Speaker 1The biggest topic this year driving everything is private markets. I would categorize that in two ways. The first is liquidity, and the second is the changing structure of the industry. So liquidity has been an issue for several years, and it all comes down to why aren't dollars coming out the back end the way they used to? It's a really tricky question because if you think about making a pizza, you need dough and cheese and sauce and toppings. And in private equity, you need equity capital. Well, there's tons of dry powder, trillion two of dry powder. You need debt capital, and there's almost an infinite amount of corporate private credit available. You need companies that are willing to transact, and there's tens of thousands of private companies. And now there's 10,000 private equity-owned businesses, a fair amount of which are later in the life of that investment chapter. So there's a lot of businesses that need to transact. You have all these ingredients in place. So how come there's no pizza? And the answer is the oven's not on. I'm Ted Seides, and this is Capital Allocators. Today's episode is our annual year in review. Our CEO, Hank, and I cover investment trends across the board. Private and public markets and top of mind issues for allocators. We then discuss highlights of the podcast and our efforts to improve discoverability of great episodes, outstanding asset management fintech products, and Capital Allocators University. With the year in review, we also kick off our countdown of the most popular episodes of 2025. We'll drop two this week and the top three next week. Coming in at number five is Adrian Mellie from Eagle Capital. It's a fun, nuanced exploration of applying the most sophisticated tools of hedge fund investing to long-only public equities. And at number four, it's Alex Sasserdote from Whale Rock Capital. Alex is a passionate TMT investor who describes how he finds companies ascending their S-curve of adoption. Next week, we'll drop the top three. Wishing you a relaxing, enjoyable, and very happy holiday. Before we get going, we have a holiday gift just for you. Discovering podcast episodes you want to listen to in a big library kind of sucks. When you find Capital Allocators or any other podcast, the natural rhythm is to listen to what comes next. After 550 episodes, it's been impossible to figure out what you'd most like to hear. We started the path to help this year with our summer series of the best CIO interviews. We'll continue pushing out a best of summer series going forward. That brings us to your holiday gift. We've taken the next step and created eight playlists of the best episodes across the following categories. Most Popular, Legends, CIOs, Fundraising, Public Equity, Private Equity, Private Allocators, and Interdisciplinary Knowledge. Each playlist has eight amazing episodes, and we'll update them as new ones rise. You can find the playlists on our website or on Spotify. On Spotify, search for Capital Allocators and the most popular and legends lists will pop up. If you click more, you can see the others as well. Wishing you a very happy holidays and happy listening with easy discoverability. Thanks for spreading the word about the new playlists of the best episodes of Capital Allocators. Capital Allocators is brought to you by AlphaSense. Here's something for you. Most AI tools today are very good at sounding right, but can you actually trace it back to a filing transcript or specific passage that drove the answer? Or are you just trusting the confidence of the output? For allocators, that's not a minor concern. A missed filing, incorrect source, or context that gets lost somewhere in the retrieval chain aren't edge cases. They're how-to cases. AlphaSense is the AI platform built specifically for this. They own the content, over 500 million curated documents, from broker research and expert transcripts to filings and earnings calls. And they own the retrieval layer on top of it. That means every answer can link back to an exact verifiable source. Because the answer is only as good as what's underneath it. And with AlphaSense, you know exactly what's underneath it. See it for yourself. Try a free trial at alpha-sense.com slash capital. That's alpha-sense.com with a hyphen in the middle slash capital. Capital Allocators is also brought to you by Morningstar. Into the tools and AI platforms you use every day. So insights are easier to spot and act on. Morningstar. Nothing in your way. Visit morningstar.com slash game on to learn more. Please enjoy our year in review.
Speaker 2So this is turning into a fun annual tradition. The genesis of this conversation was an annual letter that you used to write that outlined the business. What went on in the past year, what you're excited about for the following year? Last year, we spent a little bit of time talking about all that you're hearing in the institutional community. Even before we jump into what you're hearing, give us a sense of the interactions and the conversations you have with your peers in the institutional community.
Speaker 1Well, a core part of it is the podcast. There's 60 episodes a year, and that's 60 podcast conversations, 60 prep calls, probably another 60 calls of people that I'm thinking about having in the future talking about what they're seeing, what's happening in markets. Then we have our summits. It'll be four next year, which brings together 120 senior level thought leaders, decision makers on the allocator side and the manager side. They're all small group discussions. So you're getting a sense of what's most important on people's minds.
