E235: The First Thing LPs Notice That GPs Never Think About

Summary

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Podcast Summary: How I Invest with David Weisburd

Episode: E235: The First Thing LPs Notice That GPs Never Think About
Date: November 3, 2025
Host: David Weisburd
Guests: Alex (Experienced Institutional Allocator), Maeve (Co-contributor)

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Overview

This episode explores the nuanced dynamics between Limited Partners (LPs) and General Partners (GPs) in institutional investing, particularly examining what LPs notice during diligence that GPs often overlook. Through candid reflections on careers in institutional asset allocation, the panel discusses the evolution of the “endowment model”, the importance of operational process, the psychology of early adopter LPs, collaborative culture among allocators, and emerging best practices for both allocators and managers.

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Key Discussion Points and Insights

1. The Infinite Game of Investing

• Investing as a Continuous Learning Process

  • Investing is framed as an “infinite game” where knowledge is always evolving and no one ever has perfect mastery.
  • Quote:

    "Even if we had perfect knowledge of every single asset class in the world, tomorrow it would be stale... It's this kind of cool thing where you know you could keep playing this game for the rest of your life and keep on improving."
    — David (52:42)

• Humility in Knowledge

  • The more experienced one becomes, the more one recognizes how little they know, especially as markets and opportunities continually change.
  • Quote:

    "The more I learn, the less I know."
    — Alex (52:50)

2. The Morgan Creek & Modern Endowment Model Story

• Institutional Innovation Backdrop

  • Alex shares insights from joining Morgan Creek during its pivotal growth phase and the wider adoption of the endowment model made famous by David Swensen at Yale and Mark Yusko at UNC.
  • Early adopters were recognizable by their willingness to embrace total portfolio thinking and innovative asset classes before it became mainstream.

• Holistic Portfolio Management

  • Smaller endowments and family offices previously lacked access to comprehensive portfolio solutions; the Morgan Creek model brought endowment-style management to a broader audience.

• LP Forward-Thinking

  • Early adopters of new models are often characterized by a willingness to operationalize processes and focus investment team efforts on analysis rather than rote data management.
  • Timestamps: 03:16–06:47

3. Performance, Alpha, and the Masking of Beta

• Understanding Factor Exposures & Risk

  • Many managers report simple beta statistics without conducting deeper factor analysis, potentially masking beta as alpha.
  • Quote:

    "The problem is a lot of allocators do not do factor exposure work beyond beta… so a lot of funds have been able to kind of get away with it."
    — Alex (10:02)

  • The importance of using models (like Fama-French) to differentiate genuine alpha from exposure to common risk factors.

• Best Practice:

  • Always run multi-factor analyses to suss out true manager skill (11:15–12:35).

4. Characteristics of First-Mover Allocators

• Culture of Openness

  • On the allocator side, there's a strong culture of sharing information and best practices, driven by the non-zero-sum nature of most institutional investing (other than exceptional high-demand VC funds).
  • Quote:

    "Allocators don't see other allocators as competitive... open to sharing information, seeing processes, hearing about conversations."
    — Alex (12:41)

• Operational Efficiency

  • First movers create systems that prioritize high-value analysis (versus administrative tasks) and cultivate an anticipatory mindset about where “the puck is going,” not just where it is now.
  • Timestamps: 13:21–15:59

• Risk and Career Dynamics

  • Allocators face asymmetric risk: when right and differentiated, results look like luck; when wrong, career risk is significant—leading to herd behavior among many.

5. LP Collaboration: Examples & Methods

• Collaborative Networks
  • Regional allocator groups share portfolio details (sometimes even down to manager lists and exposures), discuss strategies, and host closed-door peer meetings followed by educational sessions with managers.
  • Memorable Example:
    Cleveland Pittsburgh Allocator Group: Sharing templates of portfolio allocations prior to confidential roundtable sessions. (19:14–21:14)
  • Reason for Collaboration:
    Most asset classes are not zero-sum and more capital actually helps both parties, except for scarce access private funds (e.g., top-tier VC). (23:04–24:59)

6. Diligencing New Asset Classes as an Allocator

• Education Process

  • Stepwise approach:
    1. Reach out to GPs/banks for education
    2. Tap allocator networks for direct experience
    3. Conduct on-site diligence
  • Quote:

    "You can call every GP and ask to get smarted... within just a day or two, you can have set up a bunch of calls with other allocators."
    — Alex (30:03–32:16)

• Importance of In-Person Visits

  • In-person meetings reveal subtle signals:
    • Check the cars in the parking lot ("Red Ferrari Syndrome")
    • How the office operates (security, team energy)
    • Consistency of responses from junior and senior staff regarding the fund’s edge.
  • Quote:

    "If you ask it on a zoom call... you're always going to get the same answer. When you're in person... you get the vibe."
    — Alex (40:12–41:52)

• Operational Due Diligence (ODD) as a First Step

  • Screening for “red flag” issues (e.g., self-administered funds, unusual auditor changes) before full diligence to prevent wasted resources. (35:31–36:58)

7. Best Practices for GPs Educating and Engaging LPs

• Clarity and Anticipation

  • Top GPs:

    • Explain complex concepts simply, at the right depth.
    • Anticipate data requests—don’t hide information: send full historical data/exposure, analytics, and proactively disqualify LPs if there’s a clear mismatch.

  • Quote:

    "Try to give them maybe not too much but a little bit more than they're asking... so they can come to the true understanding that you have which is that you are providing alpha for your fund."
    — Maeve (48:34)

  • Quote:

    "Lead with [key diligence info] and disqualify the LP before they disqualify yourself."
    — David (47:21)

• Being User-Friendly
  • Make it easy to interact and reduce the friction in the diligence process by understanding the allocator’s perspective and needs.

