The interview below is part of a series from the McGuireWoods Emerging Manager Program featuring impressive emerging managers. The McGuireWoods Emerging Manager Program supports emerging managers throughout the most critical stages of a fund’s evolution. It offers a differentiated and proprietary approach to connecting emerging managers with limited partners, providing intelligence on market terms and preferences, and advising emerging managers on all components of building a durable brand as an investor. To recommend an emerging manager for a future interview, email MWEMC@mcguirewoods.com.
Q: What led to the decision to raise your initial fund? What were the indicators — external and internal — that you were ready?
Chris Lawrence: It is never easy to decide to leave an established global firm that you had significant impact on after 11-plus years, but sometimes you have to trust your instincts and go for it. That’s what I did in 2020 when I founded Labyrinth Capital Partners.
From a macro-perspective, there is the continued investment in global private markets which, as of June 30, 2023, stands at over $13 trillion in assets, according to McKinsey’s latest 2024 report. This amount reflects almost two times the $6.5 trillion quoted by McKinsey in June 2019. With this macro-tailwind of more assets coming into the private market “supply,” we as investors continue to evolve, creating new and innovative investment strategies to take advantage of the growing landscape of investment opportunities. I witnessed this growth firsthand at my prior firm where I co-led the global private equity secondary team and served as a member of our investment committee overseeing global primary and co-investment funds.
With growth of this magnitude on the supply side, competition inevitably grows with it. This is especially true with mature investment strategies such as limited partner (LP)-led private equity secondaries, an increased area of focus for many general partners (GPs) and allocators. At my prior firm, we also used our secondary capital to provide solutions to private market stakeholders in other ways that created openings for new market opportunities and deal types. Some of these transaction types now are commonly known as “GP-led” secondaries, which are fundamentally made up of three deal types: continuation funds, fund restructurings and staple transactions. I completed my first GP-led-type deal in 2010 and continued with several other investment types to further enhance our liquidity solutions-oriented approach for private market stakeholders.
Our work from 2010 onward using these strategies provided confidence that we had the ability in our niche market to create Labyrinth. The Labyrinth team set up the firm as an institutional entity with our focus on generating money multiple (MM) returns in a better risk-adjusted way through a broad set of investment strategies focused on liquidity solutions for all private markets’ stakeholders. We already knew our strategy worked globally, and our objective at Labyrinth is to take forward this core strategy and pivot to having slightly longer hold periods of two-to-five years versus shorter duration secondary funds.
When underwriting any investment under consideration, we focus on significant MM generation, not internal rate of return-focused shorter duration deals, as is often the approach for traditional LP-led secondary firms. At Labyrinth, our mission is to help all private market stakeholders solve their liquidity needs.
Simply put, we launched Labyrinth due to our confidence in the macro-trends in private markets and our extensive prior experience executing on these transaction types in an area of the market where we could be a leader and not a follower for the long term.
Q: With emerging manager programs on the rise, what do you foresee with respect to LPs’ willingness to invest with emerging managers?
CL: It has been a challenging environment for emerging manager fundraising over the past several years, particularly since the COVID-19 pandemic and the challenging distribution environment not seen since the global financial crisis in 2007-2008. The idea that there is more risk investing in emerging managers than established funds is not always accurate as risk depends on many factors. An established manager that did well with a $500 million fund and is now doubling the fund size to $1 billion may not be less risky than an emerging manager who is spinning out to continue the same strategy that generated attractive returns with the same team and fund terms. I appreciate that LPs have a large number of funds to review, but I hope over the coming quarters that the re-ups into existing, established managers parallel an increased focus on emerging managers and new strategies. While every LP’s portfolio construction has different objectives and considerations, we strongly believe those LPs who do the work to find and invest in new emerging managers will win in the long run.
As a former investment committee member reviewing managers for primary fund commitments, I understand there is no substitute for a manager’s experience and deal attribution when reviewing a potential fund investment, but there is always more to investigate during due diligence. LPs, whether they are investors in new funds of established managers or emerging manager funds, need to have the same investment rigor when considering both options given the risk factors often are the same. Deal attribution, references, team, fund terms, demonstrated experience as a manager of third-party capital and the overall competitive advantage of the firm are areas that should be explored repeatedly for any fund investment.
Q: How did you think about assembling your team?
CL: One thing I consistently say is that the most valuable asset in the world is “relationship capital.” Relationships you make over one’s professional career can grow and hopefully lead to making yourself better. You may also be able to leverage these relationships to do your job better.
Cameron Lee and Tony LaRose, principals at Labyrinth, have been with the firm since the beginning. I have worked with Cameron for over eight years, and his 10-year friendship with Tony enabled us to bring him in during our first year of development. All three of us bring something unique to the table to make Labyrinth what it is today. I tend to look at team-building as a sports analogy. We want the best athletes for what we do. Our strategy is not one where we need an army of analysts given that we leverage our experience and relationships to drive our investment strategy. As we scale, we know the type of culture we want to foster, and we will seek to add individuals who fit with our belief that relationships matter, not for the short term, but for the long term.
Q: What is the best advice you received when raising your first fund?
CL: “Hold on tight, it is going to get bumpy” and “Stick with it. You will get there.” I heard these comments consistently when I decided to launch Labyrinth. As with any departure from a firm, the ability for us to tap prior international LPs was not available, and we had to reconstitute and educate more LPs about what we were doing. We had more headwinds than tailwinds starting out. One piece of advice I would give to others is to never start a firm 45 days in advance of a global pandemic. COVID-19 was our first challenge. The more recent lack of distributions in private markets made it extremely difficult to raise capital despite our investment opportunity set continuing to grow.
“Emerging manager” is another term for “entrepreneur.” You must build it and fight for it. You also must be realistic and take and listen to advice and constructive feedback. We are still here at Labyrinth because we chose to listen, and we are thankful for the continued support of our large anchor LP in our fund II along with other supporting LPs in our smaller fund I. All these supporters continue to provide invaluable assistance and advice during our journey. We believe that listening to feedback, believing in yourselves as a team and seeking continued improvement are the keys to success as a new manager.
About Chris Lawrence
Chris Lawrence is the founder and managing partner of Labyrinth Capital Partners. Based in Greenwich, Connecticut, he has nearly 30 years of financial services and private equity-related experience, including working as a direct investor and intermediary, and holding executive roles at underlying portfolio companies. Most recently, Lawrence was managing director, co-head of global secondaries, investment committee member and executive committee member at HQ Capital Private Equity. Prior to this work, he was an operating principal for a portfolio of angel-backed companies in the healthcare, software/services and manufacturing sectors. Lawrence has also served as a senior operating executive for a Warburg Pincus portfolio company and was a deal leader for a venture capital affiliate of GSC Partners.
Lawrence began his financial services career at Arthur Andersen as a manager in the corporate finance services division providing advisory services to public and privately held clients. He earned an MBA from Columbia Business School and a BBA in accounting from Southern Methodist University.
