Rahul (2:19)

The thing is, with all politics everywhere today, people say one thing one day and another thing the other day. So if you react every time something is said, you're Chasing your tail the whole time. But if you just sort of take a step back and see what is said and say, see what happens and really what is the impact going to be. So, for example, when there was the endowment tax, it was a really big thing that people worried about talking about and everything. Everyone's calmed down right now. We know where things are going to land, then they have to think about things. If at that moment everyone decided they were going to do something dramatic and they realized they didn't need to do it, it would have been probably overzealous. And people sort of thought, oh no, I overreacted. So I think I see now people actually just taking their time and just being more slow, more patient. You know, the hardest day, Ted Sadies always says the hardest day to invest is today. And I agree with that. So I think just taking your time, which is what people are doing more and more, is the right way to do it. You know, pre gfc, everyone was in a rush. I just don't see that now. People are fine. This kind of Jomo, this phrase I heard, joy of missing out. I think people are fine to miss out on stuff now. It's not like it was.

David (3:24)

And when they say they're taking their time, are they actually doing more diligence? Are they waiting to see macroeconomic factors play out? What does that mean? Exactly.

Rahul (3:33)

So taking the time to make sure they get to know a manager and if it's the right fit. Smart investors, they chase performance. They're trying to understand, is there philosophical fit? The values of our organization are same as the values of this manager as a person. Are they going to be transparent? Are they going to give us access? Are they doing something that we don't have in our portfolio already? So it's just watching someone. I think over time, people just want to find someone that's consistent, that allows them to sleep at night and is just adding value to their portfolio. The thing about performance, right, it's hindsight, it's 20 20. It doesn't tell you anything about the future. And you never know, even if someone's got a great track record, if it's the right thing for your portfolio. I think the philosophical alignment is more important. If someone invests you because you've got good performance, then when you don't have good performance, they're going to redeem. So I think people taking their time is a good thing because the longer they take, the longer they'll stay with you.

David (4:33)

Have you found that to be the case? In what cases is it that people that take time are actually long term holders versus the ones that are.

Rahul (4:41)

First off, good example, the investors that we took on board in October took between five and 15 years right to come. And it's fine. But I knew at every stage what they were thinking, why they were taking their time, whether we were a fit for their portfolio at the time or not. And so just having those ongoing relationships I think really, really helps you understand how they see you as an organization. If someone says, oh, you've had five great years, I want to give you money and then we have a terrible year and they redeem, what's the point? It's a lot of hard work for nothing. And you're not building a partnership. It's transactional.

David (5:19)

What are they de risking over that five to 15 years?

Rahul (5:23)

It could be anything. It could be changing governance, changing cio. Actually we want more equities. No, we want less equities. Or actually your portfolio is more correlate than we thought it was or it's less correct than we think it was. Already have a lot of exposure in the names you already have in your portfolio. Let's wait and see. It's, it's so many things. It's not, you ask 100 people, it'd be 101 different things. It's just not the same thing. So I think I've just learned over time to just take my time and be patient. Because again, the thing for me, I said it, said it to before. I think the thing for me is if I can pick up the phone and call that person 20 years time, that's what's more important to me than if they're going to invest with the manager that I work with. Having access to people is, is more important than if they invest with you.

David (6:07)

Why is that?

Rahul (6:09)

Because at any time in the future you could end up working with them. If you're short term and transactional about it and they don't invest with you, you tend to just walk away from it and say, move on to the next person. But a lot of people who are transactional also tend to have inappropriate behavior. They're really annoyed that someone's not invested them or they don't understand or they don't agree with their reasoning. And so they go away and they tend to have behavior which upsets an LP and they'll be like, I'm never going to deal with that person again because they behaved inappropriately. And a master I worked with for, I worked with the hewlett foundation since 1998 and her for 21 years. And she's worked with me across 11 managers, right? And the first manager I ever worked with her, when she fired me, I fired my firm. Still came the next manager she invested with. So the first manager I worked with on was the first manager she fired. The next manager she invested me with is the biggest manager in her portfolio ever. And still today. So the fact is, you've got to maintain those relationships with people regardless of what they do. Sometimes it's not their choice, sometimes the governance thing is an investment committee thing is something that's beyond your control. So I just think about it in that way.

David (7:17)

There's a GP hat, which is you have to be patient. You have to wait until they have an opportunity in their portfolio, until the strategy makes sense. But there's also the LP hat, which is they're waiting five, 10 years. Is that rational? My default framework is that the worst thing you could do is not invest. So the second worst thing you could do is invest too much or be overallocated in the strategy. But the worst thing you could do is just not invest. Because over time, you know, the market goes up every five years, typically.

Rahul (7:49)

But those people are always invested.

David (7:51)

They're just other strategies.

Rahul (7:52)

Every GP will say the worst thing you did was not invest with us. Every GP would say that, right? Because every GP thinks their fund's the greatest fund in the world. But the reality is, if someone invests with you at the right time, when you know they're going to stay with you for 20 years, I'd rather wait for that. Then they invest with you and you have having a rough period and they redeem. What's the point? So I think this whole philosophy of building a relationship and them investing at a time is right for them, but they build the position and build the relationship is the right way to do it. So I kind of always say to people, it's like eating a sandwich. If you take bites of it, you taste it and you know what's in it. But if you. If you eat the whole thing, you'll be sick. Right? You never know what a manager is going to do until he's actually in your portfolio. And when they're in your portfolio, all of a sudden, like, oh, wow, actually it's more volatile or it's more correlated or. Or it's not doing what I thought it would do, or there seems to be a correlation between this traction, that strategy and I don't understand why. So I prefer to sort of take your time. You know, if you go dating with Someone you don't want to meet them on the first date and tell them everything about you. You need to sort of build that relationship, that rapport, that trust, that alignment of values.