8. Allocator Training Institute

• Overview
  • An educational program designed to train younger allocators on the essential skills of institutional portfolio management, from factor models to case studies of large public pension developments.
  • Best for those with -1 to 10 years of experience, including undergraduates, interns, and early-career analysts. (49:08–51:40)

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Memorable Quotes & Moments

• On Humility:

  "The more I learn, the less I know."
  — Alex (52:50)

• On Office Signals:

  "You would call it red Ferrari syndrome... and you realize the manager as good as they were numbers will always be probably…"
  — Alex (38:04)

• On Early ODD Checks:

  "Put these, not many, just a few odd red flag questions up front... before we come visit the office, before we come say hi..."
  — Alex (36:53)

• On Non-Competitive Culture:

  "It was a way for our little group of allocators to get together, share information, share best practices... to provide a better outcome for the beneficiaries of the capital with which we were entrusted."
  — Maeve (21:32)

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Important Timestamps

| Timestamp | Topic Summary | |-----------|----------------------------------------------------| | 00:00–02:59 | Infinite game of investing, overview of guest careers | | 03:16–06:47 | Morgan Creek’s launch; endowment model adoption | | 08:29–12:35 | Identifying masked beta vs. true alpha in managers | | 13:21–16:58 | Operational excellence and future-focused investing | | 18:02–24:59 | Allocator collaboration, peer groups, zero vs. non-zero-sum dynamics | | 29:58–33:36 | Diligencing and learning new asset classes | | 35:31–43:03 | Site visit diligence: ODD, “red Ferrari” syndrome, team vibe tests | | 43:34–48:28 | GP best practices educating LPs, data transparency, anticipating needs | | 49:08–51:40 | Allocator Training Institute description and fit | | 52:42–54:33 | Humility, infinite learning, continual market evolution |

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Conclusion

This episode is a masterclass in institutional investing, emphasizing that success as an allocator or asset manager isn’t just about finding performance—it’s about building processes and culture that foster long-term, adaptive excellence. Operational diligence, humility, peer collaboration, and transparency are woven throughout the conversation, offering practical takeaways for both LPs and GPs.

"I keep being humbled by how little I know and how much I've had to learn."
— Alex (54:33)

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Transcript

[David]

When people ask me why I'm so interested in investing, the best way I explain it is the infinite game of investing.

[Alex]

I think that's incredibly well said and one of the things I heard other people say. But the more I learn, the less I know.

[Maeve]

When I started my investment portfolio I remember thinking I knew how to invest, I knew how to pick stock and I thought I was very fanatic. Obviously I did nothing wrecked up or anything.

[Alex]

And then after Warden Creek I had such a great experience there.

[Maeve]

I thought I knew the appropriate and only way to invest for institutions and even with families on foundation. And it took me a couple of career clones overlike it for recognizable how much I have learned but how little I know.

[David]

Alex, you've had a storied career going from army to Morgan Creek to J.P. morgan to Cleveland Clinic to to Aberdeen, oftentimes starting groups at these allocators. So let's start with Morgan Creek. So you started there in 2005. What was your experience like at Morgan Creek?

[Alex]

Morgan Creek was just such an excellent place to start out as an analyst.

[Maeve]

And I didn't know that.

[Alex]

I didn't know going into it that.

[Maeve]

I was going to have this amazing experience.

[Alex]

It was a new investment team.

[Maeve]

Our new investment firm really the University of North Carolina of Chapel Hill had hired Mark Yusuko another game. He was a senior ambassador at Notre Dame.

[Alex]

He joined as the first CIO for UNC capital of the UMP system in.

[Maeve]

1998 and then from 1998 until 04.

[Alex]

The UNC endowment was one of the best performing endowments nationwide.

[Maeve]

And a large part of that was.

[Alex]

A reflection of the investment philosophy that lark and while at UNC he wanted to do something bigger.

[Maeve]

He wanted to build something bigger. So in 04 he took the investment team with him and started working brief capital management.

[Alex]

And he brought this endowment model to the OCINL world which today is quite ubiquitous. But over 20 years ago these were really just buzzwords that no one really were looking for. So the fact that I was able to start with such a high quality team that had such a sophisticated way of thinking about the world and investing was really just fortuitous. The real focus of the portfolio and the management and this was a little bit different than others was Mark and his co founders, a guy named Dutch Kuyper came from Wellington as the COO and Dennis Minor who were the sales guy that brought relationships to help found the firm. The real focus that they recognized was.

[Maeve]

That holistic management of investment assets hadn't really worked.

[Alex]

So the fact That I got to.

[Maeve]

Join, you know, be a part of.

[Alex]

That and be a part of a team that was focusing on total portfolio mobile, focusing on it on a sophisticated way.

[David]

As you mentioned, David Swenson had just wrote the book on the modern endowment style. And Mark Yusko at UNC was starting to invest into asset classes like venture and then offering that in Morgan Creek. As Morgan Creek went from 0 to 10 billion in assets. What were the characteristics of the early adopter LPs that embraced the Morgan Creek model? And how does that relate to LPs today that embrace trends early? What are the psychographic characteristics of Those type of LPs?

[Maeve]

The first thing I'd say is.

[Alex]

Well you mentioned this and this was.

[Maeve]

Really what it was like that the book Pioneering Portfolio Management had just come out just a couple of years over there.

[Alex]

And it's not like today where people on Twitter, on TikTok or Subback podcast, none of that existed. And so a lot on the sharing of these investment philosophies and then also sharing of investment. You went to Yale, you were in the endowment community. I remember back then Anikubo used to put out in annual report are the performance of institutions.

[Maeve]

And if you were in an endowment.

[Alex]

You could see the list of how.

[Maeve]

Every institution did one by one.

[Alex]

And you could see at the very.

[Maeve]

Top Harvard, Jack Meyer at Harvard, David.

[Alex]

Swenson at Yale, the folks at Bowdoin. I mean there was just more consistent known the top. And so that philosophy, that endowment model philosophy that David's life in his vows.

[Maeve]

And that we more vicious files as.

[Alex]

Well, that was something new. But there was another piece of the puzzle that Mark, Dennis and Dutch realized early on. And that was that a lot of.

[Maeve]

Ultra high net worth individual families as.

[Alex]

Well as institutions below a billion dollars were receiving inch meal.

[Maeve]

So solutions from consultants, from banks, from.

[Alex]

Abiding it was, you know, they might have a concern that helped them with equity someone else that folks income someone else that may have helped them with alternatives generally. But there was nobody 25 years ago that was thinking about a total portfolio solution and thinking about the necessity of a spending policy that reflects the spending needs of the individual institution as well as the liquidity availability of the underlying assets.

[Maeve]

If you're thinking of a multi asset.

[Alex]

Class approach that includes exposure to deep private assets that will not be liquid or semi liquid asset like some absolute return funds. And so putting that all together into one solution is something back then, you know, sophisticated endowments and other institutional good deals. If you were under a billion dollars didn't have your own investment office. You really didn't have that holistic viewpoint. And so that, you know, which was brought for the Morgan street clients ranging from 20, I think the smallest client on the team's asset sheet was 25 million. I think the largest individual client was 1 billion. Most were around 250 to 500 million households. So bringing that kind of holistic view as well as. And this was something people talk about today a lot back then was still.

