Welcome to the Fear and Greed business Interview. I'm sean ailmer. Private equity is a growing part of the global investment landscape, offering access to companies not listed on public markets, but selecting the right partners is a key challenge for investors. Remember the information and this episode is general in nature and doesn't take into account your own circumstances. Obsidian Capital is an Italian investment firm that focuses on private markets, working with a range of fund managers across different geographies and sectors including technology, healthcare and business services. Daniele Mellana is a partner at Obsidian Capital, which is working with Sale Capital. A great supporter of this podcast, he joins me now from Italy. Daniella, Welcome to Fear and Greed.

Welcome to the Fear and Greed business Interview. I'm sean ailmer. Private equity is a growing part of the global investment landscape, offering access to companies not listed on public markets, but selecting the right partners is a key challenge for investors. Remember the information and this episode is general in nature and doesn't take into account your own circumstances. Obsidian Capital is an Italian investment firm that focuses on private markets, working with a range of fund managers across different geographies and sectors including technology, healthcare and business services. Daniele Mellana is a partner at Obsidian Capital, which is working with Sale Capital. A great supporter of this podcast, he joins me now from Italy. Daniella, Welcome to Fear and Greed.

Hello there, thanks for having me here.

Hello there, thanks for having me here.

Now, can you give us a quick overview of Obsidian Capital, what you do, where you invest, how you position yourself in the private equity landscape.

Now, can you give us a quick overview of Obsidian Capital, what you do, where you invest, how you position yourself in the private equity landscape.

Of course, so, Obsidian Capital was the funded seven years ago and it's a regulated alternative asset management company focusing only on international private markets. The private equity selection capabilities come from the two funders experience in a private holding company, down here in Italy where for twenty years they invested in private technicy funds. But in twenty seventeen they decided to bring these expertise to the market by launching the asset management business started raising money from family offices, high netural individuals and institutional clients. And as you mentioned, we operate in a business that is about not listed company companies where access to information is limited and Bloomberg Termina basically doesn't exist. So there are some databases, but the information is far off from being complete, so you need really to rely on your own research. And it's still a business, it's still a people business. You need to have good relations with all of the managers you invest with, and this need to be built over time.

Of course, so, Obsidian Capital was the funded seven years ago and it's a regulated alternative asset management company focusing only on international private markets. The private equity selection capabilities come from the two funders experience in a private holding company, down here in Italy where for twenty years they invested in private technicy funds. But in twenty seventeen they decided to bring these expertise to the market by launching the asset management business started raising money from family offices, high netural individuals and institutional clients. And as you mentioned, we operate in a business that is about not listed company companies where access to information is limited and Bloomberg Termina basically doesn't exist. So there are some databases, but the information is far off from being complete, so you need really to rely on your own research. And it's still a business, it's still a people business. You need to have good relations with all of the managers you invest with, and this need to be built over time.

And so do you invest with managers, pay managers or do you do the investing yourselves?

And so do you invest with managers, pay managers or do you do the investing yourselves?

Now, what we do We construct a private equity fundle fund portfolios. Right, so it means that we are manager selectors and portfolio constructors so to say.

Now, what we do We construct a private equity fundle fund portfolios. Right, so it means that we are manager selectors and portfolio constructors so to say.

Right, so how do you pick those managers? Yeah?

Right, so how do you pick those managers? Yeah?

We we of course follow some criteria I might mention some. So first we are middle market investor and this means that we want to be invested with middle market managers. This is a pretty broad definition. It changes from geography to geography, but usually is companies with revenues in the range between fifty and one billion US dollars. And we think, we really think this is the sweet spot for investing in private equity because our companies usually with high grow potential, more motivate than main management, and where opportunities in value creation are much higher thanks especially to improvement in efficiencies, and usually the hand on approach is much more visible than in larger deals.

We we of course follow some criteria I might mention some. So first we are middle market investor and this means that we want to be invested with middle market managers. This is a pretty broad definition. It changes from geography to geography, but usually is companies with revenues in the range between fifty and one billion US dollars. And we think, we really think this is the sweet spot for investing in private equity because our companies usually with high grow potential, more motivate than main management, and where opportunities in value creation are much higher thanks especially to improvement in efficiencies, and usually the hand on approach is much more visible than in larger deals.

Okay. And so when that comes bringing back to our angiographies, are the region Asia, Australia, New Zealand? Are there many opportunities in our regions fifty to one hundred billion US? It's still a sizeable amount of money? Are there many opportunities in this region?

Okay. And so when that comes bringing back to our angiographies, are the region Asia, Australia, New Zealand? Are there many opportunities in our regions fifty to one hundred billion US? It's still a sizeable amount of money? Are there many opportunities in this region?

Of course, there are many many opportunities. Also you need to factor in the Today the APAC region is basically the second market for private equity in terms of deals, average ticket size and number of operators. I think today is a pack regions of private equity ties. It is basically as twice as Europa and half of the activity in North America.

Of course, there are many many opportunities. Also you need to factor in the Today the APAC region is basically the second market for private equity in terms of deals, average ticket size and number of operators. I think today is a pack regions of private equity ties. It is basically as twice as Europa and half of the activity in North America.

