ën Gent Row : Yann Robard - The Capital Aficionado with a Preference for Blue Hues

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Yann Robard wearing a Super 150's steel blue solid suit - Photo credit via Dawson Capital Investor Relations Event

Yann Robard, an astute financier known for his affinity for shades of blue, has emerged as a pioneer in a financing realm that continues to gain momentum: facilitating investors in extracting cash from challenging private equity stakes. His firm, Dawson Partners, has rapidly established itself as a critical player in fund finance, a burgeoning $1.2 trillion market where nonbank entities are increasingly influential.

Initially founded as Whitehorse Liquidity Partners, Dawson Partners has expanded its offerings, providing institutional investors with innovative solutions to convert illiquid fund stakes into immediate liquidity. However, the landscape is shifting, revealing vulnerabilities in a strategy that relies heavily on layering additional leverage onto already debt-laden investments.

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Consider Brightline railway, a venture stretching from Miami to Orlando that represented private equity’s optimism that Florida commuters would abandon their cars for train travel. Unfortunately, the company has faced significant financial challenges, accruing debt and recording safety incidents at a higher rate than the national average. This asset is emblematic of the complexities surrounding the financings crafted by Robard and has contributed to the underperformance of Dawson's inaugural fund.
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After an initial period of double-digit gains, the fund's internal rate of return had plummeted to below 4% by midyear, placing it in the bottom quartile among its peers, according to MSCI. Brightline accounts for 2.4% of the fund's invested capital, highlighting the risks associated with such investments.

Despite these challenges, Dawson Partners has successfully raised over $5 billion for its sixth fund, which is poised to be its largest to date. Yet, some of the firm's longstanding clients, including the Alaska Permanent Fund, have chosen to withdraw their support, citing concerns over performance and strategy.

Robard, who chose not to comment on these developments, remains undeterred by the setbacks that have surfaced. His ambition, which has propelled Dawson to manage approximately $20 billion in under a decade, is evident; the firm has quadrupled its workforce to 200 in just four years and aims to eventually oversee $100 billion in assets. "We, over time, have become bigger, better, faster, stronger," Robard proclaimed in a recent podcast, likening Dawson to "the Google of private equity" for its innovative approaches. "We are unapologetic about our growth."

Innovative Financing Approaches

Robard’s marketing acumen shines through his ability to articulate the value of his firm’s complex financing structures. He presents a compelling case to pensions and private equity investors, enabling them to access cash from their holdings earlier than anticipated—without forfeiting the potential upside if their investments eventually thrive.

Investors often grappled with categorizing Dawson's unique model. It blends elements of private credit with the outright purchase of fund stakes from institutions in the secondary market. Dawson also invests in continuation vehicles, which allow private equity managers to retain companies longer by funneling previous investments into new funds. Robard frequently utilizes a whiteboard to illustrate these intricate strategies to prospective clients.

As interest rates rise and deal flow diminishes, the demand for liquidity among pensions and fund managers intensifies. However, higher rates have also amplified the stress on the assets underpinning Dawson’s financings, with private equity-backed businesses struggling under increased debt burdens.

Yann Robard wearing a Cashmere blazer in Champaign Blue Hue - Photo Credit Dawson Capital

Dawson's financing model entails providing immediate cash to investors in exchange for a preferential position in cash flows from a bundle of funds—known as the "preferred equity" tranche—while also charging interest. Investors receive the remainder, with Dawson potentially sharing in future returns. Yet, challenges arise when the underlying funds encounter difficulties, limiting cash availability for Dawson and its investors alike.

Concerns have been raised regarding Robard's aggressive strategy to facilitate cash extraction from illiquid assets, with some investors questioning whether this approach leads to weaker investments. Dawson's portfolio features exposure to companies like Xplore Inc., which recently underwent a "comprehensive recapitalization" after missing an interest payment. The Canadian internet service provider represents 2.4% of capital in Dawson's second fund. Another investment, the Clearlake Capital-backed tiremaker Hoonigan, filed for Chapter 11 bankruptcy protection in September.

Despite having exposure to a diversified portfolio of around 40,000 companies—mitigating potential losses—investors remain wary of Dawson's rapid fundraising and inconsistent returns. Notably, the Alaska Permanent Fund, which played a key role in the first fund, has opted not to back the sixth fund, joining Alberta Investment Management Corp. and Canada’s Public Sector Pension Investment Board in their withdrawal.


Navigating Challenges and Future Ambitions

In response to these concerns, Dawson is actively working to return cash to investors. The firm has approached secondary buyers to gauge their interest in acquiring some of its investments and has sought to divest several hundred million dollars' worth of older assets at a significant discount.

Robard draws upon his personal experiences when discussing his funds, often referencing a transformative 600-mile bike ride from Whitehorse, Yukon, to Fairbanks, Alaska, in 2014—an experience that solidified his decision to establish his firm the following year. While he openly shares his love for nature, he is equally focused on building a $100 billion asset management powerhouse.

Over the years, Robard's innovative financing strategies have led to the creation of larger funds and unconventional structures. Unlike most fund managers who invest in tandem with their clients, Dawson has developed a model that allows for differentiated risk exposure among its investors. This includes the outright purchase of private equity fund stakes, which enables Dawson to finance a broader array of portfolios.

Dawson packages these stakes into financial instruments, ensuring that the firm retains the most secure portions while offering investors a chance to take on riskier, potentially more lucrative segments. However, this structure can create misalignment, leading to tensions among investors who feel their interests may not be adequately represented.

Robard's exploration of new avenues includes the potential for direct lending to companies and partnerships with major players like Carlyle Group, KKR, and Brookfield Asset Management—though these discussions have yet to yield formal agreements. Recently, Dawson launched a fund targeting affluent individuals and developed collateralized fund obligations, which bundle fund stakes into securities appealing to insurers seeking higher returns.

As Robard continues to seek out new opportunities, Dawson recently completed a significant financing arrangement with Churchill Asset Management and another transaction exceeding $900 million with a U.S.-based asset manager. The firm’s recent rebranding to Dawson reflects its commitment to growth, inspired by the city on the Yukon River—a name that echoes its roots while symbolizing a forward-looking vision.

As for Brightline, the railway company has initiated plans to refinance its debt, having previously indicated it lacked the necessary funds to meet all its obligations. The evolving landscape presents both challenges and opportunities for Robard and Dawson Partners as they navigate the complexities of private equity finance in an ever-changing market.

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