David (9:01)

There's a speed limit to it.

Rahul (9:03)

I think there is. And look, sometimes it goes faster in certain phase, sometimes slower. But I'm lucky because it's a luxury.

David (9:10)

Is the opposite also true? You somehow somebody needs access to a specific manager that you fit that bill. They invest. Maybe they only know 10% about what they should know about your fund, but that they start to learn as an investor.

Rahul (9:24)

A hundred percent, 100%. But I always say to people, you know, you should ask these questions when you meet managers, investors. There's a lot of questions investors don't ask that they should be asking or they ask a question, but not in the right way. And this is just me sitting on the other side because I sit on the receiving end when they find out things that are surprised, and not just from me, but from other managers like, did you know this? Did you know that? I didn't realize this. I didn't realize that.

David (9:52)

It's kind of the difference. I would call your playbook, the $100 billion playbook, but maybe not the best billion dollar playbook. In other words, what got you to a billion dollars might not get you to $100 billion.

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Rahul (11:29)

100%. But it's the first money you raise is the hardest money to raise, right? And then after that it should get easier. The irony for me, it's been the other way around. The first money I ever raised was.

David (11:47)

The easiest to raise because of the market cycle.

Rahul (11:51)

Market cycle. The firm that I was at, where things were in terms of how people are investing and thinking about things.

David (11:59)

You mentioned last podcast, I believe it was Temasek that had 2 million in exposure into one of your funds. And then I think in the next fund.

Rahul (12:06)

50.

David (12:07)

50 million. Yeah, yeah, yeah. Is that common? Is that how you've scaled your business in that you get large investors to write small tickets and you build trust over time?

Rahul (12:18)

That was just pure luck, David, Honestly. So I worked at a private bank and they were, I looked after all the international institutional clients. They were a client of mine and they had 2 million in this with this manager that I went to work for. And when the announcer came, I'm going to work, they said, can we give you 50 million? I hadn't even started. And when I went to see the cio, I said, oh, by the way, I've got my first ticket. He said, you haven't even started. I said, I know, but these guys are a client and they, they love what you're doing and they want to do it. And for them it was a big ticket at the time, it was 20 years ago. They, they understood what the manager was doing and they were able to get access. And so, but that's, for me, it's a trust thing and I still have a relationship with them and speak to them. So it's again, the person, this is a person, the person to person thing. I just emphasize it time and time again.

David (13:08)

Your episode, episode 199, one of the most listened to episodes we've had on the show. And the one piece of feedback I get over and over, and I think you said that you got similar feedback, is it must be nice to be able to think so long term, to be able to wait five to 15 years. Why is that not the ultimate luxury? And is it really, is there a whole model, something that could be replicated by everyday people?

Rahul (13:32)

It's a luxury. It's a luxury and I pinch myself every day that I'm in a situation where I can be that long term. But when you do fundraising, marketing, whatever you want to call it. The first principle is that there's an alignment between the person who's doing the fundraising and, and the CIO or the founder of the firm. It's the first principle that everyone doesn't understand or doesn't realize. And if you have that, and that person trusts you, or you have an agreement of how this should go, what pace it should go, the quality of clients you want to have, then you're right with it. For me, I'm in that situation, so I'm very lucky. Not everyone's in that situation. So for me, that is a luxury and I'm lucky to be in that situation. I don't ever want to be in a situation where I'm forced to raise capital, either because I don't believe in the manager, or the manager's pushing me to raise money when they're having a terrible time and no one's ever going to buy and then I'll get blamed for not raising money. So I think everyone who does what I do needs to sit down with the person they're working for, working with, and say, right, what's the five year plan? What do you expect to achieve? I always say it to people when they're building a firm. Three things you need to think about is that what's your edge? What are the mistakes you made in the lessons you've learned? Because that's what shaped your philosophy and your process. And then really, let's get one page, build a timeline along the bottom, whether it's five years or 10 years, and think about assets under management, infrastructure and people, because those are the three things that everyone wants to understand today. People don't just invest in funds. They want to understand what you're trying to build and do. They want to be part of that journey. Funds can lose money, but if a business goes wrong, you're dead. So I think people spend more time trying to understand that. And obviously odd is a big part now of people investing. So I think that finding that alignment and that path to success is really.

David (15:21)

Is that just on the downside that people are concerned about the processes or why would an LP care about a manager that might grow? Isn't that kind of a negative?

Rahul (15:30)

It depends. So if a manager's got 100 million, they want to go to 2 billion. They want to understand, do they understand what it takes to get from 100 to 2 billion? Are they going to build out their technology and their infrastructure? Are they going to build out an OPS team and things like that as they grow? So you Know, I had mentioned, suggested this idea to someone who had built a firm in London. She remained nameless and an investor that I know very well said to me, I could see that you'd given me your advice. But he had no clue what he was doing because it was just him at the top with tons and tons of investment people, no infrastructure, no ops, super or anything like that. So he kind of misunderstood the whole thing. So I think that is the stuff that's going to make the whole thing work. And if it's not there, it's not going to work. So I think people paying more and more attention to that now and for.

David (16:22)

New firms, maybe they're fund one, maybe they're just going into fund two. How many years does it take to get to scale? And what are some predictable things that they run into as they scale?

