partner with managers who have a proven track record of investing in high-quality businesses run by high-quality management teams. Managers are a mix of tenured, difficult-to-access firms that are balanced by talented, newer firms.

Real Estate

The Real Estate asset class seeks to invest in assets through private structures which benefit from localized market dynamics, characterized by demographic and needs-based demand. Domestically, we partner with specialized operators who have a demonstrated track record of capitalizing on market inefficiencies; we often partner with these operators through bespoke investment structures which place Makena closer to the asset for stronger economics and oversight. Internationally, we invest in managers who have a proven ability to identify and access investment opportunities to drive alpha generation over a full market cycle.

Natural Resources

The Natural Resources asset class targets investment opportunities with advantaged cost structures by partnering with proven operators. We seek to generate a diversified return stream by executing value‐add initiatives and harvesting a development premium. Given the fragmented nature of the asset class, we source investment opportunities through our proprietary network and allocate capital to primary funds, co‐investments, and secondaries. The portfolio is diversified across sectors such as upstream and midstream energy, power generation, mining, agriculture, water infrastructure and sustainable energy.

Absolute Return

The Absolute Return asset class seeks to generate strong risk-adjusted returns that are diversifying to traditional, equity-oriented portfolios. We target investment strategies with the proven ability to generate durable returns over full market cycles with an emphasis on downside protection and compounding capital over time. The portfolio consists of experienced, differentiated managers deploying capital within a flexible mandate. We also pursue investments characterized by high levels of inefficiency, with a particular emphasis on complex, process-oriented credit investments.

Manager Selection & Due Diligence

Our Manager Selection process invariably begins with our extensive network of both General Partners and Limited Partners developed through our collective industry experience.

This network supplies our Investment Team with high-quality deal flow which competing investors do not have; it is our unique network that provides unique investment access. Our long-term orientation and partnership approach distinguish Makena as a sought-after and value-add investor among investment managers.

As our Investment Team progresses towards a formal investment recommendation, our due diligence process escalates. Due diligence at Makena is a cross-functional and ongoing assessment which involves our Investment, Compliance/Legal, Accounting, Tax and IT teams. Findings are aggregated into a formal report which is included in all Investment Committee Memoranda. Importantly, due diligence at Makena is never “complete.” Investment managers, and their vendors, are subject to annual reviews, the findings of which are summarized and presented to the Investment Committee.

Responsible Investing

Makena Capital believes an investment process that integrates environmental, social, and governance (“ESG”) factors enhances our ability to manage risk and create value for our investors.

As a global, multi-asset class investment manager focused on preserving and growing capital over an extended horizon, we are keenly focused on responsible investment practices and stewardship of capital at all levels of the investment process.

Makena became a UN PRI Signatory in 2016 and has since only strengthened our commitment to responsible investing across our portfolio. As part of our fiduciary duty to all investors, we believe formal incorporation of ESG considerations into our investment process sharpens our ability to identify potential risks and opportunities and drives attractive long-term risk-adjusted returns.

VIEW ESG REPORT