Podcast Summary
How I Invest with David Weisburd
Episode E223: The Art of Capital Allocation at $86 Billion Scale
Guest: Peyton (Future Standard)
Air Date: October 8, 2025
Overview
In this episode, David Weisburd hosts Peyton from Future Standard, discussing how to skillfully allocate capital on an unprecedented $86 billion scale. The conversation explores the merging of wealth and institutional investor channels, how to find and partner with top-performing private equity (PE) managers, the rationale behind portfolio construction, and innovations in private fund structures. Peyton candidly shares the nuanced differences between serving high-net-worth individuals and pensions, reflects on emerging manager strategies, and offers advice for LPs and GPs alike.
Key Discussion Points & Insights
1. About Future Standard and Its Client Base
- Future Standard serves institutional and private wealth clients, investing across private equity, private credit, and real estate.
- 86B+ AUM, 600 professionals, 12 offices.
- Created from the merger of Portfolio Advisors and FS Investments in June 2023.
"We've got relationships with RIAs, with Merrill Lynch, with Morgan Stanley and their wealth practices as well as Los Angeles Fire and Police ... We've got other state pension plans ... investors and clients in Europe ... so it really runs the gamut from, you know, small to large."
—Peyton [00:52]
2. Democratizing Access to Alternatives
- The firm brings institutional-quality investments to high-net-worth individuals using structures like evergreen and drawdown funds.
- Lowering minimums (some as low as $50,000) allows broader participation.
"The entire premise ... was to democratize alternative assets. And so ... even small investors can participate alongside institutions."
—Peyton [03:13]
3. Large Cap vs. Mid Market Buyout Funds
- Mid-Market Focus: Historically delivers better risk-adjusted returns; firm prefers to partner and grow with managers, not discard them based purely on fund size.
- Critical View: Large-cap is not "dead" but size is often "the enemy of returns"—mid-market outperforms by 350–450 bps on average, according to Peyton.
"All the data ... has shown that the mid market ... tends to outperform large cap, especially at the upper quartile ... if you want alpha in the private markets, you've got to go down market."
—Peyton [04:22]
Specialization enables large funds (like Thoma Bravo) to maintain an edge.
"As managers scale ... specialization is key with scaling."
—Peyton [06:24]
4. Sourcing and Evaluating Fund Managers
- Emphasize backing emerging managers, especially spin-outs from known shops.
- Strong focus on relationship-building over multi-year periods, being a supportive LP, and supporting GPs through challenges.
"Our best stories in the middle market ... have been backing spin outs ... we're always fishing in those ponds."
—Peyton [09:37]
- Partnership mentality: being present and supportive during GP difficulties (e.g., amendments, key person departures).
"When you support someone when they're down, that's when you kind of gain that respect and they trust you."
—Peyton [13:33]
5. Traits of Elite GPs
- Long-term winners know "who they are" and how they create value at the portfolio level.
- Openness to innovation and learning from failures is essential for repeatability.
"They know at their core how to make money, how to create value ... and ... always got to innovate or they've always got to get better."
—Peyton [20:00]
6. Portfolio Construction Philosophy
- Portfolios typically include 8–10 managers per multi-manager fund, allowing for 100–200 underlying companies.
- Balanced diversification: not over-diversified to dilute returns, but enough to mitigate risk.
"Portfolio construction is balanced enough to provide enough diversification, but not, you know, over diversified where we're going to water down returns."
—Peyton [27:16]
7. Innovations: Evergreen Funds
- Evergreen funds offer continuous deployment, minimizing the “cash drag” inherent in traditional drawdown vehicles.
- Institutions and individuals benefit from compounding and optional liquidity.
- Notably, some clients (e.g., a pension plan with a $300M commitment) use both approaches for flexibility.
"In their mind they could fully compound their investment ... they could diversify and core up in the middle market ... and they had a liquidity option."
—Peyton [28:51]
"We don't charge on cash ... Some of our peers do charge on cash."
—Peyton [32:32]
- Behavioral aspect: Many investors value simplicity and seamlessness of evergreens, especially in the wealth channel.
8. Working with and Advising Emerging Managers
- Candid feedback is rare but crucial; many GPs fail by trying to raise too much, lacking LP relationships, or spinning out too early.
- The importance of operational experience, timing, and at least one anchor investor for a new fund.
"The biggest disqualifier ... is you tell me you're going to do something and then you don't do it."
—Peyton [50:45]
- Advice: Track GPs’ actual behaviors and follow-through more than promises.
9. Internal Structure: Independence and Collaboration
- Distinct teams for funds, co-investments, secondaries, and credit; avoids bias, but cross-team collaboration enriches decisions.
- Time optionality is valuable—preference for investing later in a fund’s cycle when possible, but balance it with willingness to provide anchor capital.
Notable Quotes & Memorable Moments
-
On manager selection:
"Each interaction ... every time you commit to a fund, then the diligence on the next fund starts that day."
— Peyton [15:09] -
On value creation:
"At the portfolio company level, the value is the alpha. If there's no value over time, regardless of the narrative you spin, you're not going to get the returns, right?"
— David Weisburd [22:23] -
On embracing mistakes:
"We want our managers to have some losses ... We learn more I think from our managers on the 1x deal than we do on the 6x deal."
— Peyton [25:28] -
On the GP/LP relationship:
"Partnership is messy by definition ... are you there when someone needs you?"
— Peyton [11:57] -
Advice to emerging managers:
"Probably better to be a half fund too late ... than it is to be a half fund too early. It just gives you a much better chance at making it."
— Peyton [41:48] -
On what sets GPs apart:
"Clarity, knowing why you exist and how you create value. If ... you know how to do that ... we’ll want to track you."
— Peyton [47:30] -
On personal growth:
"Be patient with yourself. It's a long career ... reps matter ... rely on your team ... building real relationships and partnerships."
— Peyton [53:41]
Important Segment Timestamps
- [00:03] – Introduction to Future Standard
- [01:41] – Overview of client base and approach
- [03:13] – Democratizing access for smaller investors
- [04:22] – Large cap vs. mid-market buyout strategy
- [06:24] – Importance of specialization for large PE funds
- [09:37] – How they find and evaluate new fund managers
- [13:33] – Importance of partnership during adverse times
- [20:00] – What makes a GP endure from Fund 1 to 4+
- [25:28] – Embracing losses in PE as part of alpha generation
- [27:16] – Portfolio construction rationale
- [28:51] – Institutional use of evergreen funds
- [32:32] – Fee philosophy and benefits of evergreens vs. drawdowns
- [38:46] – Guidance for emerging managers
- [43:45] – How anchor investors affect a new fundraise
- [47:30] – What makes Future Standard want to keep watching a new GP
- [49:11] – Best practices for emerging GPs to stay on an LP’s radar
- [53:41] – Advice Peyton would give his younger self
Overall Tone
Candid, practical, and collaborative. Peyton offers a rare, transparent look into capital allocation at scale and the delicate art of fostering strong LP-GP relationships. The dialogue is both strategic and empathetic, with an emphasis on partnership, learning from failure, and staying attuned to evolving market structures.
For institutional investors, emerging managers, or anyone curious about the inner workings of large-scale private capital allocation, this episode is a masterclass in balancing discipline with innovation and partnership.