Capital Allocators – Year in Review 2025 (EP.478)

Podcast: Capital Allocators – Inside the Institutional Investment Industry
Host: Ted Seides
Date: December 22, 2025

Overview

In their annual "Year in Review," host Ted Seides and CEO Hank dissect the top trends, challenges, and shifts in institutional investing throughout 2025. The conversation spans a wide range of topics, focusing especially on private markets' liquidity challenges, the evolving structure of asset allocation and manager relationships, and key developments in public markets, private credit, and venture. The duo also reflects on favorite podcast moments, experiments in their business, the state of podcast discoverability, and what excites them for the year ahead.

Key Discussion Points and Insights

1. The Dominant Issue of 2025: Private Markets

Liquidity Dilemma:

• Private equity is "frozen" despite all the necessary capital and companies available.
  • "If you think about making a pizza, you need dough and cheese and sauce and toppings... so how come there's no pizza? And the answer is the oven's not on." — Ted Seides (08:15–08:42)
• General Partners (GPs) are hesitant to sell under current valuations, fearing LP disappointment and fundraising challenges.
• Limited Partners (LPs) are conservative in new commitments due to prior liquidity scares, even if not currently overexposed.

Industry Structure Shift:

• Institutional allocations to private equity are saturated; future growth is from sovereign wealth and private wealth, favoring the biggest managers.
  • "So the middle market, you have contraction and then you have expansion of the already large managers." — Hank (12:10–12:15)
• Many mid-market PE firms may have already raised their last fund without realizing it.
• Larger funds look to acquire from mid-market sponsors, possibly offering opportunities for returns down-market.

Status Quo and the Frozen Pizza Metaphor:

• The main drivers holding back transactions are "greed and fear":
  • "You could say that private equity is frozen because of fear." — Hank (08:51–08:54)
• Bid-ask spread remains wide: GPs want premium exits; buyers want bargains; deals aren’t happening.

Institutional Allocation:

• Most CIOs are "at target or above" for private assets and want to bring allocation back to targets over coming years, not increase.
  • "If their target is 30, they probably have 35 or 40% in privates today. It doesn't scare them. But over the next five years they want to bring that down to 30." — Ted Seides (11:25–11:38)

2. Performance, Returns, and Industry Psychology

Persistence of Optimism:

• Every LP believes their managers are top quartile, even though median outcomes persist. None self-identify as "average."
  • "Please raise your hand if you think your private equity portfolio is median or below... and there isn’t a single hand that’s ever gone up." — Ted Seides (13:48–13:55)
• The classic “we like ours” conundrum, applied to both hedge funds and private equity.

The Private Equity vs. Public Markets Bet:

• Ted attempted a repeat of the famous Buffett bet, targeting PE returns vs. S&P 500, but couldn’t find anyone to take the public side—even at Vanguard.
  • "At the end of the day, there wasn't anyone to take the public equity side of the bet." — Ted Seides (14:42–15:04)
• PE managers were eager to bet; public market champions were hesitant—a telling signal for industry sentiment.

3. Private Credit’s Rise—Especially with Wealth Channels

Private Credit vs. PE in Wealth:

• The main driver of alternative flows in wealth management is private credit, not private equity.
• Key appeal: "It’s really hard to lose money in a year” in private credit. Portfolio yields of 8–10%, low risk of loss, built-in liquidity via coupons (15:44–16:15).
• The institutional market remains less attracted due to lower returns relative to illiquidity.
  • "If you have a known illiquidity budget, you want to make sure you get compensated for that with return." — Ted Seides (16:39–16:44)
• Return expectations are misaligned; wealth investors may be anchored to unsustainable numbers (18:02–18:09).

4. Venture and Growth Equity Dynamics

Structural Shift and Illiquidity:

• Venture portfolios now include significant, illiquid growth equity exposures as successful VC-backed companies stay private longer.
  • "What’s happened is a lot of the institutional allocation portfolios... their most successful venture investments have created a very meaningful bucket of growth equity that they can’t exit." — Ted Seides (18:52–19:09)
• This trend increases overall portfolio illiquidity and reduces new commitment capacity.

5. Impact on Public Markets

• Public markets have been relatively quiet except for passive flows.

• 2025 saw a "sneaky" resurgence of active management performance; increasing allocators' attention.

• When private markets unlock liquidity, “first wave” of redeployment will go into public equities, not back to privates.

  • "When private markets unlock for liquidity, the first wave... is going to go back to the public markets." — Ted Seides (20:35–20:49)

• Ongoing focus on the "Mag 7" (mega-cap techs) and their aggressive AI spending, raising bubble fears.

6. Geopolitics and Other Allocator Focus Areas

• Major global events like "Liberation Day" create nervousness but have little immediate impact as most allocator pools move slowly ("like tanker boats, not fleet boats").

• China exposure has become more cyclical and nuanced as relationships thaw.

• Artificial Intelligence: Growing operational adoption and strategic interest, but much current discussion is "disbelief at the size of these valuations." — Ted Seides (23:34–23:39)

7. Industry Practices and Approaches

• Growing interest in “total portfolio approach” (TPA): not just rebalancing asset classes, but using data to understand risk and manager exposure more dynamically.
  • "Total portfolio approach is using data to have a better understanding of what you own." — Ted Seides (23:47–24:10)

8. Business Updates and Podcast Highlights

Podcast Discoverability/Playlists:

• The expanding episode library makes discoverability tough.
• Capital Allocators created themed Spotify playlists (most popular, legendary investors, public/private equity, interdisciplinary, etc.) — a step-change in user experience (03:08–03:50; 31:35–32:09).