Rahul (16:37)

You have the guys who are, you know, the goal scorers, they, they come out, they launch, they shut, and then you have the guys who are like planting seeds endlessly to try and grow the business, right? So on the first one, obviously that's, that's the dream. But the problem about that, and I've worked with a firm like that who is four times oversubscribed, is that they think it's easy, right? And so when it goes wrong, they don't understand how to deal with it because from day one, they, they raise more money than expected. Everyone to give them money and they can walk on water. And then when it doesn't go right, they don't know what to do and they're lost.

David (17:14)

Why is that? Because they never put in the discipline or they never, they had it easy.

Rahul (17:18)

They didn't fight, right? If you, if you have a PM who starts with 10 million and it takes them two years to get to 100, then another two years to get to 250. I love those guys because they never give up their fighters and they know how hard it is to raise money. And so they appreciate every investor. I think this whole industry is, to me, about a fine line between it being an honor to manage people's money and people who feel it's their right to manage people's money. And that's a very fine line. And if you feel it's an honor, you appreciate the process and you appreciate how people think and what it takes for them to commit to you and say, I'm going to invest with you, and what that partnership really means. If you raise all that money quickly because everyone thinks you're amazing, all of a sudden there's a Lot of pressure on you. And then when it doesn't go right, you're like, oh my goodness, what am I going to do? I thought I walked on water. And we've seen endless numbers of those in the last 10 years. Right. So all these spin outs come out, raise 2 billion, 3 billion, whatever. And then it doesn't work and they lose.

David (18:22)

What happens next? They lose talent. They're not able to lose talent.

Rahul (18:25)

They turn into family offices, they shut down, they start again. You know, it's, it's same old story.

David (18:37)

We were talking before we started. I had somewhat of an opposite philosophical episode with Yasmine from Sine Fine.

Rahul (18:45)

Yeah.

David (18:46)

And she actually focuses on, she'll work with LPs and she'll figure out what holes they have in their portfolio and, and she'll only deal with providing them those funds at the time that they need it. And it's much more pragmatic in that you're trying to fill a hole with a specific product.

Rahul (19:05)

Yeah, yeah.

David (19:06)

Almost like an opposite of your strategy, which is you build a relationship and wait until they actually need or could benefit from one of your funds. Is there truth to that model? And why can't that model also be true?

Rahul (19:21)

They're all true. I, whenever I speak about how I think about things, I always say it's one way, it's not the way. Right. I always put think about Frank Sinatra, it's my way, not, not, not the way. There's loads of ways to do this. But the philosophically long term minded relationship, everything is kind of suitable to my personality because I'm a people person. I'm not a transactional.

David (19:43)

It's founder, product fit, essentially. It's fit to your strengths.

Rahul (19:47)

Yeah, it fits my personality, my strengths, how seriously I take relationships. And also I, I sort of have this aversion to what I call wheelbarrowing. Hey. Hey David, you want this? No. Hey, David, you want this? There's going to come a point.

Podcast Host / Advertiser (20:01)

Is that a British thing?

Rahul (20:02)

It's not a British thing. I've seen plenty of people do it everywhere, but I guess the terminology is, is British. I, I kind of just have an aversion to doing that. I rather contact people less, but when I contact them it's substantive and you have a good conversation. Even if they don't work with you, you understand what they're doing, what they're up to, where they need help and to be able to have access to people and spend time with them is, it's just, that's priceless. You can't put, you know, I always people more my peers in London will say to you, why'd you go to the US Every, every month it's like to spend time with people because I get a feel for what's going on in the market. I get a feel for what people are worried about or they're interested in. And literally if there's a path to taking the next any of these people or not. And there always isn't. And sometimes there are people I meet that I'll never have a relationship with or I never will have a relationship with them again before. Doesn't matter. I learn a lot. And people move, they transcend organizations. You know, we've had some people have invested us five times, but they've moved to different organizations and stuff. So you just never know what's around the corner. You never know.

David (21:09)

Why is that that they'll invest with you from different positions or for different ones of your funds. What's the consistent principle there that they're relying on?

Rahul (21:17)

I don't think it's performance, even though some of them say it is. I think it's relationships.

David (21:24)

Trust.

Rahul (21:25)

Trust, transparency. Accessibility and just allowing them to sleep a night knowing that if something goes wrong, I'm going to pick up the phone and tell them.

David (21:34)

It's funny because I'm more of this cynical person that I believe that I'm this hyper rational performance investor myself. And then I realized I had this moment of self awareness when I was investing in crypto. This was I think 2019. And I realized I wasn't actually investing into the fund that had the best track record. And I'm like, why? And it's because there's another fund which I won't name because it's kind of a backwards, but it's somebody I really trust. And I knew that he might lose my money, but he wasn't going to lose my money, which was a real concern in crypto at the time. So I realized that me, myself, I was investing not on profit maximization but also on trust, on transparency.

Rahul (22:14)

All those things one of my friends said to me, and I quote it all the time, is performance is commoditized, but integrity is not. And it's I, I would rather someone invest in me because of trust than because of performance because performance is not always going to be there. But you know, I always believe that I've been brought up to do the right thing and I would always do the right thing.

David (22:38)

Is that a principal agent thing in that if I'm at ABC Endowments, my Career is not based on am I getting an 11% or a 10% return. It's whether I could justify my decision whether any of my funds are going to blow up. All these kind of asymmetric downsides situations.

Rahul (22:58)

It is, but every organization is different. I just, it startles me every day how different every organization is. Whether it's process, whether it's governance, whether it's legacy and just. I in Covid I was part of this group that organized these get togethers online and we'd have.