Speaker 2So hundreds of conversations with different people in and around the industry. What are you hearing?
Speaker 1The first is private markets. The first is liquidity. And the second is the changing structure of the industry. So liquidity has been an issue for several years. And it all comes down to why aren't dollars coming out the back end the way they used to? Well, there's tons of dry powder, trillion, two of dry powder. You need debt capital. And there's almost an infinite amount of corporate private credit available. You need companies that are willing to transact. And there's tens of thousands of private companies. And now there's 10,000 private equity owned businesses, a fair amount of which are later in the life of that investment chapter. All investment either happens or doesn't happen because of greed and fear. That's basic behavior. You could say that private equity is frozen because of fear. It's fear on the GP side of if they sell, returns aren't what their LPs would have thought. They're afraid they're not going to be able to raise their next fund. So rather than say, we'll just transact and move on, if we hold it longer and the business continues to grow, we'll get to our MOIC target. We'll get to 1.8. We'll get to 2.0. It's just going to take a couple more years. On the LP side, you still have the aftermath of 2008 where you got too skewed to privates and there were liquidity challenges. There aren't real liquidity challenges on the institutional LP side now, but they don't want to go there. So they say, well, you're holding for longer. We're going to commit less. There's fear on both sides. Private equity firms only want to buy if they get a great deal and they only want to sell if they're getting full value. There's a few turns of multiples in the middle and you haven't seen
Speaker 2that thought quite yet. What's interesting about that is you mentioned dynamic last year. Why hasn't anything changed? I was in AGM where
Speaker 1I spoke a couple of weeks ago and they had done a poll the previous year of, do you think exits are going to be more than 10% higher, 0% to 10% more, 0% to 10% less and worse than 10% down? 90% were in the 0% to up 10% and the answer was minus 40%. At the beginning of this year, I wrote a blog post that effectively said, a lot longer than people think. And then Liberation Day hit. So Liberation Day had an impact on strategics. That's a significant part of exits. Economic uncertainty slows down strategics interest. I continue to think this takes several years. Maybe it's two, three, four years away. It's a question of how long does it take for that bid-ask spread to narrow?
Speaker 2Do you get the sense that GPs feel the pressure? Do they know that LPs are sitting there with their foot tapping saying, when are these exits going to happen? When are these distributions going to happen? Oh yeah, this isn't a secret.
Speaker 1They feel the pressure, but it's a different kind of a pressure because it's a pressure on the GP business. The GP needs to raise their next fund. They need to keep their talent. They need to keep growing. The LP actually doesn't care that much. If I want 20% privates and I have 20, I'm good. I'm just not going to commit as much because there's not coming out as much at the back end, but I'm okay. The LPs are not over their skis. The other is the structure of the industry. You went from 25 years ago, institutions had 0% in private equity to today, they're anywhere from 10 to 50. The institutions are where they want to be. The market share in terms of asset allocation is not changing. If anything, almost every CIO you talk to, if their target is 30, they probably have 35 or 40% in privates today. It doesn't scare them, but over the next five years, they want to bring that down to 30. That's the institutional market, which is what's fueled private equity for 25 years. What the GPs then look for is what are the next areas of growth? Two, there's sovereign wealth funds and private wealth. If you're sovereigns, you have huge pots of money to put to work and you don't want to have 500 small relationships, so you concentrate on larger firms. The private wealth channel is a whole different distribution mechanism. What those two things have in common is they benefit the largest firms. They don't benefit the middle market player. In the middle market, you have contraction and then you have expansion of the already large managers. That's the landscape for what's happening with fund flows, particularly in private equity. What does that mean for the middle market? There's two things it could mean. One, it probably means there's a contraction. There are a lot of private equity firms out there today who don't realize they've already raised their last fund. But there's another side to that, which is in theory, if the largest funds are raising more and more money, they need things to buy. What are they going to buy? Well, the business from the mid-market sponsor that's been growing is now ready to be purchased by a larger asset manager. So there should be an opportunity for returns.
Speaker 2You have this joke about hedge funds. You ask a room of LPs, do you like hedge funds? They all say no. But then you ask them, do you like your hedge fund managers? They all say yes. Is that what the middle market has become? Well, not yet.