Okay, and hence Obsidian Capital's interest in the region because, to be honest on our show, we haven't done many interviews with Italian fund managers to be perfectly honest, Daniella. And so it is interesting that you're in this region. What role does sector or geography expertise in sector expertise in geography play when you're looking for a manager. So I'm sort of still exploring this idea that you're investing in this region. How much is it that you need people on the ground here who know what they're doing.

Okay, and hence Obsidian Capital's interest in the region because, to be honest on our show, we haven't done many interviews with Italian fund managers to be perfectly honest, Daniella. And so it is interesting that you're in this region. What role does sector or geography expertise in sector expertise in geography play when you're looking for a manager. So I'm sort of still exploring this idea that you're investing in this region. How much is it that you need people on the ground here who know what they're doing.

Yes, of course that's really key to have people on the ground. So of course, as you mentioned, we are an Italian manager and fund selectors, and that means that we travel a lot. But we want to be invested with managers that are deep roots in the places where where they invest, and so basically we really rely on our own research. That means that we really travel like crazy, so to say, and we really want to meet the managers. So as part of our dutiligions, of course, we want to meet the people we give money to locally. We want to visit the headquarters, discuss their strategy, their truck record, their people background, and so we really have a pretty discipline, the due diligence process in place.

Yes, of course that's really key to have people on the ground. So of course, as you mentioned, we are an Italian manager and fund selectors, and that means that we travel a lot. But we want to be invested with managers that are deep roots in the places where where they invest, and so basically we really rely on our own research. That means that we really travel like crazy, so to say, and we really want to meet the managers. So as part of our dutiligions, of course, we want to meet the people we give money to locally. We want to visit the headquarters, discuss their strategy, their truck record, their people background, and so we really have a pretty discipline, the due diligence process in place.

Stay with me, Daniele, and we'll be back in a minute. My guest this morning is Danielle Mellana from Obsidian Capital. Okay, so they're the source of managers you're looking for. Before the break, we discussed that what are the sorts of investments that you're seeing here? And I've got a pack here in front of me, and you talk about a supercycle, particularly around technology and investment trends. What other sources of the areas that you saying opportunities in the private market as opposed to public markets.

Stay with me, Daniele, and we'll be back in a minute. My guest this morning is Danielle Mellana from Obsidian Capital. Okay, so they're the source of managers you're looking for. Before the break, we discussed that what are the sorts of investments that you're seeing here? And I've got a pack here in front of me, and you talk about a supercycle, particularly around technology and investment trends. What other sources of the areas that you saying opportunities in the private market as opposed to public markets.

Yeah, of course, I mean the unlisted markets are less drugged by what's called the betech fact, right, they are much more decorrelated. And if you consider the life cycle of one private tech with fund is usually ten years. So of course we need to start with a kind of top down approach and see what the trends are. This is why, for instance, in all of our vintages investing in international private equity, we want to be exposed to Asia and the ATPARC region because we really really see these secular growth trend even though of course there can be piccups like it's happened with China. So now we are now launching our new app strategy and probably China would be ruled out at the beginning, but of course then we have four years to invest and then we can maybe reconsider it, and we want to focus more on some of our geographies in Asia at the moment, India and Japan first. But also in terms of sectors, we are pretty sector agnostic, so we but but of course we want to be invested again in secular trends. Then business service technology represent a pretty large part of our portfolio, whereas we tend to exclude some others like you know, real estates, metals and mining. So we represent a kind of good diversification factor for our Australian investor. As you know, a large part of the portfolio is exactly in this segment. And also of course we apply some ESG filters and then there are some other sectors like oil and gas and energy and tobacco and alcohol that are excluded for the portfolios.

Yeah, of course, I mean the unlisted markets are less drugged by what's called the betech fact, right, they are much more decorrelated. And if you consider the life cycle of one private tech with fund is usually ten years. So of course we need to start with a kind of top down approach and see what the trends are. This is why, for instance, in all of our vintages investing in international private equity, we want to be exposed to Asia and the ATPARC region because we really really see these secular growth trend even though of course there can be piccups like it's happened with China. So now we are now launching our new app strategy and probably China would be ruled out at the beginning, but of course then we have four years to invest and then we can maybe reconsider it, and we want to focus more on some of our geographies in Asia at the moment, India and Japan first. But also in terms of sectors, we are pretty sector agnostic, so we but but of course we want to be invested again in secular trends. Then business service technology represent a pretty large part of our portfolio, whereas we tend to exclude some others like you know, real estates, metals and mining. So we represent a kind of good diversification factor for our Australian investor. As you know, a large part of the portfolio is exactly in this segment. And also of course we apply some ESG filters and then there are some other sectors like oil and gas and energy and tobacco and alcohol that are excluded for the portfolios.

Okay, properly in metals and mining, why is it that you favored towards those sorts of sectors at the moment.

Okay, properly in metals and mining, why is it that you favored towards those sorts of sectors at the moment.

Now that there is no prejudice in it, is the fact that it's usually in the metals and mining sector. A lot of big deals are happening and those are not to be included in the middle market range that we mentioned before.