David (23:22)

With lesson.

Rahul (23:23)

Yes, exactly. And we'd have these discussions about different topics and the stuff that people said. I, I'm glad we did it on. What was that technology?

David (23:33)

Clubhouse.

Rahul (23:34)

Clubhouse. We did it on Clubhouse. And I was so glad that people couldn't see my face because some of the comments that people made, I was so shocked. We were saying, why, why would I invest in a new fund? Because by the time it does, well, I'm not gonna even be here and I won't get conversation on it. And I was like, you're in a situation where you have permanent capital and you have the ability to be long term and go early and really, really take advantage of that and get people at their, you know, their best time and their hungriest time. So it just, it shocks me still day to day. I, I think all the, all the principles that we think LPs have, they don't all have them. A lot of them do, but not all of them.

David (24:14)

What do you mean by that?

Rahul (24:16)

So I think people don't take advantage of their situation or their seat to fulfill their abilities and their potential based on the asset, based the client. So the client base are the assets they have. And they think too short term.

David (24:36)

Said another way, they don't care about their mission or they're not aligned with their mission.

Rahul (24:40)

Yeah.

David (24:41)

They're just.

Rahul (24:41)

Their mission is long term, but yes, 100 they're short term. So it's not investment management, it's career management.

David (24:47)

What do you think? I had a conversation with Dan Federer from University of Michigan.

Rahul (24:51)

Yeah.

David (24:52)

And he really focuses on. He wants to go in early on a lot of funds because he wants to build that. Really? He wants to help that fund build.

Rahul (25:01)

Yeah.

David (25:02)

And you believe that it creates a lot of great goodwill with fund managers. Several elite LPs believe that. Do you believe that to be the case and what are some examples of that?

Rahul (25:12)

I think it's a huge thing and I think more and more people do that. And you, you know, you think about all the funds that Yale Back day one when they went on to become some of the best funds in the world, whether it was farallone or bow post or lone pine. And I think over time, I remember Seth Alexander said to me when he left Yale and went to mit, you know, everyone calls David, I want everyone to call me. And he's achieved that now. Right. I think even I would say is almost turned the model upside down because today, in the old days you had a jigsaw puzzle and everyone's like, right, I've got my, my endowment model. I need a bit of this, a bit of this, a bit of this to make it work. But he sort of said, well, actually I'm going to be a treasure hunter and just go and find the best managers, whatever they do. Exactly. So they both work, but everyone calls him now right when they first want to.

David (26:05)

And these are not even contractual. This is just good old fashioned loyalty. You backed me earlier. I'm going to show you that some.

Rahul (26:14)

Some people go and they get really good terms because they can give people big checks and things like that.

David (26:19)

I guess those aren't mutually exclusive. Even if they're getting good terms, they still could king make.

Rahul (26:24)

Yeah, but everyone does it differently. Some people want terms, some people don't want terms. Some people want economics, some people don't want economics. It just depends on what aligns with you or how much money you want day one, or whatever it may be. Everyone's different, everyone's different. There's no right or wrong model. I think you just have to find the person and the firm that suits you and is aligned to what you're trying to build. You know, MIT will have a limit on how much they want you to raise day one. And some people, like, I don't want to raise that small amount, I want to raise a bigger amount so there's not alignment. And other people say it doesn't matter to me. Some people say, as you grow, I want your asset, your management fees to come down. So you just have to find the right partner that's aligned with you and how you think about it. And some people want to work with certain mission based organizations, whether it's an endowment that they went to or a foundation, whatever that's doing work in the space they're interested in. So this is all just so much less black and white than it's ever been, I think, because there's no one way. There's lots of ways similarly to raising capital. I have a way, but it's not the way for everyone. And you know I wake up every day and pinch myself saying, I'm lucky to be able to be in that situation. But I would have breakfast, lunch or dinner with every single client that we have because I love them all and they're great people. They've really taken their time to get to know us. And I think, I really believe if you take your time to get to know someone, they'll stay with you for longer because they understand what you do and they understand where you fit into their portfolio.

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David (28:36)

Yeah. What are some other really top best practices that the lead LPs do that almost no one else does?

Rahul (28:43)

So I think, first of all, process in terms of how they get to know you. Some great examples of that. Rothchild Investment Trust. Some of the best due diligence I've ever seen in terms of them laying out their whole process and who's going to be involved when. From our side, from their side, how long they need, the documents they need. Just incredibly diligent, thoughtful Texas teachers. Again, they have a doctrine called the Texas Way, which sets out their entire organization and what they manage internally, what they manage externally, then what they expect from the external managers and the process of getting into their system, as it were, and then how you get onto the premier list and then how they invest and how they think about different managers. And I think when you lay that out, that people know what you're doing and how you fit into that process, you know, it's interesting, I always say to investors, you always say, these managers keep contacting me all the time and I'm not interested. It's like, well, then tell them you're not interested. They don't know all the time. Now, some of them will still ignore it and still contact you. But if you say to them, listen, it's not a fit if it changes we'll let you know. Nine times out of 10, I think they'll leave you alone.

David (29:59)

I always thought this kind of playing for optionality is an absurd strategy because there's just enormous opportunity cost. If you're spending half of your time for one in a hundred chance that somebody turns around a hundred million dollar fund into the next Sequoia, then you're spending half of your energy on these extremely long tail bets that it didn't ever seem to. It might make sense if you have infinite energy and infinite time, but this play for optionality to me always seems absurd. And yet it seems like the default operating principle of LPs.

