Podcast Summary: How I Invest with David Weisburd

Episode: E319: GP Stakes Investing: Liquidity, Alignment, and the Real Risk
Guest: Todd (Managing Partner, Cantilever Group)
Date: March 6, 2026

Episode Overview

This episode dives deep into the world of GP stakes investing—where institutional capital partners with private asset managers by taking minority equity interests in their firms. Host David Weisburd interviews Todd, Managing Partner at Cantilever Group, to explore the evolving landscape of GP stakes, the liquidity challenges, risk alignment, and how Cantilever's approach distinguishes itself in the market’s lower- and middle-market segments.

Key Discussion Points & Insights

1. What is GP Stakes Investing?

• Definition: Minority equity investments in the operating businesses (GPs) of alternative asset managers.

• Returns: Investors participate in fee streams—management fees, carried interest, incentive fees.

• Distinct from Being an LP: Returns at the GP level often align with equity/private equity-type risk and profile, whereas LPs earn fund-level returns.

• Quote:

  “Fundamentally, GP stakes investing is a minority equity investment in the operating business of an alternative asset manager. You’re purchasing a participation in the fee streams derived from these private asset managers.”
  — Todd (00:36)

2. GP Stakes vs. Fund Investment—How Should LPs Decide?

• Fund-level investments offer steady returns (e.g., 8-12% in private credit).

• GP stakes offer potentially higher, equity-like returns—also more risk, especially around liquidity.

• Quote:

  “If you’re making an equity investment at the GP level, those returns are more commensurate with equity... It’s a derivative of the same business.”
  — Todd (01:21)

3. Downside Risks & Liquidity Challenges

• Key Risk: Lack of control over liquidity or exit timing.

• Unlike in private equity funds, minority GP stakes investors cannot initiate exits.

• Returns are tied to the ongoing performance and decisions of the firm’s principals.

• Quote:

  “As a minority equity partner... it’s hard to predict when or even whether there will be any liquidity for that investment. You don’t control the exit.”
  — Todd (02:09)

Liquidity Evolution (03:17)

• GP stakes managers have introduced ‘strip sales’, continuation vehicles, levered recaps, and, in some markets, public listings.

• Peters Hill’s Listing: Good portfolio, poor fit with public venue (especially non-US investors), highlighting structural and communication missteps.

• Quote:

  “The investments in that portfolio did quite well… the issue really was that the structure and the venue were not right for that type of a listing.”
  — Todd (04:32)

4. Cantilever's U.S. Public Listing Innovation

• Cantilever aims to list its fund publicly in the US, a challenge due to regulatory constraints (the 40 Act).

• By being independent and GP-stake focused, Cantilever aims to offer ongoing LP liquidity via public markets—solving a major concern in the asset class.

• Quote:

  “We’ve designed our entire business to be able to list our fund publicly in the United States... The only way to do what we’re doing is to be an independent business which we are, focused only on GP stakes.”
  — Todd (05:43)

Alignment & Permanent Capital (06:29)

• Public listing provides not just LP liquidity, but also ‘permanent capital’—reassurance for GP affiliates and better alignment for long-term partnership.

• Quote:

  “For our affiliates it’s also helpful because we are truly a permanent capital partner. They don’t need to wonder... about getting liquidity for the underlying investments.”
  — Todd (06:29)

5. Market Positioning & Sourcing (09:35)

• Focused on lower/middle-market GP stakes ($15M–$75M per deal), where competition is lower and differentiated value-add opportunities exist.

• Push vs. Pull in Deal Sourcing (10:44):

  • Cantilever does not ‘sell’ its product—GPs must have a capital need that justifies the equity cost. Engagements may develop over months as managers evaluate their needs.

• Quote:

  “Our product is not sold, it’s bought. I’m not going to talk a firm into taking our money because it's expensive... Only if they have a need for that capital that justifies the cost, that it makes sense to take our investment.”
  — Todd (10:44)

6. GP Motivations: Why Do Managers Sell Stakes? (11:55)

• Three Main Reasons:

  1. Growth Capital: To fund GP commitments, seed new strategies, or expand flagship funds.
  2. Capital Restructure: Buy out retiring partners, early investors, or facilitate generational transitions.
  3. Taking Money Off the Table: Principals monetize years of sweat equity—least attractive, but possible.

• Quote:

  “The biggest use is really growth equity.”
  — Todd (11:55)

Deployment of Growth Capital (13:20)

• Most often used for:
  • Increasing GP commitments (to attract more LP capital)
  • Seeding new strategies or adjacent business lines

7. Investment Structure and Alignment

• While deals can be structured to capture just a new product’s upside, Cantilever prefers whole-business stakes for full alignment.

• Partial stakes (e.g., one strategy) often lead to weaker alignment and are more suited for structured debt, not equity.

• Quote:

  “Part of the critical thing in GP stakes, in our view, is full alignment with the partners and the principals who are running the firm… as equity investors in businesses, we want to invest in the entire business, not just a piece of it.”
  — Todd (16:25)

8. Emerging Landscape: ‘GP Solutions’ (17:22)

• ‘GP Solutions’ refers to a broader toolkit: GP-level equity, preferred, term loans, secondaries, continuation vehicles, NAV lending, etc.