Now that there is no prejudice in it, is the fact that it's usually in the metals and mining sector. A lot of big deals are happening and those are not to be included in the middle market range that we mentioned before.

Okay, but of.

Okay, but of.

Course there is a kind of in the grade to play those sectors because we do also have some Australian managers in portfolio in our previous vintages. And of course maybe you want to be investing with managers that are focusing on sectors like business service to metals and mining sector. So it's kind of way to indirectly play this theme in portfolio.

Course there is a kind of in the grade to play those sectors because we do also have some Australian managers in portfolio in our previous vintages. And of course maybe you want to be investing with managers that are focusing on sectors like business service to metals and mining sector. So it's kind of way to indirectly play this theme in portfolio.

And what about the technology you mentioned as an area that you're interested in looking at? But technology is a small word covering a lot of areas. Is it more around II and virtual reality slash augmented reality? Are they the sours areas that you're seeing opportunities at the moment?

And what about the technology you mentioned as an area that you're interested in looking at? But technology is a small word covering a lot of areas. Is it more around II and virtual reality slash augmented reality? Are they the sours areas that you're seeing opportunities at the moment?

Yeah, of course AI is a big, big theme. I mean it's on every everyone's mouth at the moment, and of course we don't want to miss out, so of course we invest in that segment with manager. But we've all been managers that are kind of investing in companies servicing the AI. So because now the largest investors are made by the usual suspects that we can find on the list and markets, but of course also indirectly, we want to directly and directly play data theme via business services or for instance data centers and and all of what can be called the complementary business to the AI.

Yeah, of course AI is a big, big theme. I mean it's on every everyone's mouth at the moment, and of course we don't want to miss out, so of course we invest in that segment with manager. But we've all been managers that are kind of investing in companies servicing the AI. So because now the largest investors are made by the usual suspects that we can find on the list and markets, but of course also indirectly, we want to directly and directly play data theme via business services or for instance data centers and and all of what can be called the complementary business to the AI.

Okay, finally, before we leave, what are the trends you're seeing in the private equity sector at the moment?

Okay, finally, before we leave, what are the trends you're seeing in the private equity sector at the moment?

So we have heard a lot about it, and it ebbs and flows at times, but it just seems in Australia at the moment, investors are looking for non publicly listed assets more and more, and part of that's because Australia has this massive amount of superannuation or retirement savings which we are trying to place, and it just seems that non listed assets are very popular at the moment.

So we have heard a lot about it, and it ebbs and flows at times, but it just seems in Australia at the moment, investors are looking for non publicly listed assets more and more, and part of that's because Australia has this massive amount of superannuation or retirement savings which we are trying to place, and it just seems that non listed assets are very popular at the moment.

You think that'll continue, of course, I mean the portion of private equity investments in the in portfolio is growing massively year after year.

You think that'll continue, of course, I mean the portion of private equity investments in the in portfolio is growing massively year after year.

I mean, of course, if you take a US endowment, already sixty percent of the portfolio is invested in such a sets. But for instance, if I talk about my own country, that's less than probably six percent, including real estate but this trend is really changing. As said, we are sect or agnostic, but of course we are seeing some clear trends. But you can also get it from from newspaper headlines that the globalization is not over but is decreasing. And so what you want to do, of course, you want to be invested in local businesses that are not really exposed to what's happening at the moment. So we we create this fundel at the very beginning with our un array of opportunities, and then of course little by little we filter out and we remain with the managers, strategies and sectors we want to be having in portfolio for the next ten years.

I mean, of course, if you take a US endowment, already sixty percent of the portfolio is invested in such a sets. But for instance, if I talk about my own country, that's less than probably six percent, including real estate but this trend is really changing. As said, we are sect or agnostic, but of course we are seeing some clear trends. But you can also get it from from newspaper headlines that the globalization is not over but is decreasing. And so what you want to do, of course, you want to be invested in local businesses that are not really exposed to what's happening at the moment. So we we create this fundel at the very beginning with our un array of opportunities, and then of course little by little we filter out and we remain with the managers, strategies and sectors we want to be having in portfolio for the next ten years.

Fantastic Daniele, thank you very much for talking to Fear and Greed.

Fantastic Daniele, thank you very much for talking to Fear and Greed.

Thank you very much.

Thank you very much.

That was Daniele Mellana, partner at Obsidian Capital, which is working with side Or Capitals, great supporter of this podcast. Remember information this podcast is general in nature and you should get professional advice and make sure a product is right for you before proceeding. This is the Fear and Grade Business Interview. Join us every morning for the full episode of Fear and Grade. The daily business news the people, make your own decisions I'm Sean Aylmer. Enjoy your day.

That was Daniele Mellana, partner at Obsidian Capital, which is working with side Or Capitals, great supporter of this podcast. Remember information this podcast is general in nature and you should get professional advice and make sure a product is right for you before proceeding. This is the Fear and Grade Business Interview. Join us every morning for the full episode of Fear and Grade. The daily business news the people, make your own decisions I'm Sean Aylmer. Enjoy your day.