Rahul (30:35)

But it's always a free call option for LPs. Always good.

David (30:39)

Isn't there a trade off there in terms of time, energy, opportunity cost?

Rahul (30:44)

I think LPs and LPs will always have that. Some GPs have it, not many, but GPs are always going to be at the mercy of what the LPs want because ultimately they're the ones with the money. Right now there's ways around and people say I'm not going to succumb to those, those terms or those requirements, everything. But the reality is at the end of the day, the LPs are the ones who will fund the business and give the capital to go forward.

David (31:14)

I want to double click a little bit and bring it to life for the audience. So you went from 99 billion to 10. 100.3 billion.

Rahul (31:24)

100.1, yeah.

David (31:24)

100.1. So 1.1 billion in the last close. Some of those were five to 15 year processes. Unpack that. How did specific relationships evolve over the five to 15 years? And more specifically, how are you providing value in the short term in order for them to want to meet with you for 5, 10, 15 years?

Rahul (31:42)

So with all of those people, 5, 15, I've known them all for at least 20 years. Okay, so the one that took 15 years, ironically was a day one investor of ours and then there was changes in personnel and the person who was there when we got fired just decided they didn't want to work with us anymore. So it just went away and it was a horrible ending. And then the person that took over is someone who was someone I'd worked with before and we just were friends and we just talked and they said three years later, can you just send me some information on what you guys are doing? I said, yeah, sure. So I sent it. And then over time we sort of talked, just kept on talking, just kept on talking, Just kept on talking. And Then about three years ago, the conversation changed and said, what you guys do is actually really interesting. And over the next two, three years, we're going to do some work, but I've got lots of other priorities right now and there's some changes in the team, whatever. And then it came, came to the fore this year and said, right, we're ready now to do some work. The adding value was just maintaining a relationship with the person, number one. Number two, helping them with things that they were looking at, whether it's Japan, whether it's India, whatever it may be.

David (32:56)

Making introductions to managers, to managers or.

Rahul (32:59)

To other people who are looking at the same space or they're traveling to different parts of the world. Hey, meet these people. They're really smart. Meet these people. They're really smart. Invite them to dinners in London where our clients are there. So all of those things, it worked out. It worked out great. Another one was someone I've seen, this is their third CIO role, but someone on their team has been an investor of ours twice before and it's just been a slow burn. The organization had a lot of change, a lot of turnover and. But eventually they got to it. But we've been speaking for nine years, on and off, on and off.

David (33:36)

And I've seen you challenge on other podcasts about this. This issue of you never actually ask people to invest or send them materials. Which the reason I think a lot of people challenge you on this is because it's antithetical to any other business process. So any other sales process, you're always asking for the clothes. That doesn't mean you push things on them, doesn't mean that you're wheel bearing them and sending them five different products. But you're always asking for the sale. Why do you not believe in asking for the sale and maybe unpack the wisdom behind your strategy?

Rahul (34:07)

It's because it's a binary outcome. It's a yes or a no. And I'd rather not know if it's a yes or a no. I'd rather wait because the longer you leave it, the chances are hopefully that it works in your favor. I think everyone has a gut instinct whether someone's ready or not ready.

David (34:27)

But I was not necessarily that you don't ask for a sale. You just have this sixth sense of when the time is right.

Rahul (34:34)

I look, there's ways to do it rather than to, you know, I sat next to a really dear friend of mine who asked an investor, we were at, we were at lunch, said, so, so you're Going to invest with us a lot. And I went, no, you're not fair. And I just wanted the world to swallow me up because I felt terrible for my friend. And I also felt bad for the investor because that question shouldn't have been asked in front of me, number one. And number two, it just wasn't asking in a delicate, articulate way. I would have sort of said, so how are you feeling about the world? What are you looking at? What you're not looking at, you'd have to say, is what we do of interest? There's ways around it. And I always ask people for feedback. When you look at a firm like ours, what are things that excite you? What are things that, you know, worry you? So there's ways around it and ways to ask it. And I just kind of do more.

David (35:25)

Delicate ways of gauging the temperature.

Rahul (35:27)

Yeah, well, maybe it's. I don't be rejected. But I think when you do this role, I always say to all these young people I meet that want to do I am, I said, the first thing to be able to do is have every door shut in your face. Right? I literally say, you need to be punched in the face. And if you can take that, you're going to be fine. You know, you think every invest, every 100 investors you meet, 20 will do work. Five might invest this. You have to kiss a lot of frogs and deal with people's businesses and governance and issues and whatever it may be. But if you can deal with all that, then I think you can. You can take it and deal with all those no's and those rejections. I. I don't want. I think, I guess I'm scared of those conversations being permanent no's. I'm more interested in let's. Let's stay in touch, see what happens. And, you know, I've met plenty of investors who are looking for managers in our space, but I never talk about us. And then another manager says, if they're not told, have you not asked him about his firm? He's like, he never talks about it. It's a deliberate thing that. It's so funny. I had breakfast today with one of our clients who'd been with us for a long time, and he said to me, I see you guys pop up more and more. I said, yeah, but I love is there's people who say, you guys have been around for 21 years and I'm an investor in TCR and you're on the TCR platform. I've never heard a few, and I Love that. Because I don't want, I want to be the extra little bit special. I don't want to be the manager that's harder to find, that's more interesting. I don't want to be the manager that everyone's invested in. You know, can you have fewer relationships that you can have proper relationships with people and deal with them and pick up the phone to them and interact with them and have time for them? That's just much more interesting than saying, oh my goodness, I've got whatever, thousands of investors and I can never see all of them or spend time with them or help them out, whatever.