Speaker 1That's a classic exercise in base rates. The base rate of a hedge fund return, nobody likes that. But of course, we like ours. Private equity still has shown returns that meet investor expectations on average. Middle market's been better than large. Small has been better. The middle market, median has outperformed the S&P. Bottom quartile, definitely not. Top quartile, buy a lot. The question becomes, as prices go up, as exits aren't there, if the returns compress to the point where you can only pencil out the magic 8%, if you get below 8% net, then you're going to be in a situation where people don't like the market. They still will love their managers. I've asked at every AGM I've spoken to this year, please raise your hand if you think your private equity portfolio is median or below. And there isn't a single hand that's ever gone up. Everyone playing is playing for the top quartile.
Speaker 2Earlier this year, you posed another bet, similar to the one you made with Warren Buffett back in 2007. This one was private equity returns versus the S&P 500.
Speaker 1What happened with that bet? There was a lot of interest when that paper came out. And for several months, it looked like another charitable wager would come to formation. I had everything from several private equity firms coming out, including Carver Vest and Hamilton Lane that have fantastic databases where you could get at an average realistic private equity return. I had a conversation with Todd Simkin from Susquehanna. They own Kalshi. So there was the potential for taking the bet and putting it on a prediction market. So a lot of things that looked interesting. At the end of the day, there wasn't anyone to take the public equity side of the bet. I reached out to some friends of mine who are also private equity fund managers. And I said, hey, I'm going to take the bet. And I said, okay, I'm going to take the bet. provider of solutions, including an early adopter of adding privates to 401ks through a partnership with Carver Vest. So there just wasn't any natural person to do it. Warren might have been a natural person to do it. But unfortunately, at his age and his retirement, I don't think he had an interest in doing it in the public eye. So we'll track the bet. But I thought it was interesting that on the margin, given all of the challenges in private equity, it's the private equity managers that were more than willing to step up and take that bet. Maybe someone will hear this and want to support the index side of the bet and we can do something for charity. But for now, it's just a
Speaker 2concept. Where does private credit fit into this dynamic? With this market structure and private equity, most
Speaker 1of the move to alternatives in the wealth channel has been in private credit. There's a bunch of reasons for that. One is it's a great vehicle for wealth. It's really hard to lose money in a year. So you make a portfolio of loans and let's say they're yielding eight to 10% unlevered. Let's call it 10% to make the math easy. For you to lose money, you need a 20% default rate. You need a 20% default rate. You need a 20% default rate at 50% severity. Almost never happens. So the returns might not be great, but you're never going to scare them out because you're just going to be making money. The other piece of it is that the wealth channel is used to liquidity. And by design, all of these alternative assets are less liquid than stocks and bonds. Well, private credit creates its own liquidity through coupons. So all that has led to the design of structures like interval funds and all this money is going in. The funny part about that is that private credit, it's never been all that interesting to the institutional market. And the reason is if you have a known illiquidity budget, you want to make sure you get compensated for that with return, not just risk-adjusted return, but return. Now, if you're compressing your allocations, you're going to focus more on early stage venture, growth venture, and some buyout. You're certainly not going to do it in something that has a lower expected return. So it's this really interesting setup where the move, of all the wealth, has almost all been private credit. And the large alternative asset managers are trying to figure out, can you create a structure that works in private equity, but it's much smaller than private credit's been today. So with all that said, what happens with returns in private credit? So you have the beginning of some defaults. No surprise, there's lots of businesses. Businesses do default. And Jamie Dimon says something about cockroaches and people freak out. I do not think there's going to be some calamity. The structure that the asset managers are using is just much better than what the banks used to use. Borrow short, lend long. So these are very long dated structures, which is great. You can work through problems. Where I think there is a challenge is when all this money comes in, the one thing it does for sure is compress spreads. I don't think the people buying in the wealth channel have the right understanding of what returns they should expect. There was a corporate unlevered loans could yield 12 or 13%. I think people are anchored to that when the actual return is probably half that. That's just what happens when all this money comes into the space.
Speaker 2So you previously mentioned venture. How has institutional interest in venture changed in the last year?