[Maeve]

Kind of new forward thinking about access to high quality managers or differentiated philosophical people.

[Alex]

So it's something that David talked about in his book that a lot of sophisticated investors talk about today is the view philosophically that if an investment manager is down performance wise, that may be the best time to invest. And today a lot of people know that.

[Maeve]

A lot of people have heard this.

[Alex]

Well, 45 years ago, 20 years ago, that was still very controversial. And a lot of performance, we called it performance chasing people trying to buy last year's bull. So that view and implementation of a holistic portfolio solution, recognizing that sometimes it's.

[Maeve]

Best to invest when a manager was down. That was new back then.

[David]

One of the best times to invest might be when a manager is down. Presumably that's because the entire market is down. The manager might have not made a mistake. It's just, just the nature of cyclical markets. You also mentioned about separating sustainable returns or alpha versus beta. Alpha is somewhat intuitive. You might have structural alpha, you might have proprietary sourcing. You might have a special right to win. What are some hidden ways that managers advertise beta? In a way that maybe they mask it in a way that maybe it looks like alpha but it's actually high beta risk. How do you know when a manager is actually masking a high beta strategy?

[Alex]

So it's an excellent question. The first thing I'd point out, and this is something that seems to be systemic within the allocator community. I've seen it my whole career. I still see it to this day. When you look at pitch decks for.

[Maeve]

Managers and when you look at the.

[Alex]

Other side of a pitch deck, you look at the holistic performance report or.

[Maeve]

Risk report or you know, something presented.

[Alex]

To an investment committee from the allocator side. So the VP side about how that fund is doing and then from the altitude side when they're reporting to the.

[Maeve]

Investment committee or they're reporting publicly their.

[Alex]

Person, something always jumps out. And that's a lot of statistics around risk or performance evaluation. Our focus will have a number in the legislative table. And so you'll see something when people.

[Maeve]

Will talk about, oh, you know, our.

[Alex]

Beta, or the Beta pun is 0.6, 0.7. There are cases in my career where.

[Maeve]

We focused on a number when we wanted to have a beta closure of X or a given type of manager.

[Alex]

But data from CAPM is just a starting point. And when Fama and French did the.

[Maeve]

Three factor model and then the five factor model, well, if you want to provide back a model from Palo French.

[Alex]

CAPM is the beginning part of it.

[Maeve]

And the first part of it is.

[Alex]

Beta, which is just the factual exposure to the market.

[Maeve]

Problem is a lot of allocators to.

[Alex]

This game do not do factor exposure work beyond data. Because beta is a factor, it's normal.

[Maeve]

The largest factor exposure and moving beyond.

[Alex]

That takes a little bit of quantitative and qualitative work. So in, in large part a lot of funds have been able to kind of get away with it because they are reporting a true number and they're just not talking about the other number as much.

[David]

For those that don't know Fama, French improved on the capital asset pricing model Cap M and they found that there was additional factors like whether the security, whether the company was small or large, and whether it was value or growth. So they found other ways to more efficiently price the historic returns versus just the beta of the stock. So by adding those other factors, you're able to more effectively price whether it's actually beta exposure, which is maybe it's a smaller value kind of investment versus where it's true alpha, where it's out performance for the same risk and return.

[Alex]

Absolutely on that. That's something that I find to this day.

[Maeve]

One of the first analytics we always.

[Alex]

Run, at least for the last decade.

[Maeve]

Or so, is just running through a pharmacy by factor model. See what you do, they're probably the easiest thing to do. It's one of the easiest ways to kind of suss that out.

[Alex]

The thing where it gets tricky, I've.

[Maeve]

Discovered that are equity law only equity.

[Alex]

Law short I didn't know value productivity.

[Maeve]

It's relatively easy to come up with a useful factor model to assess whether a manager is adding whether number one, whether they're adding alpha.

[Alex]

Number two will type in the consistency.

[Maeve]

Of the factors they have and work. Three, whether you have any interest in.

[Alex]

Even attempting replicate those factor exposures. If they're only giving you a beta that certain factor exposures, maybe that's the.

[Maeve]

Kind of beta that you want.

[Alex]

The top thing is in my career for macro managers, so like the Bridgewaters of The world.

[Maeve]

For example, coming up with a good.

[Alex]

Factor model to explain what very sophisticated macro managers like that are doing has always been important.

[David]

Going back to the asset allocators that embraced this new Yale model in the mid 2000s and other forward thinking LPs. What are some characteristics of either the institution or the individuals that are first movers in new strategies?

[Alex]

One thing I always loved when sitting.

[Maeve]

On the allocator side of the table is that allocators don't see other allocators as competitive. So they're very open to sharing information, very open to seeing processes, hearing about conversations. Something that when I was working on.

[Alex]

Wall street could get you fired.

[Maeve]

You follow the competitor up even if they're selling new and app and what they were working on.

[Alex]

For the ones that are able to.

[Maeve]

Kind of leap forward in terms of their investment focus and hopefully well on their investment outcome, it's really two separate things.

[Alex]

Number one, and this is the first part not as exciting, but it is useful in operationalization of epoches that allow the investment team to focus on and on rules. So a lot of times actually in.

[Maeve]

My career I used to go participate.

[Alex]

A lot of times you'll have young.

[Maeve]

Analysts or member gate investor community focused.

[Alex]

On what we call an ETL constitutes.

[Maeve]

Extract, transform and model.

[Alex]

So they're extracting data from different sources.

[Maeve]

They'Re transforming it into a way that can be you and fight others and then they're loading about it with them.

[Alex]

So a lot of Excel hit me.

[Maeve]

Up a lot of PowerPoint, a lot of PDFs that they email out later on Friday night and all of that work.

[Alex]

We always said later in my career. Well if this is, if the task that we're doing is something we could hire a high school student to do.

[Maeve]

We should not be here.

[Alex]

This is just a time intensive task.

[Maeve]

That doesn't really add value and it's not worth obstacle. You people focus on the investment team.

[Alex]

The real value add is analysis, analysis of the investment, analysis of markets, analysis of the portfolio. Everything focused on the analysis and the.

[Maeve]

Decision board problematic analysis.