David (37:26)

Today we have a lot of. You mentioned some of the endowments and foundations are taking a step back. But you also have the retail push, you have these interval funds, all these new structures coming on board. How does that affect your business?

Rahul (37:39)

It doesn't because I stay away from it. I'm quite cynical about it. Maybe it's because I'm old fashioned institutions. I split investors into asset owners and asset allocators. So the asset owners are the people that have fiduciary responsibility for the assets they're managing or they're the principals of that capital. The problem is when you're dealing with intermediaries, you never know who you're dealing with. You never know who's behind the curtain. And the problem is the person who's guarding the curtain is guarding their business first before they're investing. So I always want to know who I'm dealing with.

David (38:12)

The principal agent issue, 100%. Why is that not just a cost of doing business where you get access to more capital? Some, there's going to be some churn and then, you know, that's just part of the business.

Rahul (38:24)

I just don't like that business. I want to know who I'm dealing with. I want to understand how they're thinking and why they're with us rather than them giving us capital because someone told them to or someone's forcing the money on us. Rather than understand the rationale for being a partner of ours, that's what I'm more interested in. Why have you chosen to work with us? And I remember it goes all the way back to the first firm I worked at where we were growing. We were small and we won this massive pension client and I was really happy we won the client. But I said to the CIO the first time I saw him, why did you give us the money? Not to sort of say, oh my God, goodness, are you crazy? And he said, we met everyone in your space and you were the smallest firm. But we gave you the money because when we asked if you had any trading errors, you were the only firm who admitted you had trading errors and you'd log them. And you told us what went wrong and why it went wrong and how you're going to mitigate against those in the future. That's why we gave you the money. It's a trust issue and that's always stuck with me. And so having those relationships and understanding why someone's going to work with you is really important because when they stop working with you, understand the reason. When you have allocators, you don't always know that because people are just pushing money around and usually it's because they're chasing performance.

David (39:40)

And this is one of those things that everybody talks about having a hole in your portfolio once an LP leaves. But it seems like getting from fund one to fund two with any capital, good or bad, is probabilistically smarter than optimizing on LP quality and avoiding any holes on fund 3, fund 4, fund 5. I know no one wants to publicly talk about this trade off, but isn't there something to be said about just getting capital in and solving the problems as they go on? And why is the quality of the LP so important early on?

Rahul (40:17)

The quality of the capital determines the duration of that capital. And that duration comes from understanding who you're invested with and that there's an alignment. If someone invests you because you've got good performance, when you don't have the good performance, they're going to go. So that's why I think it's so important to spend time understanding who's sitting across the table from you, what they're looking for. Are you a fit? Are you not fit? I've said when, when we were. We closed our long earning strategy in October. I met probably seven or eight investors this year who were interested in us. I didn't even follow up with half of them because there was not a philosophical fit. And the moment we have a tough time, all my energy is going to be spent on trying to explain to them why we've lost money. And I don't mind explaining to why we've lost money. But that's all they're focused on. They're not going to be focused on that. The reason we lost money is because it aligns with how we invest, right? We're contrarian. So we're going to lose money before we make money and things like that, or we're going to be too early or there's a change in regulation, but we're not worried about that change in regulation. So I, I just, I think about that alignment thing as just being the most important thing and having that quality of relationship. And if those people move, you know what they're going to come back like it's happened to us many, many times because they understand who we are and what we do and why we do it. Not that we're the guys that make them loads of money, of course that's important, but it's one factor. If that's the only factor, then they're going to go away when it's not there.

David (41:45)

It's interesting because I think one of the most underappreciated aspect in finance is the concept of LP. Capture the quality of your LPs could dictate your fund. So people kind of look at GPS and LPs almost as this. Two different worlds and LPs being passive, GPS being active. But oftentimes the LPs can massively change the trajectory of the fund. An example, today everybody's yelling for dpi, which obviously is an important thing. But forcing managers to get dpi, especially in assets that don't naturally have a liquid buyer or a lot of demand, could destroy the, could cut off the legs of that fund for future vintages versus other endowments that are thinking really long term and want to be long term capital partners. Not only can they avoid kind of forcing this DPI, but sometimes, to your point, sometimes the best LPs will back you when the market's down because that's a great buying opportunity.

Rahul (42:42)

To me, that's the, that's the epitome of having the right LP is that they double down, not that they run away. That's exactly. To me the definition of finding the right lp. That's exactly.

David (42:54)

That's a limits test.

Rahul (42:56)

It is, it is.

David (42:57)

So again, do you ever pre screen.

Rahul (42:58)

That we ask questions? I always ask how do you think about volatility? How do you think about concentration lockups? All, all of that. But it also plays into, you know, when you work with someone, you say to them, give us a quarter or a third of your capital. And then when the volatility comes and you call capital like we do Brexit, Ukraine, Covid, do they add or do they not add? And then that's the first test. And 99 of the time they add. They usually don't add either because they haven't got liquidity or because they're full on us. But yeah.

David (43:34)

So outside of parvis you also have a lot of other interesting activities. So tell me about the other things that you work on.

