How I Invest with David Weisburd

Episode 248: The Institutionalization of GP Stakes: What Comes Next

Recorded at the Future Proof Conference, Huntington Beach
Date: November 24, 2025
Guest: Mark (CAS Investments)
Host: David Weisburd

Episode Overview

David Weisburd interviews Mark of CAS Investments, the world’s most active investor in GP (General Partner) stakes, about the evolving GP stakes market, structural changes, alignment of incentives, downside protection, and the parallels they see between GP stakes and sports franchise investments. The episode focuses on how institutionalizing GP stakes creates new opportunities—and risks—for both GPs and investors, and it closes with an engaging debate on the surging value of sports franchises.

Main Discussion Points and Insights

Introduction to CAS Investments and GP Stakes

[00:02–01:03]

• CAS Investments’ AUM has grown from under $300M to over $10B in the last decade, with a team expanding to over 100 people.
• CAS is “the most active investor in GP stakes in the world.”
• “All of that's focused in the private markets. We don't really invest a ton publicly.” (Mark, 00:47)

What Is a GP Stake?

• GP stakes = buying equity in the management company of a private markets firm (private equity, credit, real assets), rather than just being an LP (limited partner) in a fund.
• The CAS approach is fundamentally thematic: invest in long-term trends, notably the rapid, persistent growth in private markets.
• The rationale: owning a slice of the firms benefitting from explosive capital inflows to private equity, credit, and real assets platforms.

GP Stakes: Evolution, Structure, and Motivation

[01:03–04:10]

Evolution of Deal Structure

• The market for GP stakes has shifted from straightforward sales of common equity/profit interests to more complex structures (preferred equity, NAV loans), but CAS remains focused on equity.
• “We remain focused on owning the equity... We're not really a lender, we don't want to be a lender. I don't participate in the full upside if I'm just a lender.” (Mark, 02:57)
• GPs increasingly need growth capital to scale—proceeding as both investor and operator in their own funds.

GP "Skin in the Game"

• Private equity GPs must co-invest significant capital in their own funds (GP commitment), unlike public market asset managers, intensifying the need for external capital.

Addressing Misconceptions: Incentives and Adverse Selection

[04:10–07:14]

Are GP Stake Sellers Misaligned or Underperformers?

• The claim that GPs cashing out misaligns incentives or signals insider pessimism is largely wrong:
  • Most deals involve primary capital (for growth), not just secondary (cash-out).
  • GPs get diluted only if they believe external capital will accelerate firm growth/value.
  • Only top-performing GPs can sell minority stakes to institutional buyers.
• “Pie people are focused on making the pie as big as they can be and looking for partners to help them do that with.” (Mark, 06:07)
• Historical data shows firms selling minority stakes often outperform subsequently.

Economics of GP Stakes

[07:14–08:32]

Core Returns

• Primary return sources:
  • Management fee profits (“very consistent yield”)
  • Upside from carried interest, if investments perform well
  • Growth in enterprise value over time via fundraising success

Comparing GP Stakes vs. LP Investments

• As an LP: Specific, narrow bet on strategy, asset class, vintage, manager.
• As a GP stake holder: Broad, diversified exposure to a manager’s future platform—a bet on longevity and franchise value.

Downside Protection and the “CAS Case”

[11:13–15:01]

Downside Protection: Contractually Obligated Management Fees

• Mark’s mantra: “When you buy into these private equity firms, it’s locked up capital ... contractually obligated management fees.” (11:30)
• Stable management fees (from long lockups) offer downside protection uncommon in other asset classes.
• The CAS Case: If after investment, the GP just raises and manages one more fund (per historical performance), absent any new profit/carry, the investor recovers most capital due to fee income alone. Downside is relatively limited (a 20–40% loss is a “pretty bad case”).

Alignment

• CAS principals and employees have ~$700M of personal capital invested, with a majority in GP stakes, illustrating commitment and alignment.