[Alex]

So the second thing, so the first is really operationalizing classification to the second is focusing on.

[Maeve]

And I, I hate that you use.

[Alex]

This term because people have used it for so long. But I think it's focus is focused on where the puck is going to not worry now having a good sense on well where the markets are moving.

[Maeve]

To or seeing in some phrases virtually seeing, you know something move at a very slow rate. Where markets and therefore where portfolios are.

[Alex]

Going to go as one Easy example.

[Maeve]

In phase credit environment interest rates are just dropped by 0.5. Most people have a very good sense with the change from the operating stang mode the FOMC that will probably continue down with interested. And so it may not be as fast as equal inspection unless there's a catalytic movement. And being ahead of the expected drop in interest rates instead of them being.

[Alex]

That's. That's really the two and that's. That can be almost the toughest of investing and thinking about the portfolio in.

[Maeve]

The future state and where you want it to be. And therefore trying to invest there knowing.

[Alex]

And this is the other part. It's kind of cliche, but it still exists and it's still part of our career. So we have to acknowledge it is that if you invest in a differentiated fashion from others and you're right well people might just think you got lucky. People may not recognize that you took.

[Maeve]

Well a well populated risk for the public portfolio.

[Alex]

If you take the differentiated you and.

[Maeve]

The implementation of your portfolio and you're wrong well then you might not have a career. And that's very difficult.

[Alex]

And so the default the Nash equilibrium.

[Maeve]

Outcome from that pipeline world career optionality is that many investors then tend to fall back to you know what are.

[Alex]

The samples type of portfolio where are the consultants signed off on. And that means you still have decent returns for the portfolio but that you'll.

[Maeve]

Be in the middle of the path relative peers or relative to the effect it outfit means given the inflation environment that we have and the increased spending move to the portfolio.

[Alex]

And as well this is a concurrent thing that is happening more and more so these days where every single month.

[Maeve]

Higher pool the much lower rate of.

[Alex]

Distributions on private asset performed is which.

[Maeve]

For grant making validations or pension plans or endowments with penalties, you know that actually really trip them up.

[Alex]

So having a forward looking thinking move.

[Maeve]

Part in your portfolio the implementation and.

[Alex]

Philosophy and separately the first thing I mentioned having an operationalized process focus on analysis versus data. That's a way that teams can really jump.

[David]

You mentioned that the top allocators don't see other allocators as competition. Explain that how do the top allocators collaborate with other allocators Give me very specific use cases.

[Maeve]

I was very fortunate in my career to work on Wall street and to work in the allocating community. So I got to see what it's like on both sides of this picture. When I was working on Wall street if I had called well while I.

[Alex]

Was at the office and respectively one of the office if I Called a friend, anyone and asked them what do.

[Maeve]

They think about the markets? Well, how were they invested in my portfolio? What funds did they like? What tool did they use? I would have thought the fundamentals. In contrast, what I experienced from working on the allocated target table, and I'll give you a specific example of it.

[Alex]

Because I was so proud of is.

[Maeve]

That you could always call me a few and if you didn't know them, you know, if you wanted to reach out to a few Alex Vader, that you had no connection. You're not connected on LinkedIn, you've never met this person.

[Alex]

But I saw, you know, hey, this.

[Maeve]

Institution was in the recent magazine article doing really been evaluating. They implemented CHOP Ax, which is proctored by now. Or even just call them. You can just email them with a name.

[Alex]

Well, not to fix your brain about how you guys capture this process, how.

[Maeve]

You guys so much. I done it dozens of dozens of times.

[Alex]

I'll give you one specific example that.

[Maeve]

I think every allocator from implement it was phenomenal.

[Alex]

I was so glad to be a part of it.

[Maeve]

I was part of the Cleveland Pittsburgh Allocator Group.

[Alex]

This was a nonprofit volunteer group led by Alice Gavin. And once a quarter we would get.

[Maeve]

Together in first room at somebody's office.

[Alex]

And before the meeting we would send around a template.

[Maeve]

Well, I was the president of this. We'll put you here. So I was.

[Alex]

We would send that around a template where allocators would put their portfolio and they could put in the actual names.

[Maeve]

Of the managers or they could put.

[Alex]

In or just some code if they.

[Maeve]

Weren'T comfortable with that. And you would put in your exposure.

[Alex]

Size, either a dollar or something.

[Maeve]

We could get a good sense of how everybody's allocated. This is a group of maybe 25,000 people and kids weren't hearing.

[Alex]

And then we would get together once a quarter and we would sit around.

[Maeve]

The big conference table one by one.

[Alex]

We would just talk, talk about, you know, if you're a DB pension plan.

[Maeve]

If you're thinking about doing a crt, a pension list transfer.

[Alex]

And maybe you are, maybe you are thinking about it.

[Maeve]

Maybe it happens. If you're an endowment, you know, and you have a new spending policy that.

[Alex]

The policy behind which you guys decided.

[Maeve]

To go through that process and how's that going, how to get through the investment committee.

[Alex]

If someone's investing in a new asset.

[Maeve]

Class or a new country or they're.

[Alex]

Going to visit some country. We would like to know, hey, do we know any managers in India?

[Maeve]

You know, people raise a Hand. Yeah, let's talk about that.

[Alex]

We would do that for about two hours and it was a closed door session, allocators only, you know, Chatham house rules. So nothing said in the room could leave the room and then we would invite a GP to come by or lunch and the gp, y' all know well ahead of time they were gonna be there, they'd come in for lunch, we'd open the door, GP would come in, we'd have lunch delivered, paid for by the gp.

[Maeve]

So GP would spend a few hundred.

[Alex]

Bucks on lunch and over lunch for about an hour, the GP was allowed.

[Maeve]

To talk about whatever they wanted to talk about.

[Alex]

Zali was something interesting to the Alex I remember Goldman Sachs came in one time, wanted to talk about private credit, had a really great discussion, learned a lot with them. Goldman Sachs loved it because they had an opportunity to meet with a lot of allocators in one space and it was kind of a friendly space. And then after lunch we all went home. So this was something we did once a quarter, all volunteer led, no cost to the institution. But it was a way for our little group of allocators to get together, share information, share price practices. It was a really unique opportunity, really unique group and it was really reflective the fact that for allocators, you know, we weren't trying to sell each other anything and require school funded information or employees. We were trying to share our best practices so that we could all in our own state, provide a better outcome.

[Maeve]

For the beneficiaries of the capital with which we will implus at the moment.

