Capital Allocators – Ted on Alt Goes Mainstream (EP.458)

Date: September 8, 2025
Host: Ted Seides
Guest Host: Michael Sidgemore, Alt Goes Mainstream Podcast

Overview

In this episode, Ted Seides takes the guest seat on Michael Sidgemore’s “Alt Goes Mainstream” podcast. Their in-depth conversation explores the convergence of private markets and the wealth management sector, drawing on Seides’ extensive experience as an allocator and asset management expert. They cover the enduring impact of David Swensen’s “endowment model,” lessons for wealth advisers from institutions, the evolving landscape of private equity versus public markets, the parallels and pitfalls of hedge funds and PE, behavioral biases in manager selection, and the transformative power of content within asset management.

Key Discussion Points & Insights

Ted Seides’ Journey in Institutional Allocation

• Background at Yale (06:12): Seides began his career under David Swensen, learning investment discipline and the foundations of the “endowment model”:
  • “He approached the world from… first principles…basic economic principles rooted in research.” (06:48, Ted Seides)
  • Lessons included equity orientation for long-dated assets, the rigor of asset allocation, and a durable discipline ingrained early.

The Endowment Model & Wealth Channel Applications

• Applicability to Individual Investors (08:25):

  • Seides recounts Swensen’s lesser-known second book for individuals, emphasizing disciplined asset allocation, diversification via various ETFs, and rigorous rebalancing over alpha hunting.
  • “The market’s giving you beta. If you’re starting with stocks and bonds, there’s a lot of different betas you can create.” (08:25, Ted Seides)

• Alpha vs. Beta in the Wealth Channel (10:31):

  • Persistent alpha is challenging, but access to established private equity (PE) managers may offer some advantage as access broadens:
  • “There is more persistence in private equity than in the public markets… The large public alt managers…are really good.” (10:31, Ted Seides)
  • He tempers expectations: “Median, maybe median plus, maybe you can get to top quartile with some of these funds. But at $20, $25 billion private equity funds, it’s hard to do that.” (11:22, Ted Seides)

Emergence of a “Wealth Model”

• Advisory Frameworks (12:21):
  • “I don’t think there’s anything new under the sun… Advisors are amazing at figuring [risk] out for their clients… It’s just a question of the advisor community getting a little bit more sophisticated.” (12:21, Ted Seides)
  • The basic risk allocation frameworks (stock/bond splits) are stable; sophistication arises in populating the asset buckets.

The Private Equity vs. Public Markets “Bet”

• Chances for Outperformance (16:08):

  • Seides estimates only a 40% chance that median PE outperforms the S&P 500, mainly due to fees and scalability challenges:
  • “The average private equity manager has to deliver 100 or 200 basis points a year to break even. That’s not what people sign up for.” (16:08, Ted Seides)
  • Top-quartile managers, however, remain likely to outperform.

• Persistence of Top Quartile (17:24):

  • “Over longer periods of time there has been persistence of who’s… in the top quartile… but there’s always movement.” (17:24, Ted Seides)

• Diversification’s Growing Importance (18:55):

  • “It used to be you only participated in these alt strategies for alpha… Now… getting sufficient access to private markets helps fill out a broadly diversified portfolio.” (18:55, Ted Seides)
  • Public markets alone no longer provide broad, global asset access.

Parallels: Hedge Funds and Private Equity

• Industry Evolution (20:22, 23:07):
  • PE is following a parallel arc to hedge funds’ “winner-take-most” consolidation, with risks of overcrowded and undifferentiated “messy middle” managers.
  • Larger institutions can accept lower returns due to lower cost of capital: “As you get bigger, your opportunity set shrinks.” (23:07, Ted Seides)
  • Seides predicts eventual consolidation, with large firms possibly acquiring deal teams to increase origination: “I’d be very surprised if one of the big players doesn’t try to do that over the next five years.” (27:11, Ted Seides)

Culture, Diligence, and Behavioral Bias

• Evaluating Investment Culture (27:54):

  • “So much of it is qualitative that it’s hard to put your thumb on it… What is the investment philosophy of this organization? That will eliminate about 60% of all organizations…” (27:54, Ted Seides)
  • On diligence: check for first principles and internal consistency, not just a pitch.

• Process Over Questions (29:14):

  • “In order to underwrite a manager, there’s a lot of information you need… We had a very long memo… The specific question you would ask… could easily change.” (29:26, Ted Seides)
  • Allocation is a “human” activity—ultimately about investing in people.

• AI’s Future Role (31:33):

  • “There are aspects of the diligence process that will get automated. It’ll be a long time unless you’re a Quant manager before the ultimate decision gets made by an LLM.” (31:33, Ted Seides)

• Defining “Edge” (31:59):

  • Behavioral, Analytical, Informational, Technical (B.A.I.T.):
    • “The data sets that people have been in private equity business for decades have is a big advantage to someone who’s new…” (32:38, Ted Seides)

• Behavioral Biases (34:02, 36:08):

  • “The hardest day to invest is always today.” (34:21, Ted Seides)
  • The solution: process discipline, writing decisions down, learning from mistakes, group decisionmaking best practices (e.g., ultimate decision-maker speaks last).

