Capital Allocators – Top 5 of 2025: #2: Ian Charles

Date: December 29, 2025
Host: Ted Seides
Guest: Ian Charles, Founding Partner at Arctos Partners

Episode Overview

In this standout episode, Ted Seides sits down with Ian Charles, co-founder of Arctos Partners, a $14B private equity firm that has rapidly emerged as a leader in both the sports investing sector and as a strategic partner to private market sponsors. The discussion dives deep into the evolving dynamics of private equity, focusing on the complex challenges faced by general partners (GPs), the consolidation trend among firms, liquidity pressures on limited partners (LPs), and the innovative frameworks and technology Arctos uses to support these stakeholders. Ian shares his candid insights on market forces, talent retention, capital concentration, and Arctos’ own strategic mission.

Key Discussion Points and Insights

1. Ian Charles' Journey and Mindset

• Early LP and entrepreneurial experience shaped Ian’s ‘servant leadership’ approach to private equity.
• Co-founded Cogent Partners, a pioneer in the private equity secondaries market.
• Founded Arctos to help solve private market complexities, particularly for GPs and LPs.

“Being one of the founders of a business that really changed the cost of capital for limited partners forever was an incredible opportunity.” — Ian Charles, [06:25]

2. Complexity of Private Equity Businesses

• GPs run increasingly complicated businesses requiring both investment acumen and entrepreneurial grit.
• Many GPs are inwardly focused and lack a broader market perspective, relying on occasional fundraising cycles to connect with LPs and market data.

“That entrepreneurial journey is particularly lonely in this industry. And so our team’s job, the thing that I love, is serving the entrepreneur on that journey.” — Ian Charles, [07:46]

3. Current Market Narratives (‘NOW Narratives’)

• Arctos collects and distills data to summarize pressing issues for GPs and LPs each quarter.
• For Q1:
  • Election’s impact on M&A and ‘animal spirits’
  • Consolidation and M&A among managers
  • Challenging fundraising environment
  • Increased focus on value-add capabilities

“There’s this animal spirit around the election results, the new administration, deregulation… whether that manifests itself into actual deal activity to be determined.” — Ian Charles, [11:38]

4. Arctos’ Private Equity Framework (‘Levels Pyramid’)

• Arctos tracks 6,000 private equity firms, categorized into 10 ‘levels’ by complexity, size, product breadth, and organizational capabilities.
• Only six firms are in level 10 (“look more like Goldman Sachs than Arctos”).
• 0.2% of firms control 20% of AUM; top 700 firms control 90%—a stark power-law dynamic.
• Most managers aspire upwards, yet the complexity and strategic risks increase non-linearly.

“There’s this massive power law of capital concentration within the asset class that I think most investors are aware of. They don’t appreciate how strong that power law is.” — Ian Charles, [15:37]

5. Right to Win and Strategic Positioning

• Arctos deploys sophisticated data and proprietary software to help managers objectively diagnose their sources of alpha and assess their ‘right to win’ as they consider strategic moves.
• Growing from one level to another can risk losing what makes a firm unique.

“Do you have a right to win in the direction that you’re going? … We lost ourselves on the way to level eight. We lost the thing that made us special.” — Ian Charles, sharing a client anecdote, [18:36]

6. Changing Industry Rules and Capital Aggregation

• The largest asset managers (Level 9/10) have greatly increased their dominance, aggregating capital particularly from insurance companies and private wealth channels.
• For these giants, the challenge is not raising capital but sourcing sufficient deals.
• “Winner-take-all” dynamics create a very different landscape for the rest of the market, especially as a ‘maturity wall’ of fundraising pressures looms for smaller firms.

“The rules of the game that you’ve been playing, tear them up. There is a new game that the 15 biggest firms in the world are playing.” — Ian Charles, [21:55]

7. Managing Talent and the ‘Melting Ice Block’ Metaphor

• Many mid-sized and smaller GPs will struggle to raise successor funds, leading to tough choices for talented teams.
• Unlike the ‘zombie firms’ phenomenon post-GFC, today’s challenge is unrealized potential—firms are “penguins on a melting block of ice.”

“They’re almost penguins on a melting block of ice. You don’t know how fast it’s melting. It might not even be melting. And you can just sit and wait it out.” — Ian Charles, [23:56]

8. LP Narratives: Liquidity and Consolidation

• Key LP concerns: lack of liquidity, slow exits and fundraising, reduced control, and the emergence of permanent and wealth channel capital.
• Relationship consolidation: LPs focusing on fewer, deeper partnerships (‘do more with fewer’).

“The dominant now narratives for LPs are all around liquidity and constraint or changes in the market that might be eroding traditional LP control over this market.” — Ian Charles, [25:42]

9. Distribution Yields and the ‘Goldilocks’ Paradox

• Private equity distribution yields are at historic lows.
• Even with a solid economic (“Goldilocks”) environment, several structural factors—overvaluation, high entry prices, expensive leverage, and shifting sponsor incentives—stymie exits and liquidity.