[David]

Perhaps this is obvious, but the reason allocators are willing to trade information with each other is because most of the new trends and most of the top managers are not capital constrained. In other words, it's truly not a zero sum game. Whereas let's say venture GPS at the Series A may not be as willing to share deal flow because there could only be one winners in that space. Is that basically what it comes down to or is there more dynamic to it?

[Alex]

No Dave, that's a phenomenal point and I'll give you just a quick, you know, sound bite on that part because this would come out sitting around that table or talking whether our allocators and for the most part, yeah, you're exactly right, almost every asset class was, was not strong in terms of we invested and they invested. Actually that's, that's better. That really helps. We're, we're on the same, we're locking our arms together. The one place where that may not be true is actually related to what you just said. If our institution has a relationship with XYZ Venture Capital Fund and we just got an allocation to XYZ Fund 7, that's great for us. But us having that allocation is not reflective of us shoehorning out other folks. It's really a rare question, especially for the very hard access venture capital funds.

[Maeve]

Building long term relationships with those firms, seeing them and them seeing us as long term partners and investors in what they're global and what we're investing in.

[Alex]

And that does not impugn upon the.

[Maeve]

Ability for other allocated around the table.

[Alex]

Around the country to also have built those relationships or try to build relationships. So it's really this kind of separate thing where we're comfortable saying yes, we're invested in this liquid asset class, this liquid fund.

[Maeve]

If you're about to do, that's great.

[Alex]

And acknowledging, you know, hey, yes, we did get an allocation to XYZ vector on 7. You guys may not have invested or gotten an allocation, but that's not because we did.

[Maeve]

You know, we spent a long time building that relationship.

[Alex]

Happy to introduce you to this team, but you guys are just meeting the political economy. So it's a really different kind of world and it's very nice when you're on the allocator side of the table.

[Maeve]

People are very friendly.

[Alex]

Everyone always says, like, oh, what a.

[Maeve]

Great question you had.

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[David]

Andy golden, who used to run Princo, he told me one of the reasons he retired is he wanted to see whether he was really that funny or whether it was tons of billions of dollars behind him. And perhaps this is naive on my side or maybe too direct, but whenever I find myself in zero sum games, I'm just explicit about it. I'm trying to partner with this manager I'm deploying in him. This is maybe not the best time. Maybe in the future there'll be future allocation and if it's not non zero sum, I'm happy to make that introduction. What do you think about this perspective of being kind of extremely explicit on where you could be helpful, where you can't versus kind of making excuses?

[Alex]

Yeah, that's such a really great point. The one thing, and this does come up, this did come up in my career I have seen this where.

[Maeve]

Well, if we are in a vest.

[Alex]

Form, if we are an investor in a fund, especially a private fund, well for the most part comfortable sharing that.

[Maeve]

You have our allocators talking about it easily, discreetly, without publishing this on a legislative.

[Alex]

Sometimes it would happen though where we're evaluating funds, we're looking at investing in certain types of funds. And so we need to keep that discreet either discreet because we know, hey, this is a new fund, they're only taking a certain number of clients and.

[Maeve]

Well, we're one of a few that's a talking to because of legacy relation false.

[Alex]

Well, you know, we really value that.

[Maeve]

And we don't want to share that publicly. So we're not going to share that publicly and we're not going to put it in people's face like hey, we.

[Alex]

Got access to this plan, you haven't.

[Maeve]

Even heard up yet.

[Alex]

So it's really a matter of just trying to be respectful, professional and polite.

[Maeve]

And open where you can be.

[Alex]

The other piece about that too is a reflection of the culture of the institution and a reflection of the culture.

[Maeve]

Of the senior leadership on your investment team.

[Alex]

So I've been fortunate that the leaders that I work with in the allocated.

[Maeve]

Community were very open to sharing, very open to meetings.

[Alex]

Some allocators I heard don't really take.

[Maeve]

A lot of meetings.

[Alex]

Your portfolio is full or they'll call you if they need to. Whereas places that I worked, very fortunate.

[Maeve]

Because it's my personal philosophy of, well, hey, if someone comes to town, you know, we have time, you can meet with them, we'll be up front, blah blah blah, we'll be well enough. Well, it's really I think of the allocator community when that community of discretion where necessary, but trying to be polite and friendly because this is a wall fun game. And the allocator community of Bag and scrapbook.

[Alex]

You're very small loan, everybody knows everybody.

[Maeve]

And if they're not in your first line connection, you're all one, usually maybe two. Usually just one financial mic motorbooty popped. Well, most people have a very polite.

[Alex]

Application, otherwise they don't really work with a whole lot.

[David]

You mentioned that as an allocator you always wanted to go where the puck is going to. So let's say you had a thesis on GP stakes 10 years ago when dial was just getting started. Assuming that you can't invest in a brand new asset class, how do you operationalize digging into the asset class and what are those steps for an allocator? Either getting into new asset class or getting into either getting into an asset class that the allocator had previously not been in. So perhaps they're now getting into venture capital or getting into an asset class that's brand new or that's really risen in the last couple of years.

[Alex]

That's a great question. The first and this is where being.

[Maeve]

On the allocator side of the table.

[Alex]

You'Re very lucky in this regard that if you're encountering a new asset class.

[Maeve]

That you haven't invested with before or.

[Alex]

An up and coming asset class. So think private credit for the last 10 years, especially the last few years.

[Maeve]

Has been a little hot.

[Alex]

One thing that you're able to do easily is call every GP and ask to get smarted.

[Maeve]

So you will call the big banks.

[Alex]

Call JP Morgan or Goldman Sachs, ask them to fly to wherever you are.

[Maeve]

If you're In Battle Creek, Michigan, in Cleveland or St. Louis, Missouri, they will all fly up to come see you.

[Alex]

And you can ask. And we've done this many times. We just want to get smart on this asset finance. And every big bank, every consulting firm.

[Maeve]

They get paid on not just the.

[Alex]

Friendly meeting, but on the execution.

[Maeve]

Something after the fact.

[Alex]

A lot of times the execution can only start in the initial process of education. And so you reaching out and asking for that education while people all and over a fist provide that for you. So you have this opportunity from the investment community, investment managers alone.

[Maeve]

And you can get lots of different.

[Alex]

Perspectives because they know you know, you're just entering the dating pool and you're trying to see which type of fund.

[Maeve]

You'D like to swipe right on.