Podcast Guest Reflections:

• Ted’s favorite guests this year include both new acquaintances (Adrian Meli; Herb Wagner; KK Rowland) and longtime friends (Alex Sasserdote, Dave Lyon, Ed Grefensted, Tim Sullivan).
• Great value from guests open about setbacks (e.g. WCM’s Mike Trigg and Sanjay A sharing the story of overcoming a drawdown — 28:23–28:49).

Private Wealth Mini-Series Learnings:

• Early-stage concentration in mega-managers; private banks like JP Morgan act like institutions, but there remains huge diversity in private wealth orgs.
• "How much this accrues to the biggest asset managers and the incredible amount of resources they have..." — Ted Seides (29:50–30:02)
• Private wealth adoption curve mirrors past phases: first need brand, then move to smaller “satellite” managers.

Business Ventures and Team Growth:

• Coaching business launched—retired CIOs aiding managers with storytelling and fundraising.
• Strategic investments in fintech tools:
  • Labs Campbell Wilson: allocator intel
  • Thema: AI-driven private company mapping
  • Third Ascension: HR/comp software (33:50–35:07)
• Capital Allocators University moved online, expanding curriculum and increasing accessibility—a shift to lower-cost, subscription-based model (35:18–35:56).
• Addition of key hires (Tamara Auerbach for relationships; Liz Smith for media) and growth of core team.

Notable Quotes & Memorable Moments

• On the Private Market Stalemate:
  "You have all these ingredients in place, so how come there's no pizza? And the answer is the oven's not on."
  — Ted Seides (01:03–01:13; 08:42)

• On Manager & LP Psychology:
  "Please raise your hand if you think your private equity portfolio is median or below... and there isn’t a single hand that’s ever gone up."
  — Ted Seides (13:48–13:55)

• On Private Credit’s Popularity:
  "It's really hard to lose money in a year. So if you make a portfolio of loans ... to lose money, you need a 20% default rate at 50% severity...almost never happens."
  — Ted Seides (15:44–16:09)

• On Total Portfolio Approach:
  "Total portfolio approach is using data to have a better understanding of what you own. It starts with a very simple reference portfolio."
  — Ted Seides (23:47–24:10)

Fun and Personal Closing

Favorite Podcast Moment:
Ted recommends Patrick O’Shaughnessy’s and Acquired’s podcast episodes, and tennis content from Andy Roddick/Andre Agassi (40:00–40:47).

Personal Takeaways & Advice:

• Lesson from the year: the importance of understanding both the "best self" and "true self" of a fund manager (Kim Liu’s framework — 39:17–39:47).
• Best advice: "You can't do things alone." — Ted Seides (43:20–44:15)
• Joy: “I love nothing more than connecting the dots between people in the industry to create some compounding of value.” (44:44–45:06)
• Fun fact: Ted is a chocolate chip cookie connoisseur.

Timestamps for Key Segments

• 00:00–01:13: Setting the table—liquidity and structure in private markets (“pizza” metaphor)
• 07:01–13:26: Deep dive on private market liquidity and changing structure
• 13:48–15:31: Return persistence, industry psychology, the “Buffett bet” on PE vs. S&P
• 15:38–18:09: Private credit — rise in wealth channel, return dynamics
• 18:20–19:27: Venture/growth equity’s new portfolio role, exit challenges
• 20:05–21:15: Public markets — implications, Mag 7, AI
• 22:25–23:39: Geopolitics, AI, China, and allocator perspectives
• 23:43–24:46: Total portfolio approach (TPA) explained
• 24:51–25:48: Predictions for 2026; what’s likely to be top of mind
• 26:28–31:12: Podcast guest reflections and key conversations from 2025
• 31:35–32:49: Podcast discoverability; Spotify playlists and new initiatives
• 33:01–35:07: Business experiments and strategic fintech investments
• 35:18–35:56: Capital Allocators University update and future plans
• 36:14–37:15: Team and partnership growth
• 39:03–44:15: Fun/closing Q&A: learning, book recs, joy, advice, cookies

Thematic Wrap-Up & What’s Ahead for 2026

• Industry-wide illiquidity in private markets won’t resolve quickly; expect further pressure on GPs and possibly compressed returns.
• LPs' allocations to privates are at or above plan — limited appetite for new commitments.
• Anticipate eventual reallocation from privates into public markets as liquidity returns.
• Business-wise, Capital Allocators is focused on content discoverability, community-building (summits, CAU), and selective investments/partnerships.

Looking ahead:
Increasing focus on AI (miniseries coming in 2026), growing the team, and strengthening the foundation to explore new optionality in the business.

For New and Returning Listeners

• Spotify and web playlists are live to help you discover the best past episodes (“Most Popular,” “Legends,” “CIOs,” etc.)
• Exciting interviews ahead—both new names and longtime industry friends.
• Expect more innovation in allocators’ education and networking, plus candid insider perspectives on what’s shaping the industry.

End of Summary