Speaker 1To some extent, very little. Venture itself went from only early stage 20 years ago to all the way to growth. The one interesting aspect of venture structurally is to the extent private venture. Venture feels like it's private forever. It's a power law business. You invest in all these early stage companies and very few become Stripe. Those companies now are wildly profitable and private. And if they need any funding, they can get it in the private markets. If they need any liquidity, they can do secondaries in the private markets. So what's happened is a lot of the institutional allocation portfolios who never used to invest in growth equity, their most successful venture investments have created a very meaningful bucket of growth equity that they can't in a secondary market, but they can't if that position is still being held by the venture capitalists. So there's a different skew in the portfolios that used to be early stage venture, exit to the public markets, rinse and repeat. And now you have this big growing allocation to illiquid growth equity that may never have an exit. They're great businesses. You might want to own them for a long time, but people are changing the way they have to think about those
Speaker 2exposures. How has that new pop in this now growth equity, allocation because these companies are staying private longer affected the rest of the portfolio?
Speaker 1The first thing it's done is increase the illiquid allocation, which means that when it comes to how much are you going to put in of new funds on the other end, there's less to go around. Nobody knows when that part of the private landscape will get liquidity. That's the biggest impact. But in terms of allocation to great managers on the early stage side of venture, that is still highly sought after applications haven't changed at all.
Speaker 2How about public markets? How do all of the dynamics that you've just described ultimately impact public markets for both the allocators and GPs?
Speaker 1Public markets have been quiet for a couple of years other than big move to passive, a lot of activity in pod shops. But it's been a sneaky year because active performance is back. Mag7 hasn't really rolled over. S&P has done well. And yet you've got active performance. You have really good long short equity performance. So people are starting to pay attention, but there's still no dollars flowing because of the bottleneck in the private markets. The biggest impact of that over the next couple of years is that when private markets unlock for liquidity, the first wave of that money from the institutional market is going to go back to the public markets. It's not going to get recycled in the private markets. Do the GPs know that? I think the public GPs are hoping that's the case. The private GPs don't know it at all. So that hasn't happened yet. You see trickles of it, but I think we'll start to see that this coming year. Then there's all the questions about the MAG-7 and the valuation of companies facing AI. Is that a bubble in price? Probably. It's probably not a bubble in the underlying economic activity of the businesses. But MAG-7 went from these dominant cashflow machines to taking all the cashflow and spending it in something that has an unknown ROI. That's what a lot of people are thinking about in the public markets.
Speaker 2With all those structural challenges in deploying capital, where are allocators putting new money
Speaker 1to work? When capital is scarce, you need to have a really high bar for the opportunities that you do pursue. That still happens every year. On the margin, there's a lot of intrigue about Japan, particularly in the public markets. It's very much a self-help corporate governance story. More interest in Europe as the value play. And then you could think about what Josh Wolf calls directional arrows of progress, things like defense and defense tech, certainly AI investments, particularly in infrastructure and data centers. There's always opportunities that people will look at that meet a high bar. And of course, everyone's always looking for the next great manager in any area across all asset classes.
Speaker 2So we just covered a lot of ground related to different asset classes. Separate from market dynamics, what are LPs and GPs caring about?
Speaker 1Certainly first half of the year, there was a lot of geopolitical uncertainty, starting with Liberation Day. The interesting thing about that in this community is it doesn't affect much of anything that people do. And that's because these allocator pools are like tanker boats. They're not fleet boats. So unless it's an allocator who's outside the US domiciled in a non-US currency, and they have to make that currency call, you don't see a lot of activity. So it's not a lot of activity. It's not a lot of activity. And there was a feeling of panic on people not even sure they should come. Once they were all there, there was this catharsis that, oh, you also know the right thing to do is not much. The only thing that's been interesting to watch has been China. Because two, three years ago, China was going to be out of portfolios. Then you have a year where Chinese stocks perform really well. And now these things are cyclical. The US-China relationships, isn't that thawing a little bit? Maybe it's okay to invest in China. Invest in China. Even something that got so extreme is starting to come back. The other big one, of course, is AI. A lot of people are looking at it for operational efficiencies. There are some pockets where it's being used pretty meaningfully in investment strategies. But mostly people are just looking at this disbelief at the size of these valuations, how that's going to play out. Curious if there's anything else of note that you heard throughout the year from LPs and GPs. We've been talking about total portfolio approach for several years. And in the press, it's deeply misunderstood. The idea is supposed to be strategic asset allocation. You have a bunch of asset classes, total portfolio approach. You're going to be more nimble. The reality is total portfolio approach is using data to have a better understanding of what you own. It starts with a very simple reference portfolio. If you're a 70-30 investor, stocks, bonds, you can go on that passively. Anytime you invest in a manager, you're going to fund it from the same exact risk as 70-30. But that doesn't tie you to my 70% has to be broken down 20% U.S. equities, 25 international equities, 20 hedge funds. If you like a hedge fund, you can do it, figure out what the risk is and fund it. There's been a bunch of things written in the press. Has TPA done better than? That's kind of ridiculous. It depends a lot on how you implement it. But that's something that more and more people are talking about because you have more data, you can refine risk better, and you can have more flexibility, particularly if you're looking at environments where you don't think the asset class betas get you to your spending needs.