• Some GPs may prefer debt, not equity, due to cost and control preferences.

• Quote:

  “[With] GP solutions... you can provide anything in the capital stack.”
  — Todd (17:38)

9. Underwriting: Avoiding Red Flags (24:27)

• Key risk: If a principal is already wealthy and seeks to cash out, alignment issues arise.

• Strong underwriting dissects overlap in firm/personal finances—ensures taking “money off the table” doesn’t diminish principal commitment.

• Quote:

  “A red flag for us as a general matter is if we're investing in a firm where the principal is wealthy, it's unclear to us why they need our money.”
  — Todd (24:27)

10. Firm vs. Founder: How to Tell the Difference (28:32)

• A sustainable business has:

  • Deep teams
  • Institutionalization
  • Real growth prospects

• If reliant on one/two personalities, not scalable—Cantilever is cautious.

• Quote:

  “You get to know the firm, you get to know the principals... all of those things can lead to a conclusion that it's a business rather than just an investment partnership.”
  — Todd (28:32)

11. Evaluating GP Managers (29:36)

• What Cantilever looks for:
  • Fund performance and LP relationships
  • Leadership’s drive to grow
  • Sound infrastructure, compliance
  • Trust and respect with key principals (‘people business’)
• Example: Usually invest in managers with third/fourth funds.

12. Due Diligence Timeline (31:16)

• Deals can take a year or more from first conversation to closing.

• Even in auctions, a minimum of 3–5 months ‘dating’ is typical to assess fit and alignment.

• Quote:

  “We have conversations ongoing today that are 18 months long.”
  — Todd (31:29)

13. After the Investment: Value Addition (33:20)

• Cantilever’s capital is strategic by itself.

• Provides ongoing strategic advice (growth, new strategies, hiring).

• Builds shared services (distribution, generational transfer), especially helpful for smaller managers.

• Passive, not controlling—GP remains central.

• Quote:

  “Our capital is by itself strategic. It's also passive and permanent... If we can be additive... we're delighted to do it. But fundamentally ours is a passive type of investment.”
  — Todd (35:47)

14. Being on the GP Side: Strategic Benefits (36:04)

• Enhanced co-investment, info sharing, and deal flow.
• Position to assist with strategic events—such as advising or facilitating a sale of the GP.

15. GP Stakes in Venture Capital Firms (37:26)

• High bar: Unlikely to invest unless it’s a venture firm that's institutionalized, has proprietary platforms (e.g., AI sourcing), and strong barriers to entry/exit.
• Venture can be “too volatile for its own good” for a GP stakes investor.

16. Advice to a Younger Todd (40:24)

• Build and nurture your professional network.

• Do what you enjoy.

• Invest extra effort early; it pays off over your career.

• Quote:

  “Invest in your network... Do something that you enjoy... and be prepared to work really, really hard, particularly in the early years of your career.”
  — Todd (40:24)

Notable Quotes & Memorable Moments

• On Liquidity Risk:

  “You are, in effect, betting with the principals of that firm and relying on them ultimately for your exit.” (02:09)

• On Market Positioning:

  “We want to be able to make investments that are between $15 million on the low side and $75 million on the high side, but with a focus really on the lower end.” (09:35)

• On Aligning with Management:

  “If we buy only a piece of their business, then the alignment is not right.” (16:25)

• On Assessing GPs:

  “Asset management is a people business. You have to respect and trust the firms that you're investing in and believe that you're aligning your own interests with their long term interests.” (29:36)

• On the Value of Relationships:

  “Whatever you do in the future will benefit from those types of relationships.” (40:24)

Timestamps for Key Segments

| Timestamp | Key Segment Description | |-----------|---------------------------------------------------------------------------| | 00:36 | GP stakes as minority equity in asset managers; participation in fee streams | | 02:09 | Core liquidity risk of GP stakes investing | | 04:32 | Why Peters Hill’s public listing struggled | | 05:43 | Cantilever’s business model and approach to public listing | | 09:35 | Lower/middle-market GP stakes focus and rationale | | 10:44 | “Push vs. Pull”—Deal sourcing dynamics | | 11:55 | Three main GP motivations for selling stakes | | 13:20 | Practical uses of GP growth capital | | 16:25 | Investment structure, full alignment vs. single-strategy stakes | | 17:22 | The evolution to broader GP Solutions | | 24:27 | Underwriting “money off the table” and identifying red flags | | 28:32 | Distinguishing a scalable ‘firm’ vs. a founder-centric business | | 31:16 | Timescales for due diligence | | 33:20 | How Cantilever adds value post-investment | | 36:04 | Strategic benefits of being on the GP side | | 37:26 | Barriers to investing in venture capital businesses | | 40:24 | Todd’s advice to his younger self |

Episode Tone & Final Thoughts

The conversation is analytical, candid, and educational—Todd offers practical, real-world perspectives on the nuanced world of GP stakes and how alignment, liquidity, and deep due diligence shape successful investments. Both host and guest underscore the importance of relationships, strategic fit, and long-term vision in this growing asset class.

Recommended for: Institutional investors, GPs contemplating stake sales, and anyone interested in the intersection of private markets, long-term capital, and innovative fund structures.