[Alex]

The second thing that you can do is talk to, like I mentioned, when Nick Cleveland is very allocatedly talk to other allocations. So reach out, reach out first to your warn network and ask like hey, has anyone invested in this specific Fund this specific asset fund. You may already know this, but it's.

[Maeve]

A very quick turnaround.

[Alex]

You know, within the next day, you'll have a response, you know, oh, we haven't, but you could talk to these guys. This team over here, she has, the new CIO brought this strategy to the table. So she'd be a great person to speak with. And you can get them on the phone even if you don't know them. You just send them an email. Hey, we're an allocator.

[Maeve]

We're looking for investment strategy. We heard great things from someone else, a friend. We'd love to talk to you about it.

[Alex]

So within just a day or two, you can have set up a bunch of calls with other allocators. We'll find out and learn more. And then the final part, if you're getting closer and closer to thinking about investing in a new tech fund, new type of asset class, well, specific move.

[Maeve]

On is meeting with them.

[Alex]

And one thing that's happened, especially in.

[Maeve]

The COVID and post Covid era, is.

[Alex]

That a lot of meetings, a lot of initial meetings especially take place over.

[Maeve]

Zoom or over teams types of calls.

[Alex]

One thing we always like to do where I came from, you might have.

[Maeve]

That first call, just kind of get to know people, just kind of level.

[Alex]

Set, like, okay, is this something worth reading about? But then go see them go. She cans go see the office go in person. A lot of these funds are in major metropolitan areas, and there's always an excuse to get from New York City to Boston, Philadelphia to Chicago to Los Angeles. We're following other allocators, other funds that you can see around that.

[Maeve]

And if you can make a good day of it, then you can make it worth it. Meaning you don't have to have all of your meetings over to negotiate, plan to get to know people, get to learn a lot more about it, and.

[Alex]

They want to teach you. And that's, you know, really, how else.

[Maeve]

Can you do it?

[Alex]

One thing I've discovered, especially with new AI tools that have come out like ChatGPT, a lot of people say, you know, while these tools will surpass all.

[Maeve]

The need for the regular investigatory work.

[Alex]

But one of the problems that you.

[Maeve]

Had, especially with, for example, the Oracle at Delphi, he now departs well over.

[Alex]

From Greece, is that even if the.

[Maeve]

Oracle has all the answers, we have to know what question and the words you get. The answer is wrapping the Ottoman circle from a conference. Otherwise you might go to war. So the best way to get some of these Neptunes and I think the best way to build relationships and truly understand people and funds and firms and bosses is to go meet them, go shake their hands if they dial upon, ask them questions. Well, ask them questions that hopefully they weren't asked by everyone else.

[David]

It's funny, I sometimes get frustrated with ChatGPT. I ask it questions and it answers the questions literally. And then two months later I realized I was clearly asking the wrong question and I get frustrated. I'm like, why didn't it tell me this was the wrong question? It just very basically answered it literally. So it's kind of funny how, how underrated asking great questions are you mentioned you like to go on site to the gps. What exactly are you trying to ascertain? What, what are you able to see in an in person that you're not able to see on a zoom specifically?

[Maeve]

Well, what car they drive, start with.

[Alex]

Kind of a funny thing. But we always ask, we always check, we always go to the parking garage. I can look actually small thing, but the first thing that we're looking for is really from the IDD and an.

[Maeve]

ODB perspective sample form.

[Alex]

And something that I'm afraid to say that it took me too long to realize is that the odb, the operation of the diligence slide, is almost always the first point of contact necessary. What I mean by that is historically in the Allocator community, operational due diligence, ODB is usually the last thing that happens. You know, you send the CLO or the head of ops or whoever that is where you're consulting, usually with a checklist of important things to go see.

[Maeve]

How things are flowing and they come over okay.

[Alex]

Well, it's happened a number of times.

[Maeve]

My career with Allocator that you go down to the wire with a number of ponds, you go visit them, especially if they're in an afternoon at the wall trip to go hit tires to them. And then the 4dd comes in last.

[Alex]

And discovers there's a critical red flag.

[Maeve]

So a critical red flag, for example.

[Alex]

Could be my fund is self administered.

[Maeve]

When the guy that owns the firm is not.

[Alex]

Therefore that's a red flag.

[Maeve]

We forgot what we call. And finally in myallocator career that we.

[Alex]

Put these, not many, just a few.

[Maeve]

Odd red black questions up front.

[Alex]

So not the full odd work.

[Maeve]

But we want to know, hey, before.

[Alex]

We come visit the office, before we come say hi and really get some of you guys, we just got to.

[Maeve]

Ask a couple of questions here. We just need to make sure as.

[Alex]

Long as all of these are yes.

[Maeve]

Then we're okay, you know or no.

[Alex]

One so upon is self administered. No, we're not in unless it's in Chicago. And instead of if the fund for example is working with a non top tier accounting firm or has recently changed auditors multiple times like that's the kind.

[Maeve]

Of red flag where hey you know what?

[Alex]

We've seen this many many times before.

[Maeve]

People not do it.

[Alex]

So those just few odd questions. We'll actually put a few foot before.

[Maeve]

Meeting with any manual thing.

[Alex]

And then when we're going on site we're doing a few things.

[Maeve]

I mentioned the cars.

[Alex]

There's this old joke that one of.

[Maeve]

My first CIO's mark used to be saying.

[Alex]

You would call it red Ferrari syndrome. They go into a PM's office and you'd see on their desk, you know, instead of NP10 eight days and all that stuff, you'd see books about yacht books about Ferraris. You'd see the lot of magazine you'd.

[Maeve]

See at the airport with the Lamborghini thing. And you'd look into the parking lot.

[Alex]

And instead of seeing regular cars, even.

[Maeve]

A BMW could do a bunch of.

[Alex]

You'd see you know, APU graphic or.

[Maeve]

You'D see a Ferrari catalog for a.

[Alex]

Compact which actually like it's happened and you realize that the manager as food.

[Maeve]

As they were numbers will always be probably.

[Alex]

One thing I discovered in the allocated community.

[Maeve]

As much as people say like oh, performance is not the most important thing.

[Alex]

I love to ask people when they.

[Maeve]

Say that how many managers of you.

[Alex]

Guys that have bought solitude what bottom half?

[Maeve]

We're always meeting with top half, top quartile, top depth dial manager.