Speaker 2What will be top of mind? For allocators and managers at the end of 2026?
Speaker 1I'm very reluctant to make a market call because I deeply don't believe in market timing. So I will say whether it's next year or the year after or the year after, I would be shocked if there isn't a significant compression. Maybe starts with the valuations of private AI companies and significant down rounds. And maybe that has downstream effects because of data center spending. I don't know how that all plays out, but I'd be shocked if there isn't some correction. At a period of time, and people will be talking about that. I think people will be talking about the continued lack of distributions from private markets, at least for another year. It's just not going to unlock in any significant way. You're not going to see the IPO markets all of a sudden go ballistic because private CEOs don't want to be public. And I don't think strategics are going to immediately come back in spades. I just don't know what that unlock is. I think people will be talking about public markets and the potential for outperformance from active managers because you're teed up pretty well to have a good period of time. It's the most Jeremy
Speaker 2Grantham I've ever heard you on a market call. One of the things that I'm most excited about with this conversation is just to get your take on what you're hearing because you are so plugged into this community. Let's shift gears. Let's talk about our business. This is our opportunity to give updates on our business, give a rundown of what happened on the podcast over the year, what we're excited about next year. One of the things you mentioned on last year's conversations are with folks you don't know and are doing interesting things. Who did you speak to this year on the podcast that you didn't know previously that is doing interesting things?
Speaker 1That's one of several buckets of my favorite guests. It's very rare that I meet them that year and then have them on the podcast. But there were a couple examples this year, Adrian Mellie from Eagle, Herb Wagner at Fine Point, KK Rowland from J.P. Morgan who runs Superstars and what they do. Then there's a bucket of well-known managers that for whatever reason through my career, I've never met. Having Jeff Aronson from Centerbridge on or Robin Mason at Value Act. Managers I've known of for a long time, but had a chance to spend some time with and have them on the show. So those are always fun. The biggest bucket is the old friends bucket. People I've known for a long time and it's the right time for them. So Alex Astrodote, who I went to Dave Lyon, another business school classmate who's hysterical and incredibly savvy investor. Ed Grefenstedt at the Dietrich Foundation, who I first asked seven years ago. After asking and asking,
Speaker 2finally had him on. I'm so glad you did. The one-liners from Ed's conversation, you could hang most of them on the wall and frame them.
Speaker 1And then like Tim Sullivan, who probably I've known longer than anyone I've had on the show. We worked together for my first job in 1992 and he retired from Yale after 39 years and had an incredible conversation. Then there's the small bucket of organizations I've gotten to know that are super dynamic and super interesting and are changing over time. The two I'd put in that bucket are like WCM and Arctos. And I had another one with Ian talking about the private equity landscape. Another one with Mike Trigg and Sanjay Air this year, talking about what's happened with them since their first big hiccup three years ago. The last bucket is some miniseries. So some topic that is of great interest. And it's my way of getting in two or three people. And I've had a lot of fun with that. And I've had a lot of fun with understanding what's going on. I did that in private wealth this year, and it's something I think I'll do in AI next year.
Speaker 2The WCM conversation was incredible because it's rare that a manager is willing to share their perspective on a drawdown. And we got to hear that firsthand from Mike and Sanjay. Hopefully there's more of that because there is a lot of insight and learning to hear the perspectives of what happened, what they changed, and how they've improved from it, what they're doing differently is remarkable and rarely, and you get to hear that in a podcast forum.