The Power and Limits of Content

• Usefulness for Investors (39:28, 40:06):

  • “Allocators don’t go into a meeting with a manager without having checked…[for] an interview. It just speeds up the process.” (39:28, Ted Seides)
  • Storytelling aids in trust and information discovery.

• Content as a Differentiator for Managers (47:44):

  • Most managers aren’t “good at understanding the LPs”—they focus on pitching, rather than listening:
  • “Great salespeople aren’t talkers, they’re more listeners.” (47:44, Ted Seides)
  • Authenticity and self-awareness in storytelling are critical—don’t force a channel or style that doesn’t fit your DNA.

• Distribution Channels (49:45, 51:02):

  • No single “best” content modality; depends on the fit with firm or individual style, and the platform (LinkedIn, mailing list, Substack, etc.).
  • Owning your direct relationship with your audience (e.g., via mailing lists) is important for actionable communication.

Lessons from Building Capital Allocators

• Serendipitous Start (40:26):

  • “This podcast found me. I didn’t find the podcast.” (40:26, Ted Seides)
  • Began with casual conversations, became a business through serendipity and a request from Northern Trust for advertising.

• Feedback Loops & Professional Growth (41:47):

  • The podcast provided a feedback loop absent in pure investing:
  • “I never had a feedback loop. I never came out of a meeting with a manager and said, how did I do?” (41:47, Ted Seides)

• Conferences & Community (46:02):

  • Capital Allocators shifted the standard conference experience towards authentic relationship-building and away from transactional “panels.”

Most Interesting Insights & Investments

• Notable Guests (52:26):

  • Example: Ed Grefenstette (Dietrich Foundation CIO), “90% in privates, half…in venture, as much as 20 or 30% in China.” (52:26, Ted Seides)
  • External voices add insight (Annie Duke, Don Miller).

• Personal Investment Approach Now (54:10):

  • “I only invest in things where there’s a relationship component to it.” (54:10, Ted Seides)
  • On AI: “Nobody knows what’s going to happen…What’s interesting is how highly they’re all valued today already…” (54:10, Ted Seides)

• AI as an Investment Theme (56:39):

  • “My way of playing AI is invest with Gavin [Baker].” (56:39, Ted Seides)

• Final Wrap (57:15):

  • “So much of investing…is about people. So I think that’s a great way to wrap this up.” (57:15, Michael Sidgemore)

Notable Quotes & Memorable Moments

• On the Endowment Model:

  “He approached the world from… first principles… basic economic principles rooted in research.”
  — Ted Seides (06:48)

• Access and Alpha:

  “There is more persistence in private equity than in the public markets… The large public alt managers… are really good.”
  — Ted Seides (10:31)

• Process Trumps Questions:

  “In order to underwrite a manager, there’s a lot of information you need… The specific question you would ask… could easily change.”
  — Ted Seides (29:26)

• On Biases and Decision-Making:

  “The hardest day to invest is always today.”
  — Ted Seides (34:21)

• Content in Asset Management:

  “Allocators don’t go into a meeting with a manager without having checked…[for] an interview. It just speeds up the process.”
  — Ted Seides (39:28)

• Building Capital Allocators:

  “This podcast found me. I didn’t find the podcast. There was no reason to think that you’re going to have a conversation, share it for free, that that could turn into anything like a business.”
  — Ted Seides (40:26)

• The Essence of Investing:

  “The first, second, third and last thing LPs will tell you is that they value people. That for them it's relationship business and they want to be partners with great people.”
  — Ted Seides (46:06)

Important Timestamps

• Ted’s Background & Swensen’s Lessons: 06:12–07:55
• Endowment Model in Wealth Context: 08:25–10:07
• Private Equity vs. Public Markets Bet Dynamics: 14:04–16:49
• Hedge Fund Evolution Parallels: 20:22–23:07
• Investment Culture & Due Diligence: 27:33–29:26
• Behavioral Bias and Process Discipline: 34:02–36:08
• The Rise & Role of Content: 39:28–41:47
• Starting Capital Allocators: 40:26–41:47, 44:36–46:06
• Most Interesting Guest/Insights: 52:26
• On AI as an Investment Theme: 54:10–56:39
• Closing Reflections: 57:15–57:32

Episode Takeaways

• The endowment model's core (long-term, diversified, disciplined allocation) can be adapted for individual investors, but true alpha remains elusive.
• Private equity's outperformance is not guaranteed; only top performers are likely to beat public markets after accounting for high fees.
• The industry is consolidating, with “winner-take-most” dynamics, and talent, process, and cultural fit are ever more important for enduring success.
• Behavioral discipline and process, not gut, drive better investment decisions and manager selection.
• Content is a crucial tool for both managers and allocators: it accelerates trust, understanding, and differentiation but must be authentic.
• AI is a powerful tool but won’t (yet) replace qualitative judgments in manager selection.
• For both institutional and wealth investors: “It’s all about the people.” (46:06, Ted Seides)