[Alex]

But performance is always, almost always, almost always great. So you got to look at everything else. So separate from the discussion about evaluating performance or what I feel like what's.

[Maeve]

That do when we go meet with the managers? You know, we're looking in the parking.

[Alex]

Lot, looking at the office, looking to see for example security on the office. You know, were we able to walk into the building and into their office by kind of tagging along behind someone? You know that happens sometimes something we notice some places you go in, it's like a fortress. Nobody gets into any office without a key card. All the servers are locked up, you know, with a separate key card or they're really legitimate offside, off site backup capabilities, things like that. One other. I'll just give you this one last question that we love to ask senior.

[Maeve]

Leaders and junior leaders and investment staff when we go visit a DC and.

[Alex]

If you ask it On a zoom.

[Maeve]

Call, you know, you have all the.

[Alex]

Faces, maybe they're all in the same.

[Maeve]

Worry, maybe they're in different levels, but.

[Alex]

You'Re always going to get the same answer.

[Maeve]

If you're on a zoom call is.

[Alex]

That when you're in person, you like.

[Maeve]

To end and end and react in a separate room. You will PM and to the analysts, what is your industrial problem? How do you make money? How do you generate alpha that swings will come.

[Alex]

And for the most part, not surprisingly, the answer was pretty consistent. What you hear from the analysts, senior.

[Maeve]

Or junior, what year from and how the junior PM and what you hear.

[Alex]

From senior leadership is usually very consistent. What can be concerning is when those answers differ, when the answers differ, like.

[Maeve]

Oh, we made a lot of alpha here.

[Alex]

We used to make alpha probably just difficult, but now we make alpha a different loan and if the senior leaders say something must quite different lot that is more difficult and we put fair notes afterwards. Hey, what was the vibe? What did you sense when meeting with.

[Maeve]

The junior staff independently of meeting with the senior staff?

[Alex]

We have noticed.

[Maeve]

I'll never forget the meetings where it.

[Alex]

Happens because it doesn't happen often and.

[Maeve]

That'S where you have to go and you have to meet with them, you have to see them feel like there's a vibe that you get the vibe that you get the feeling that you.

[Alex]

Get when you visit the manager and.

[Maeve]

You meet with the team independently, that.

[Alex]

They'Re excited to be there, they see great opportunities, things are going well, staff is being compensated from an equity perspective.

[Maeve]

That leads you to believe what we're going to be the next generation of leadership that takes over the car while the senior leadership, the rent, who leads?

[Alex]

Or you get a feeling that you're visiting a prisoners of war camp on Park Avenue and they're still getting fed, but they're going to get out of there as soon as possible if they pay. And that has happened to 81 out.

[Maeve]

Of 25 meetings that I've been to.

[Alex]

But you won't get that in a zoom call because everyone will be on.

[Maeve]

The same date bigger and their friend.

[Alex]

Pocket phone while asking, answering those questions independently, being a vichap the red Ferrari Aniston drone.

[Maeve]

And I think probably most important, though.

[Alex]

Few, well, this isn't the full OED.

[Maeve]

Trip menu, mind you. This is the red flag odd check. You know, just a few questions up.

[Alex]

Front that hey, if these things are.

[Maeve]

Not hit that we're not meeting, calling.

[Alex]

That stuff done allows you to have.

[Maeve]

Much, much better meaning much more focused.

[David]

We talked A little bit about how LPs can get up to date on new strategies or up and coming asset classes from the GP side. Let's say they realize that they're in a meeting with somebody that's getting up to date on an industry. What are the best practices? What have you seen in the very top gps that are masters in this education process and how do they turn that into an investment over time?

[Maeve]

Yeah, it's a great question.

[Alex]

The real critical part, number one, is being able to explain complicated things simply and ensuring as well, because this has happened in part.

[Maeve]

Needles all function. You go to a meeting and you ask exactly as you ask, how can they share this information?

[Alex]

And you start getting the speech and.

[Maeve]

The portfolio manager or the PP have their prepared speech on a given topic and they're going to work their way through it.

[Alex]

We're not really noticing whether the lp.

[Maeve]

The allocators across the table, are they really understanding what's happening? Well, are their eyes leaning over because technical language is being used that loyal.

[Alex]

Will sometimes, especially younger LPs, they may not know the right question. And sometimes it's hard for the GP to discern that the LP is just.

[Maeve]

Rotting their head and saying yes, but.

[Alex]

Isn'T really picking up the critical points. So trying to discern, like Richard Feynman.

[Maeve]

If you ever seen his lectures, do you really understand the gaps were driving through here?

[Alex]

And if not, let's pause and make sure each part is understood because I mean they're sharing what they think is really critical alpha generating capabilities and that's valuable. So we should highlight the value that.

[Maeve]

They have and their capability provided that.

[Alex]

Alpha, especially on a consistent basis, because.

[Maeve]

That'S hard to find.

[Alex]

The other thing, and this is sometimes common, not as much common today as it was 20 years ago, but I still see it. Ask GPS for some information and they'll.

[Maeve]

Send you a link to their pitch deck, a link to the data room.

[Alex]

Or maybe they'll send you a PDF.

[Maeve]

Of their pitch deck.

[Alex]

But what you need sometimes people like Maeve, save me the time, send me the Excel file with all the data.

[Maeve]

That we're looking for.

[Alex]

And sometimes that Excel file is just a performance or monthly performance, but you.

[Maeve]

Want much, much more than that.

[Alex]

And so anticipating what allocators are looking for, hey, you know, here's the historical performance monthly in Excel. I'll also here on the historical exposures.

[Maeve]

And the profile attribute reports to show the drivers of alpha on a given basis. Here, the factor model that you run.

[Alex]

Answer all of their questions before they.

[Maeve]

Can even be asked or at least.

[Alex]

Have those answers available.

[Maeve]

Easy for the allocators to be able to get these because the goal on.

[Alex]

The GP's perspective is to get indebted and the goal from the allocator's perspective is to find and break investments for their institutions. Everyone's on the same page trying to help their beneficiary. But the key sometimes is that miscommunication or you know, delay unnecessarily because the.

[Maeve]

Process by which we're communicating with each other are different now we're speaking French, they're speaking Italian.

[Alex]

Yeah, they're roughly same. They have the same basis. It's about the same language.

[Maeve]

So therefore we're not understanding the same.

[Alex]

So trying to anticipate that. Get ahead of glazed eyes, get ahead of the data requests, get ahead of the analytics. Not even just a lot of data. But here are the analytics that you.