Speaker 1One of the reasons I love that organization is they are super thoughtful, humble, and dynamic in how they go about doing the same thing. So they're willing to have that conversation. This should be an open call for people who have really struggled. Usually they don't want to talk about it until they've come out of the struggle, but I agree with you. Those are incredible conversations. For obvious reasons, it can be hard to have them come on the podcast and tell that story. What did you learn from the private wealth miniseries? First thing was the structure of how all this is working. This is very much a game today, at least for the megas. It won't always be that way. I've seen this in different asset class adoption over time where there's a new pool of capital that comes in for a new area and they need the comfort of a brand. When I started Protege Partners, they needed the comfort of a fund of funds because people couldn't spell hedge fund. Over time, that pool of allocators will say, I've got my core allocations there, and they'll start to look. It's going to take a long time, but we're not there yet. That's the first piece was how much this accrues to the biggest asset managers and the incredible amount of resources they have to put in to make it work. KKR went from no one in private wealth to a team of 250 reps. The other thing you realize in talking to the allocator side is there are different types of private wealth organizations. You have a private bank like JP Morgan, and they run like an institution does. There's a small focused decision-making unit. They've been investing in alternatives for a long time. John Matthews, the head of UBS's private wealth channel, and he's running 230 teams that manage north of a billion dollars. There's next to no alternate, and that's a huge education process. There's a very wide dispersion even within that of the types of players and where that money might come from. What are you excited related to the podcast into next year? Those buckets, people I haven't met yet, and I've got one or two of those teed up that I'm getting to know, people I've known for a long time. great managers that I haven't come across and then there's always a thread of a discipline outside of managers and allocators that is super additive. So this past year, tips and tales of the year, first episode, last episode was on storytelling. I'm really excited to take the lessons from Don Miller and Matt Dix and apply them better because it's pretty incredible. Someone who understands storytelling, how impactful that can be in all of this.
Speaker 2You mentioned the interdisciplinary podcasts. One of the things that we've learned over the eight years you've been doing this, the five years that I've been with you, is podcast discoverability sucks. We're changing that a little bit for our followers, where we're going to give them access to historical episodes in a new way. You want to talk about that?
Speaker 1Yeah, it does suck. You can imagine someone who just hears about the podcast, great. They listen. What do they listen to? The most recent episode. And what do they listen to after that? The next most recent episode. That is great, but it's not necessarily after 550 episodes, the very, very best. The first thing we did was a summer series of the best of CIO episodes. Two things came out of that. One is it was extraordinarily well-received. And some of these episodes are six, seven years old, so the relevance is fantastic. That's a push. Next summer, we're going to have a different series and we're going to push it out to you and you can listen to it. But there should be a better pull. I don't know if anyone has done this before, but we've created Spotify playlists. The most popular episodes, legendary investors. I've had on the show. Top public market managers, top private equity managers, interdisciplinary thought leaders, marketing and branding. They each have eight episodes. If you go onto Spotify and look at capital, you'll see the most popular and you'll see the legends. You have to click more to see the other lists. And then we'll have them on our website. I think that'll be a great way for someone who's coming to the podcast for the first time to have a really good experience. If they can find that list and now they can see these are eight great episodes in a row. Well, that's the podcast.
Speaker 2A lot of excitement. Playlists are going to be super helpful to allow our listeners to access older episodes that they may not have heard before. What else is going on in the business? Most of the business is the podcast and our summits.
Speaker 1And there's always a series of experiments. We started this coaching business this year. We haven't figured out how to crack it as a business, but we have a bunch of retired CIOs and asset management executives helping managers tell their story, understand the process of marketing. We also started doing a few strategic investments. We sit in this intersection between GPs and LPs. The most obvious way to unlock that would be to cross sell, but I don't want to be a broker dealer. It is wildly profitable, but not the profits we're going to make. So that said, I've come across a couple of great fintech products that either serve the allocator community or the manager community, and we can significantly move the needle in business development. We've done three of those this year. Oh, well labs. Campbell Wilson's business. That is the best tool I've ever seen for allocators to get information on holdings, on personnel moves, on other allocators' holdings. And now managers are starting to look at it too, because for their marketing, if you know someone you're talking to is investing in a certain subset of managers, not only can you understand them a little better, but you can then click and see, well, of that manager, who else is one of their clients? So it's a great tool. There's one called Thema, which is a UK-based business that started using AI several years ago to classify private companies. And map out a universe. If you're a private equity firm, and you're looking at tech software businesses in some niche, it's really hard to get the information on who the comps are, information about size of the business, number of employees. And they've done all the web scraping and AI. It's an incredible tool. So we're helping Finn McCabe at Thema and introducing him to a bunch of private equity firms. And the third, Ascension Software, which is an HR software package that's helping the allocator community. We've organized their compensation workflow. So you can imagine you have a bunch of employees, each one's on their own comp schedule, bonus schedule, performance. It gets even more complicated. And I'm sure they'll get to the manager community. Imagine carry and how you're splitting up carry and tracking it. Most people track it on an Excel spreadsheet. So they're doing that in an automated way.
