Capital Allocators – Inside the Institutional Investment Industry
Episode: Year in Review 2024 (EP.424)
Release Date: December 30, 2024
Host: Ted Seides
Guest: Hank Sturmak, CEO of Capital Allocators

Introduction

In the Season-End Edition of Capital Allocators, Ted Seides takes a reflective journey through the accomplishments and insights of 2024. Unlike previous years where Ted authored the annual letter, this episode features a unique twist: Hank Sturmak, the CEO of Capital Allocators, interviews Ted to dissect the year's highlights and chart the course for 2025. This comprehensive discussion touches upon content creation, notable podcast guests, investment activities, industry trends, and strategic business developments.

Year in Review: Content and Insights

Ted begins by highlighting the year's content milestones, emphasizing a shift from his usual prolific writing to focusing on significant projects like his book, Private Equity Deals. He reflects on three pivotal blog posts:

1. Investment Office Playbook: Explores the dynamics when a new Chief Investment Officer (CIO) takes the helm, particularly the challenges in deployment timing and strategy shifts.

2. Investment Manager Playbook: Discusses growth in asset management firms, balancing performance optimization with business expansion. Ted notes, “Allocators see a manager they like getting there early, someone who's great delivering performance, and then they get frustrated as they grow without a true understanding that growth often is really, really healthy for organizations” (07:54).

3. Yale's Emerging Manager Program: Focuses on bridging knowledge gaps between General Partners (GPs) and Limited Partners (LPs), fostering better collaboration and understanding.

These pieces resonated deeply within the community, sparking significant engagement and discourse.

Notable Podcast Guests of 2024

Ted reflects on a diverse lineup of guests that made 2024 a standout year for the podcast:

• Mike Milken and Richard Sandler: Provided deep dives into historical investment cases and legal intricacies.

• Allocators: Episodes with Carnegie Corp. featuring Ellen Schumann, Kim Liu, Meredith Jenkins, and Elisa Mall offered invaluable allocator perspectives.

• Private Equity Leaders: Conversations with Alex Baring and Daniel Schwartz from 3G covered successful deals like the Burger King acquisition.

• Public Equity and Hedge Funds: Engaging discussions with Cliff Asta and Ricky Sandler from Eminence highlighted evolving strategies in public and long-short equity.

• Scott Besant: His appearance just before his appointment as Treasury Secretary added a timely political and economic dimension to the discourse.

Ted shares, “There are some really great guests across every different area we cover” (10:47), underscoring the podcast’s broad appeal and depth.

Investment Activity in 2024 and Future Plans

Guest Gavin Baker elaborates on his investment strategy, which remains robust and diverse despite market maturity:

• Co-Investments: Partnering on ventures ranging from AI companies to European snack businesses.

• Industry-Related Investments: Advising at 10 East and investing in Oldwell Labs, which enhances allocator-manager relationship tools.

• New SPAC Venture: Looking ahead, Ted introduces a contrarian move into Special Purpose Acquisition Companies (SPACs), targeting mid-market companies with substantial EBITDA and enterprise value. He remarks, “It's going to be a lot of fun to look” (16:38), hinting at innovative exit strategies despite SPAC's turbulent past.

Top Concerns and Trends for Allocators and Managers

Ted identifies several key topics capturing the institutional community's attention for 2025:

1. Private Equity Cycle: Anticipating liquidity distribution returns and strategies for ongoing investments in private markets.

2. Economic Regime Shifts: Considering the potential impact of new economic policies under the incoming administration, including realignment and budget rationalization.

3. Artificial Intelligence (AI): Evaluating how AI advancements are reshaping industries and investment strategies, directly influencing performance metrics.

4. Capital Fundraising Challenges: Addressing the bottleneck in fundraising across both private and public markets, exploring new capital sources like private wealth and sovereign funds.

5. Industry Consolidation: Observing mergers and acquisitions within asset management firms and their implications for market dynamics.

Ted emphasizes, “Performance and that's first and foremost top of mind” (16:55), highlighting the relentless focus on achieving optimal investment outcomes amid evolving challenges.

Business Developments and Growth Plans for 2025

Looking forward, Ted outlines ambitious growth strategies for Capital Allocators:

• Podcast Expansion: Celebrating over 20 million downloads and a dedicated listener base, the podcast plans to enhance engagement through premium content and strategic sponsorships. Notably, WCM will become the lead sponsor, reinforcing valuable industry partnerships.

• Summits and Conferences: Capital Allocators will host multiple summits:

  • CIO Summit: Already fully booked for April.
  • Senior Decision Makers Summit (SDM): Scheduled for June.
  • Emerging Manager Summit: Introducing a curated event where managers are invited based on allocator recommendations, ensuring high-quality interactions.

Ted explains, “Our summits... allow us to convene really great people and let them engage with each other” (21:23), focusing on relationship-building rather than traditional presentation formats.

• Education Initiatives: Expanding Capital Allocators University, now including a course for investor relations and business development professionals, fostering skill development and peer learning.

• Strategic Investing: Venturing into strategic investments aimed at developing tools and services tailored to the allocator community, addressing existing gaps in the market.

Partnerships and Team Enhancements

Ted acknowledges the integral role of partners and the core team in driving Capital Allocators' success:

• Core Team: Hank Sturmak, Ted Seides, Morgan, and Ahana form a dynamic quartet enabling extensive operational capabilities.

• External Partners: Collaborations with Iconnections, PROSEC Partners, and event specialists like Jen and Lois ensure seamless execution of summits and events.

• Operational Enhancements: Transitioning from Excel spreadsheets to Airtable for data management and leveraging expert presentation designers like Bernie Hogue streamline business processes.

Ted sums up, “With all those incredible outsourced relationships we've been able to do a lot” (26:54), emphasizing the importance of collaborative efforts in scaling the business.

Lessons Learned and Reflections

Ted shares personal and professional growth insights from 2024:

• Unreasonable Hospitality: Inspired by Will Guidera’s book, Ted emphasizes the importance of creating memorable and heartfelt experiences for participants. He illustrates this with initiatives like personalized book giveaways at summits, fostering deeper connections (30:37).

• Value of Asking for Help: Recognizing the strength in seeking assistance, Ted remarks, “It's okay to ask for help, and people do want to help and they want to return those favors” (31:42), highlighting the communal spirit that fuels Capital Allocators’ endeavors.

Looking Forward: 2025 and Beyond

As Capital Allocators gears up for the new year, Ted expresses excitement about:

• Innovative Events: Enhancing summit structures to prioritize engagement over traditional formats, ensuring meaningful interactions.

• Strategic Initiatives: Continuing strategic investments and expanding educational programs to support the allocator community.

• Team Expansion: Recruiting additional team members to support growing initiatives and maintain operational excellence.

Ted concludes with gratitude towards his partner Hank and the dedicated team, reinforcing the collaborative ethos that drives Capital Allocators forward.

Conclusion

Episode 424 of Capital Allocators serves as a comprehensive reflection on the milestones of 2024 and sets a visionary path for 2025. Through insightful discussions, Ted and Hank illuminate the evolving landscape of institutional investment, underscored by strategic growth, meaningful relationships, and a commitment to excellence. Whether you’re an industry veteran or new to institutional investing, this episode offers valuable perspectives and actionable insights to navigate the complexities of capital allocation in the coming year.

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