Rahul (43:41)

So do loads of stuff with TED sides. The main thing is we started doing these summits post Covid. We sort of took the model of summits and what people were doing and turned them on its head. So we don't have any kind of panels or anything. We do small group discussions because the reality is that people want to talk to other people. Yeah, their peers and they want to do it in a safe environment. But we mix LPs and GPs for most of the part. And so we have always a session where the GPS are challenging the LPs and the LPs are challenging GPS and it's great. Same issues come up, but also the perspective for the, for the GPS understanding what the LPs are going through in terms of their processes, in terms of governance, in terms of liquidity and all the rest of it. And nine times out of ten they walk away and go, I didn't realize all this stuff was going on at these organizations. It's not that they're not interested, but they've got someone else so much else to deal with. And then it's LPs giving GP's advice on how to build a business well and do all that stuff. So that takes up a lot of time. And then working with Ron Biscardi Iconnections, which is. Was great and I'm on the board of a few funds and then loads and loads and loads and loads of charity work and especially September to December is just crazy time. So it's something I, I learned from my mum and I really care about and I think my mum always said to me there's always going to be people worse off with you and then people better off than you. So just, you know, make sure that you're lucky and make sure you realize you're lucky and do good things. But also my kids are 7 and I want them to see that saying something is one thing, but doing it is another. And if you do it, then they pick up on it and they say actually this is a real thing and we can, we can help people who are less fortunate. So twice a year we make our kids clear out there their playroom and their bedrooms are this stuff's all going to kids who are less fortunate than you or these clothes are all going to this kids as well as you and they like it, they like doing it.

David (45:41)

Does that help? Does that help bring perspective to your career and help you in career wise?

Rahul (45:47)

100%, 100%. And it makes you want to work more and more with mission based organizations. But there's some amazing families that do so much philanthropy, incredible amounts of philanthropy in so much so that some of them, we have one family that we work with. I wouldn't even say it's a family office. I say it's a foundation. They give all their gains away every year to charity. So just incredible people. And then obviously working for pensions, where you're working for teachers or firemen, whatever, that's an honor. You know, those people sacrifice so much to serve the public. So it's great. At the end of the day, it's just finding the right people you can have great conversations with, have a good time with and you know, hopefully work with for a long time. Yeah.

David (46:31)

You'Ve had this illustrious career, but you've also seen other people's careers, maybe some not as illustrious. And what are some timeless lessons that you've seen that GPs or LPs that succeed in the space.

Rahul (46:45)

I love people who are just themselves and they don't conform, so they always stand out. I kind of am envious of people who do that because they just have managed to just be themselves regardless of what's going on in the market or what's going on in the world. I love people who always send the elevator back down. I think it's a really important thing. A lot of people don't, but those.

David (47:11)

Who do is in terms of career.

Rahul (47:13)

Development or career development or, you know, someone pings. Someone pings you on LinkedIn. Yeah. You don't know them or you don't know what they're after. But if they're just saying, listen, can I just have five minutes or 10 minutes of your time? It's never five. It's usually half an hour.

David (47:28)

Yeah.

Rahul (47:29)

And you can't do all of them, but you know, it's. We are in this industry, are really lucky and privileged to be in this industry. Right. You know, I saw something on LinkedIn recently which was great. You know, we are privileged to wake up tired. We are privileged to wake up and have choices. We are privileged to wake up and, you know, be able to do all the things we want to do. And when you're in that situation, and not everyone's in that situation, I think we have an obligation, a right to help people who are not in that situation. That's how I think about it. But maybe I'm too emotional about it, but I just think, why wouldn't you? I'd always help a young person Because I was a young person once and not everyone helped me. So I need to take that and say, well, let's help a young person who's in that situation.

David (48:17)

I think there's definitely some younger people that have the skill of being mentee. And sometimes I observe, you know, I don't respond. There's. There's a whole question of why do you respond to some LinkedIn messages, not others? It seems like it's random, but it is.

Rahul (48:30)

Yeah.

David (48:30)

It's typically like how they're phrased, how they present themselves. So there's this interesting skill. It's a unique skill set that some people have of being great mentees. It's an underappreciated skill.

Rahul (48:41)

I think that's spot on. But also I think when you have these LinkedIn messages where you're like, where's this going? I just say, how can I help you? I literally just go straight to the point and they'll say something. I'm like, I can't help you with that, or, you should do this or think about this. I think you shouldn't ignore people. I don't anyway, even if it's one liner.

David (49:08)

What'S an underrated quality or behavior in the industry that you feel really sets people apart and makes them successful?

Rahul (49:20)

Integrity. It's just so undervalued. I think so many people chase performance. I've had investors tell me of managers they're invested in where they don't actually like the manager or they don't trust the manager. I'm like, why are you invested with them then? They record all their phone calls, they record all their meetings. They're like, because we don't trust that person. I'm like, how can you invest with that?

David (49:44)

What's the answer?

Rahul (49:46)

Makes money.

David (49:47)

Do you think that's a bad answer?

Rahul (49:50)

It's not my. I would never.

David (49:52)

It's a tough lifestyle.

Rahul (49:53)

It's tough, right? But I always say, you know, if you're CIO of an endowment and you've got two managers that you're down to two managers for a strategy, and one makes 30% a year, but gives you no transparency, has a tough personality. You can't get access to them, you don't know what's in their portfolio, versus someone who gives you 15% fully transparent, you can see the team, you know what they're invested in, which you're going to do. Some will say, the 30%, give me the 15%. Because I know what I'm investing in.

David (50:26)

And I know, and that's quite a difference. Between 30. If it's 30 and 25, I'd say probably 99% of people would say the 25.