Speaker 2So we're sitting here, we just wrapped up our second cohort of Capital Allocators University this year. You want to talk about the plans that we have for CAU next
Speaker 1year? We've run the CAU for the allocator community for five years. And we started investor relations business development last year. We decided to take the content and put it online. The content is great. The people love it. They also love the experience of being with peers. By taking the content and putting it online, it makes it much easier for us to add to that library. And we're going to bring in friends to teach great modules and people can consume that when they want. And then we'll continue to do LP only gathering, a GP only gathering for IRBD, and have it almost all be that networking piece, which we've figured out through our summit. Rather than having it be a high-priced one-time experience, we're going to turn it into a low-priced subscription.
Speaker 2Yeah, it's something we're really excited about. We've had the help of this super production crew called Fondue take all of this curriculum and turn it into almost a masterclass for the frameworks that we put together from Capital Allocators University. How are we doing this all?
Speaker 1Hank, you and Morgan have been with me going on five years. And we were fortunate this year to grow the team. And we're going to be growing the team. Tomorrow, Auerbach joined us at the beginning of the year to help with all the relationships, relationships with GPs, relationships with LPs. Trying to organize our summits in the past, we only had the ability to send emails. Well, she has time to pick up the phone. So that's been a huge unlock. And having the right person doing that on the team has been great. In the back half of the year, we hired Liz Smith to focus on the media side. So she's gotten up the curve on all of the operational production process that goes into the podcasts coming out. And then we'll start with the production process. Now to play around with what else can we do with this body of content? It's the addition of Tamar and Liz that's allowed us to be able to do what we continue to do. And then alongside of our team of five, we've had incredible partnerships on the outside. So for years, we've worked on our summits with iConnections and ProSec Partners. And of course, Rahul Mudgal as our very close partners, bringing in resources to allow us to put these events together. We got our starting five. We got our dream team. What are you most excited for next year? I had a conversation with a very longstanding CIO a couple of weeks ago. And I asked him, so you're going to be here for the next 10, 20 years? And he said, I hope so. I said, what do you mean? What happens is after a long period of time, you build the foundation. So the foundation for an allocator is the team of people on the playing field, the portfolio, group of managers you just love, you respect, you learn a lot from. And once you have that built, you get to do all the fun stuff on the margin. You can look at one-off opportunities. You can look at direct investments. And that's what he's doing. He said, well, as long as that's in place, he's going to stay for a long time. He said, but I can't imagine starting over. So for example, if his team left and he had to retrain people, it's back to the basics. I'm just going to invest in a couple of managers. Probably isn't going to be as exciting to him. I feel like the parallel exists. We've now, over the last couple of years, built the foundation for our summits that we can just execute and do that really well. Podcast is its own gift that keeps on giving. And then the question is, once you have the foundation, you can do that really well. The foundation, what else might come up? So that's what I get excited for. I love what we're doing. And then I love the optionality of something new coming up.
Speaker 2And if I could add to that, what we've done with our summits has been so well received by the institutional community that continuing to prioritize the experience they have and the value that they get out of spending two, three days together is exciting and fun and what keeps us going and very much is the foundation of what we're doing. And that's what is exciting into next year. All right, Ted, I want to turn to a couple of fun closing questions. Some of these are familiar. Some of them are new. Why don't we start with the new ones? What'd you learn this year?