[Maeve]

Might run and here are the questions you might have had. And here how we sharing graph these.

[Alex]

Types of questions for example well alpha outside of factors that's new our data.

[Maeve]

To this benchmark and probably appropriate benchmark because if they show you clearly what.

[Alex]

We'Re inducting that kind of stuff that.

[Maeve]

Allows the relationship to happen sooner.

[David]

Said another way you want to be able to explain the different layers of the thesis. I love the Einstein quote. Everything should be made as simple as possible but not simpler. So explain it to a simple most possible way without oversimplifying it. Ask and answer questions very both very literally in that if I'm asking for last month's report, send me last month's report but also try to get behind the interest of that question. Why are they trying to do that? Well maybe they're trying to figure out our track record. Maybe it would make sense to give them a three year versus the one year that they asked. Just make it simple to interact with you. Make it simple to for them to gauge the relative performance that you have versus the benchmark. So really realize that a lot of GPS inadvertently think that, well, maybe they'll get to a diligence process without asking about these points. Almost like they're hiding diligence information one way or another. If you could do the opposite, which is lead with that and disqualify the LP before they disqualify yourself, you're also saving both both parties more time.

[Alex]

100 yeah, you said it exactly. It's anticipate the larger question of what they're looking for.

[Maeve]

Try to give them, you know, maybe not too much but a little bit More the thing we're asking, right, so that they can come to the true understanding that you have which is that you are providing alpha for your fine. You'd like them to be a five.

[David]

You didn't even have chance to go down JP Morgan Cleveland Clinic, your time at Aberdeen. So we're going to have to run this back. But before we end, tell me a little bit about Allocator Training Institute and who should be double clicking on Allocator Training Institute and who would be the best fit as a potential customer.

[Alex]

Yeah, absolutely. So the Allocator Training Institute has created.

[Maeve]

The first training program for younger allocators. So it's a three level program really geared for those folks who are working in a walk to work at an allocator and want to learn topics. I'll give you an example five basic models. You know, how to create a factor model, how to evaluate more investment for how to run key or need analysis to evaluate whether or not all of.

[Alex]

These topics and many more are not.

[Maeve]

Taught in undergraduate business schools or graduate business school. I know because I went to Mobile. So we have created as a program that these young law enforcers can get really learned way to talk publicly about how to work, how to analyst it or how to evaluate. We created the program a few years ago.

[Alex]

It's going really well and the audience so far seems to love it because it's the one and only place where.

[Maeve]

You can learn all the quantitative and qualitative tools on how to be healthy.

[David]

And who would this best be used for somebody that just starting out and allocating somebody with a couple years of experience. Is there any value for senior allocators and who could benefit the most?

[Maeve]

People that seem to find it most.

[Alex]

Valuable have between we say negative one.

[Maeve]

10 years of experience, negative one meaning.

[Alex]

Still an undergrad like a finance student like a senior walked to work at an Allocator. Maybe they've had a summer internship and.

[Maeve]

They want to go back but they're.

[Alex]

Trying to get the skills so they.

[Maeve]

Can hit the ground running.

[Alex]

Up to 10 years of experience is.

[Maeve]

Really small especially for the quantitative tools that we're teaching a place that we found most valuable.

[Alex]

There are some interesting advanced construction methods.

[Maeve]

And game studies that we teach.

[Alex]

So for example what happened at the.

[Maeve]

Public floor employee ineps have been Pennsylvania what happened at Calpers? What happened at Todac Petchief Brand? What happened at diving good help. What happened at parts of Humper?

[Alex]

These advanced case studies we teach them.

[Maeve]

In the program but for a lot.

[Alex]

Of young analysts not necessarily useful for.

[Maeve]

Their career, yet something for their back pocket.

[Alex]

So for the senior folks learning about these case studies, what happened to the senior leaders at these institutions can be critical.

[David]

When people ask me why I'm so interested in investing, the best way I explain it is the infinite game of investing. And there's a specific thought experiment. So if me and you, Alex, had a million hours to go today and diligence every single asset in the world, from country specific natural resources to small caps in other hemispheres to, to quant and hedge fund strategies, even if we had perfect knowledge of every single asset class in the world, tomorrow, it would be stale. Tomorrow there's a new administration that comes into a country, a new competitor set that comes in. It's literally this skill that you cannot master even if you had a million hours a day. It's constantly evolving. It's one of the things that makes it so fascinating why there's this infinite amount of knowledge that you could gain. Not, not to keep people from starting to learn or from kind of having this analysis paralysis. But it is this kind of cool thing where you know that you could keep playing this game, you know, for the rest of your life and keep on improving yourself.

[Alex]

Well, data, I think that's incredibly well said. And one of the things I heard other people say, this beverage, I'm about.

[Maeve]

Food, but the more I learn, the less I know.

[Alex]

And I thought, and this is, this is the best part, back in the 90s, originally dating myself, when I started.

[Maeve]

My investment portfolio, I remember thinking I knew how to invest, I knew how.

[Alex]

To fix stock and I thought I.

[Maeve]

Was very good at it. Obviously I did nothing about that in the early 2000s, by time I knew about startups.

[Alex]

And then after Warden Creek, I had such a great experience there.

[Maeve]

I thought I knew the appropriate and only way to invest for institutions and even with families on foundation. And then it took me a couple of career clones of my life just to recognize how much I have learned, but how little I know. And I think your point? Well, even if we could spend infinite time, you know, a million hours studying every odds fund, everything, things change tomorrow. We're getting to plays, new policies, new frameworks with fomc, with how they think about infrastructure.

[Alex]

And so therefore we have to update.

[Maeve]

And who could have thought, you know.

[Alex]

I'll never forget, you know, when cell phones first came out and I remember seeing a camera on a cell phone.

[Maeve]

1997 and thinking, oh, that'll never spell a bit phone and that is ignorance. And then Bitcoin, when that came off. Oh, I remember thinking bitcoin, crypto, blockchain, all that stuff.

[Alex]

Well, year after year, all this will never get anymore. And now it's also almost 2 billion.

[Maeve]

I. I keep being humbled by how little I know and how much I've had to loan.

[David]

On that note, Alex, thanks so much for jumping on. Look forward to continuing this conversation live.

[Maeve]

Awesome.

[Alex]

Thanks so much for your time. Thank you.

[Podcast Host]

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[David]

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