Return Expectations and Underwriting

[16:04–18:04]

• Base case underwriting assumptions are conservative: moderate AUM growth, below-historical investment performance.
• “If we get comfortable with the downside, the upside takes care of itself.” (Mark, 17:38)
• Target IRRs in the high-teens to low-20s, and 3–4x multiples are common base cases.

Liquidity Challenges and CAS Solutions

[18:04–20:42]

• Traditional GP stakes investments lacked liquidity; CAS pioneered secondary processes and annual liquidity windows for LPs.
• Their scale—7,800 individual investors and 500 advisory firms in ~40 countries—allows for robust internal secondary markets.
• Typical investment tenure: expect principal recovery over 7–8 years, plus regular cash flow from management fees.

Sports Franchises: A Scarce, Uncorrelated Asset

[20:42–27:47]

• Host (David) and Mark debate the surge in US sports franchise valuations (~$10B sales).
• Mark’s view: value driven by supply/demand imbalance—spike in billionaires, static number of pro teams.
• Quote highlight: “There are seventeen times the number of billionaires as there are sports teams.” (Mark, 21:48)
• Sports teams offer:
  1. Strong returns (historically ~16–17% IRR)
  2. Low correlation to markets (correlation ratio ~0.1)
  3. Lower volatility than comparable alternatives (e.g., energy stocks)
• Structure matters: US leagues are effectively “cartels,” collectively controlling supply, labor (players/coaches), and distribution (media).

Bear Case (Weisburd):

• Attention is a finite commodity; sports ultimately compete with all entertainment.
• Mark’s rebuttal: live sports’ unique, unreplicable nature ("You cannot AI this type of content”— 25:38) sustains scarcity and value, even as other content diversifies.

CAS Philosophy: All-In on Private Markets

[27:47–28:00]

• Mark emphasizes CAS’s total focus: “I have all my money in GP stakes. I don't have a single dollar in public investment.” (27:47)
• Illustrates the “skin in the game” and alignment narrative running throughout the episode.

Notable Quotes & Moments

• “We remain focused on owning the equity ... I want the equity side of the ledger.” (02:57, Mark)
• “Pie people are focused on making the pie as big as they can be and looking for partners to help them do that with.” (06:07, Mark)
• “When you buy into these private equity firms, it's locked up capital ... contractually obligated management fees.” (11:30, Mark)
• “If we get comfortable with the downside, the upside takes care of itself.” (17:38, Mark)
• “There are seventeen times the number of billionaires as there are sports teams.” (21:48, Mark)
• “You cannot AI this type of content. ... They want to go watch the 49ers play in person.” (25:38, Mark)
• “We are not focused on these startup things ... we want the predictability ... it's downside protection. It's about certainty.” (26:31, Mark)

Timestamps for Key Segments

• 00:14–01:03: Introduction to CAS—firm growth and structure
• 01:03–02:24: Explaining thematic approach and GP stakes
• 02:24–04:10: Evolution of deal structure in GP stakes
• 04:10–07:14: Addressing adverse selection/misalignment criticisms
• 07:14–08:32: Drilling into the economics of GP stakes
• 11:13–15:01: Downside protection and CAS's "contractually obligated fee" philosophy
• 16:04–18:04: Underwriting returns and risk management
• 18:04–20:42: Liquidity: innovations and challenges
• 20:42–27:47: Sports franchise valuation: the bull and bear case
• 27:47–28:00: CAS’s all-in philosophy and closing remarks

Tone:
Open, analytical, and at times light-hearted (sports debate); Mark is candid and thorough, emphasizing downside protection, alignment, and the “owner, not customer” mindset.

Summary Takeaway

GP stakes investing, when executed by aligned, conservative, and highly thematic managers like CAS, can offer unique cash-yielding, downside-protected exposure to the long-term growth of private markets. The current GP stakes landscape is maturing, attracting more institutional best practices and offering greater liquidity, yet differentiation hinges on underwriting, structure, and alignment. The episode’s sports franchise tangent creatively illustrates the enduring allure—and risks—of scarcity and uncorrelated assets in diversified portfolios.