“You are in as good an economic environment as this asset class has ever seen... But both [distribution yield and PE relative value] are not true today.” — Ian Charles, [29:07]

10. Advice to LPs

• LPs must focus on partnering with true alpha generators, not just aggregators.
• LPs should actively manage portfolios, identify real value, and use data to become dynamic buyers/sellers (not just ‘buy and hold’ allocators).
• Differentiation will depend on the ability to secure access and partner credibly with top managers.

“You need to scale with alpha generators, not with capital aggregators. They’re very different things.” — Ian Charles, [35:20]

11. Packaging, Alpha vs. Beta, and the Private Wealth Boom

• Only a minority of big firms have true organization-wide competitive advantages (OCAs).
• As private wealth pours into private equity, the cost-and-value proposition of these ‘packaged’ products will matter more than ever.

“If the packaging costs more than the alpha, then we’re just selling people a bunch of really expensive beta and that’s not good.” — Ian Charles, [37:45]

12. Arctos Keystone Strategy: Serving GPs During Change

• Keystone is Arctos’ targeted solution for helping middle-market firms address key constraints or capitalize on opportunities, including consolidation, balance sheet structuring, growth, and generational equity transitions.
• Examples include helping managers buy back equity and structuring financing options beyond traditional debt or permanent equity sales.

“The keystone species is the species in an ecosystem that helps the rest of the ecosystem thrive. And that’s what our team tries to do.” — Ian Charles, [39:50]

13. Generational Ownership Transition

• Founders’ prominence makes succession particularly tricky; transitions are easier in “shepherded” rather than founder-centric organizations.
• Network dominance and the smooth transition of both economics and relationships are vital.

“There is more stability in performance or durability…depending on how founder centric the firm is.” — Ian Charles, [45:03]

14. Sharing Insights and Cross-Pollination with Sports

• Arctos Insights distributes data-driven research via newsletters and other media, aiming to serve decision-makers in private markets and sports.
• Increasing overlap between sports team ownership and private markets execs: sports assets are attractive as diversification, tax shields, and non-correlated exposures for finance titans.

“If you look at the people who have purchased control of North American sports teams over the last decade, 80% of them come from tech or private markets. It’s because they’re business builders.” — Ian Charles, [48:20]

15. Arctos' Current Level and Mission

• Self-described as a "skinny level seven," Arctos’s mission remains disruption and innovation by solving complex problems—with humility and customer focus.

“What we want to do is disrupt and innovate the markets that we serve by solving complex problems with creative solutions.” — Ian Charles, [49:57]

Notable Quotes and Memorable Moments

• On the loneliness of the GP journey:
  “That entrepreneurial journey is particularly lonely in this industry.” [07:46, Ian Charles]
• On the new ‘winner-take-all’ era:
  “There is a new game that the 15 biggest firms in the world are playing. And the wake of chaos that they’re leaving behind them is the new game everybody else is riding.” [21:55, Ian Charles]
• On the ‘melting ice block’ analogy:
  “They’re almost penguins on a melting block of ice.” [23:56, Ian Charles]
• On succession challenges:
  “If your name is on the door, it’s hard.” [45:03, Ian Charles]
• On merging sports and private markets:
  “From time to time, we have the opportunity to help leaders of private markets firms become owners of sports assets… some of the leaders of both industries are the same.” [48:20, Ian Charles]

Important Segment Timestamps

• 06:25 – Ian Charles on his early LP and entrepreneurial background
• 09:30 – Q1 ‘Now Narratives’: Top GP concerns
• 13:03 – Explaining the Arctos private equity levels framework
• 16:36 – How GPs aspire to move up the pyramid (and the risks)
• 21:55 – Capital concentration and the winner-take-all trend
• 23:56 – The ‘melting ice block’ and GP survival challenges
• 27:09 – Distribution yields, liquidity drought, and exit challenges
• 35:20 – LP advice: Alpha generators vs. asset aggregators
• 39:50 – The Arctos Keystone strategy and supporting GPs’ pivotal moves
• 45:03 – Succession and generational transition dynamics
• 48:20 – Convergence of sports ownership and private equity
• 49:57 – Arctos’ mission and current position in the levels framework

Final Reflections & Personal Insights

On Life and Career Surprises:
“I thought I was going to be a physics teacher and have a beautiful family with my incredible wife… The thing that has surprised me is how much this industry has impacted our lives.” — Ian Charles [52:28]

On Scientific Curiosity:
“I would love to understand the things that happen right on the edge of a black hole… that harmonizes somewhere right on the surface of a black hole and nobody understands it.” — Ian Charles [53:26]

On the Next Life Chapter:
“I might be in the best phase of my life. I love what I get to do professionally. My family is thriving and healthy, and I know that it’s rare for all those things to be harmonized in a positive way.” — Ian Charles [54:24]

Conclusion

This episode is a masterclass in understanding the real-time and structural evolutions of the private equity ecosystem from the front lines. Ian Charles provides rare transparency and actionable insight for both GPs and LPs, making clear the value of data-driven strategy, organizational self-awareness, and the courage to adapt. The conversation is packed with practical frameworks, memorable metaphors, and a deep appreciation for entrepreneurial leadership—essential listening for anyone navigating institutional investing today.