Rahul (50:34)

Yeah, but the reason I've emphasized that difference is because for me it's worth that trade off. Because what certainly the GPS forget is, is that line of reporting, right? You're dealing with whether it's an MD or an analyst. And it goes all the way up then to the cio, then to the investment committee chairs investment, then maybe to a board and president above that. So I don't think people realize that line of reporting. Now if I'm in that situation, I would take the 15 guy because I know what I'm investing in and I know when it goes wrong, what's gone wrong, and I know when it's working, what's making money. But if you don't know that, then how are you going to report to your board when that person loses 20, 30, 40% if they're not telling you what's in their portfolio?

David (51:22)

You gave this example earlier of integrity, which is you tell them when you had trading errors and that's why this small pension fund invested. What's another example of having integrity, it's.

Rahul (51:33)

Picking up the phone when you've made a mistake, is telling people when someone's leaving your phone. It's, you know, it's a major personal thing that's going on with someone and in your organization and you tell your.

David (51:46)

Clients it's something that almost invariably or definitionally has short term cost to you that's in the nature of the long term relationship.

Rahul (51:55)

The way I think about it is this industry, there's a lot of rumor and a lot of gossip and stuff. What is it that I need to do to control the narrative in case something gets out right? So if something's gonna happen or something's gonna go wrong, it's more important you communicate that. Then the communication finds its way to your LPs and then you've got to explain why you didn't talk about it. So for me, that's, you know, doing the right thing. Also just gotta remember that these guys have responsibility and they've entrusted their capital. It's not David's capital or my capital, it's that they're working for an institution or a mission. So you, I think you've got to help them do their job right. And when you transparent people are just going to stay with you. And again, going back to what I said before, when people accept their business, I will say always talk about the mistakes you've made. And the lessons you've learned because that's what shaped who you are and what you do. And to be honest, if someone's doing good work on you, they're going to find out about the mistakes you made from your previous shop and things you got wrong. So just be honest about it. You know, I said this to someone recently, if you start dating someone and you say oh when I drink I'm a bit of an idiot. At least they know, right? But if they find out after you got married and you've got kids, they're going to be like hold on, what's going on here? So you know, I just kind of think, just be open and up front.

David (53:19)

I learned this from Naval Naval Ravikant had on my second date with my now wife Jessica. I told her like all the negatives or many of the negatives and I'm like this is, this is my positive, these are my negatives. And I just led with them and we, we kind of had a long conversation about it and as I could see that she was fine with those and then, then it was the basis of the relationship. But it's counterintuitive because everyone wants, it's that optionality. They rather, I rather have been alone and find my true life partner rather than keep it going with somebody that I thought would not be a fit 100%.

Rahul (53:55)

So again I quite often start a pitch with these are the reasons people don't invest with us. And you should see people's faces and they're like what's going on here? I'm like, you spent whatever a day, two days a week in London getting pitched by every fund on the street. We're not here to do that. We're here to tell you why people don't invest with us. And if it's a fit we can talk more and if it's not, it doesn't matter.

David (54:19)

What's something you've changed your mind about in the last 12 months?

Rahul (54:24)

Probably AI. I think I'm so old school I'm not going to use AI for my relationships but I'm curious about learning about how it can be used to probably allow me to do even more things than I do. I'm curious about it. I don't know if I'm a believer. I mean obviously it's going to grow and be a bigger, bigger part of our world and what we do. I chair my kids school's development board. So one of the parents is obsessed with vertically co champagne and so we had these special ones made for our school for a charity night. And even though they were meant to go into an auction, we had some spare ones. And the mum came to me, said, oh, listen, I'm obsessive verb. Can you get me some of those? And I said, well, these are the tickets. And she said, I could spend all this money on these raffle tickets, but I just want those bottles. So I offered her a price point, which wasn't cheap, and she said, I'll take them, and she bought them off me. So then I thought, I'm going to create a Verve Clicot champagne collection for the school charity. And so I. For the first time, I think it might be the first time I ever used AI. I typed in all the names of all the champagnes and just went, can you create a picture? And it came out like, do you want them in height order? Do you want them in age order? Do you want them? I was like, wow. And it created this beautiful picture of all these bottles together. I thought, oh, this is quite cool. So my daughter keeps. She's seven and she keeps saying AI. She said it to me on Sunday, like, three times. I'm like, how do you even know about that phrase? So I need to learn about it and be cool with the kid, hanging out with the kids. But I think that's probably the biggest thing that I've changed my mind on.

David (56:15)

After our last podcast. You've sent me three handwritten notes. Tell me about this. And do you send this to everybody that you meet?

Rahul (56:24)

There's nothing like getting a piece of mail because no one gets it anymore. It's such a lost art. And I remember when I was a kid, you know, I had a really close group of friends in high school and none of our parents had any money. But the one thing that we, like, had an agreement was that we're always going to give each other a card. It was like a thing as, I don't care about present, but I want a card. So it sort of started from there. My mum was always sending cards to. To family, and we were getting cards from them. So it's something I've grown up with, and I don't know if it will be a thing when my kids are adults. You know, Denmark's just closing down its whole postal system now, and so maybe more and more countries following in that way. But when you send a card across the ocean, I know what it means to people. I always go back to that Maya Angelou quote. People may not remember what you said or what you did, but they always remember how you made them feel. And I know when people message me like I love my card or thank you for writing me a card, I know how I feel when I get one. So I want to just do that back to people.

David (57:26)

Yeah, well, it was quite an experience. Even Jessica mentioned she's like, who's sending you cards? I'm like, don't worry, it's a guy. So on that note, thanks so much, Rahul. I appreciate you jumping on.

Rahul (57:38)

Thank you, David. Thanks for having me.

Podcast Host / Advertiser (57:40)

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