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)

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.

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)

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)

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 |

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)