Shundrawn Thomas' next chapter: driving social impact and returns

With diversity, equity and inclusion very much top of mind for institutional investors, Shundrawn A. Thomas has launched a private equity firm with the stated goal of helping women and minority business owners grow their companies while providing competitive market returns for Chicago-based Copia Group LLC's investors.

"In the U.S., there's amazing diversity and it's growing, which creates opportunities for these diverse firms, but we still need more diversity in the money management industry and more diverse ownership of privately held companies," said Mr. Thomas, Copia's founder and managing partner, in an exclusive interview with Pensions & Investments.

"I have a deep passion for seeing private-sector companies do well, as well as the communities I am connected with," said Mr. Thomas, who left Northern Trust Asset Management June 1 after 14 years, including five as president. Those communities include the African-American community; his faith community; the Hispanic/LatinX community (his wife is Panamanian); and socioeconomic communities he is connected to through friends and colleagues.

Copia, he said, views itself as an impact investor, with a focus on five social factors: diversity, equity and inclusion; equal opportunity; health and wellness; workforce development; and quality education.

The firm worked with Morningstar Inc.'s Sustainalytics unit to integrate these factors at each stage of the investment process for use by employees in screening potential companies to invest in, he said.

The firm's debut comes as impact investing is growing globally. An October report from the Global Impact Investing Network said the market currently stands at $1.16 trillion in assets under management, a development that it termed "a significant psychological milestone for an industry still maturing and growing in sophistication.''

Copia's business plan is to identify lower-middle-market U.S. private companies with revenues of between $10 million and $100 million.

"There are limitless opportunities in private markets. We will invest in established companies that still are early in their life stage," Mr. Thomas said.

The firm's goal is to provide financing via private debt and private equity investments in U.S. companies with a strong focus on those owned by ethnically diverse persons and women managing their companies in a socially responsible way, Mr. Thomas said.

About 50% of the companies will be led by women and people of color, he said.

Copia will be looking for innovative investment opportunities in companies including those in the business and finance, health-care and consumer sectors, he said.

The challenge for ethnically diverse- and women-owned firms isn't about business formation, Mr. Thomas said. "For them, it's a capital issue. Founders need capital to scale their businesses, which we can provide," he said.

In addition to capital, Copia also will provide portfolio companies with business counseling and help in securing needed talent and identifying new clients.

Mr. Thomas said he could not discuss the private equity funds Copia will create in the future and when they will be available, citing SEC regulations.

In need of a partner, Mr. Thomas knew of Anthony D. Hoye by name through what he called a tight business and civic community in Chicago but a mutual friend connected the two last year.

Mr. Hoye accepted Mr. Thomas' offer to join Copia as partner and managing director of private credit.

Mr. Hoye was director, senior credit officer in the global corporate investment banking group of Bank of America Merrill Lynch based in Chicago.

Mr. Thomas worked for 18 years at Chicago-based Northern Trust Corp. — 12 of which was in the bank's investment management unit in various roles.

Mr. Thomas has not been replaced as president of Northern Trust's asset management unit, said Tom Pinto, a Northern Trust spokesman, in an email.

As of March 31, Northern Trust Asset Management managed $1.49 trillion.

Mr. Thomas also worked in various capacities at Goldman Sachs Group Inc. and Morgan Stanley before joining Northern Trust in 2004.

Mr. Thomas said both he and Mr. Hoye both have "a lot of relationships" because of their long tenure in the investment industry and will use various tactics to source the low-middle-market U.S. companies Copia will be interested in investing in.

Among the sourcing routes Mr. Thomas outlined are direct sourcing from their own personal networks; tapping into existing relationships with banks that have pulled back from lending but nonetheless serve clients' other banking needs; partnering with other private equity firm in sponsor deals that might involve Copia extending credit to portfolio companies; and adding employees charged with sourcing deals.

After 27 years working at big banks and mega money managers, Mr. Thomas pondered his next career steps and decided that a transition to his own company was a natural progression.

He said that he has always been entrepreneurial, even as a child he mowed grass and delivered papers for pocket money. He also noted that when he worked at Northern Trust Asset Management, he was instrumental in setting up the unit's exchange-traded fund group. Northern Trust reported ETF assets of $20 billion as of June 30 in P&I's 2022 survey of top ETF/ETN managers, ranking it No. 10.

During the interview, Mr. Thomas said he's been thinking more about the legacy he wants to leave and "where do I want to have the biggest impact? I believe business can be a force for good."

The duo still have a lot to do to finish setting up the firm, including finding permanent office space, introducing the firm to asset owners and high-net-worth investors, and ramping up recruitment over the next 12 months, Mr. Thomas said.

Messrs. Thomas and Hoye are working in a temporary workspace now but Copia's permanent headquarters will be in Chicago. That said, Mr. Thomas said "people want some flexibility about where they are based," noting "that's possible, but I want people to engage with each other. Our culture will be very important."