Speaker 1Well, we already talked about private wealth. I learned a lot about that market. Outside of that, I learned a lot about how to tell a story. I wouldn't say I'm practiced and significantly better at it than I was a year ago, but now I understand how to do it. The other one I learned, which came from Kim Liu at CAU in the summer, is that I learned a lot about how to tell a story. I learned a lot about how to tell a story. was this concept of the evaluation of a manager. We're all two people. We're our best self and our true self. We all present our best self first. Manager comes in and they're going to present their best self to you. And your role before you decide to commit money is to figure out what's their true self. That lens I have found applies in job interviews. If you're interviewing someone, you can't just learn who their best self is. You have to do the work and figure out the true self. So I learned a lot about how to tell a story. One of my fun little lessons from the year. What was your favorite podcast episode that was not a Capital Allocators episode? There's always some money management podcasts. Patrick O'Shaughnessy had Alan Waxman from Sixth Street on earlier in the year. It was fantastic. And Nikolai Tangens and Good Company had both Chris Hahn and Paul Singer on. Both of them were just amazing episodes. Outside of investing, there were two acquired episodes I loved. The first was recent Coca-Cola. I've been around Coke my whole life and I knew many of the stories, but I didn't know much about Coca-Cola. I didn't know much about Coca-Cola. I didn't know that the Coca-Cola company created our modern image of Santa Claus. So that was kind of cool to learn. And then they interviewed Jesse Cole, who created the Savannah Bananas. I've been following the Savannah Bananas for a long time, and that's just an amazing story. So I love that one. The last, I'm a big tennis nut. Andy Roddick has a podcast called Served, and he did an episode with Andre Agassi that was crack cocaine for tennis lovers, who were so insightful about strategies and understanding other players. It was really fun. What book is in your queue that you are are most excited for. There are two coming out next year that I'm excited to tell people about in the fortunate position that I've read both of them ahead of time, and they are amazing. The first, Jonathan Tepper, who's been a guest on the show in the past, who runs a long-learning firm called Privat Capital. He was a best-selling author of The Myth of Capitalism, wrote a memoir called Shooting Up. And it's his story growing up in a heroin addict community. His parents were missionaries in Madrid. It is heartfelt. It is heart-wrenching. It is deeply personal, and it's one of the best memoirs I've ever read. The other, John Kim, who until recently was the head of Capital Formation at General Catalyst, wrote a book called The Tao of Fundraising. It is the best book I've ever read describing the capital formation process. I think that'll come out in March. John's going to come on the podcast.
Speaker 2What's your favorite holiday gift that you've ever received?
Speaker 1I am a huge Ted Lasso fan and Rahul Mudgal. My dear friend has over the years given me lots and lots of Ted Lasso-themed swag. The best two gifts I've ever received, one came from Rahul and one came from one of my sons, were a signed pilot, in one instance, and a signed poster of Ted Lasso.
Speaker 2Super cool. Some familiar closing questions, some that you haven't answered in a long time or have not answered at all. What was your first paid job and what'd you learn from it?
Speaker 1I was a cashier at a movie theater, and I learned that I love. counting and keeping score, and I'm really good at it.
Speaker 2What's one thing that most people don't know about you that you find interesting?
Speaker 1I love, and when I say I love, I love chocolate chip cookies. I follow all the health stuff, and I get it. And Warren Buffett says this thing about he had a twin, and that twin only ate broccoli. He's sure that he, the current Warren Buffett, would be much happier drinking his cherry Cokes and eating McDonald's all the time. I just love chocolate chip cookies. I've gotten to the point where I won't finish one if I don't think they're good. But like grade inflation in college, like most chocolate chip cookies are an eight or above on a scale of one to 10. Okay, so now I have to ask, what is the best chocolate chip cookie? Conceptually, it has to come from a bakery. They're the cookie that's crispy on the outside and just a little bit chewy on the inside. Not massively overloaded with chocolate, but you gotta be able to taste the chocolate. And it's just so, so good. What is the best? What is the best? What is the best advice you've ever received? It's definitely, you can't do things alone. For whatever reason, I grew up feeling like I had to figure everything out on my own. There's this old story that when I was graduating college and I was interviewing at Goldman Sachs Investment Banking alongside of Yale, and I ended up not getting the offer at Goldman and ended up getting the job at Yale and went to Yale. My late uncle was the chairman of Capital Group. Capital Group was one of Goldman's biggest clients at the time. One might think I could have called Uncle Jim and said, hey, do you know anybody at Goldman Sachs? And maybe he might've said, I do. Why are you asking? And I said, well, I'm in the final round investment banking interviews. And I just thought maybe you'd know somebody and maybe that would have helped out. His last name was Rothenberg, my insight. He said no one would have put that together. I never understood how to ask for help. In the last five years of this business, everything that's happened has only happened because I've figured out we can do a lot more with great people around you. Totally agree. Last one. What brings you the greatest joy? When Morgan Housel was on the podcast earlier this year, he talked about the difference between contentment and happiness and how happiness is a one-shot deal. You're really happy for a very short period of time, but contentment is something that lasts long. So I've thought a lot about that. Whenever I'm in the flow, that's what brings me the greatest joy. So I have three kids and two stepkids, and there's a line that you're only as happy as your least happy kid. And right now, it seems to be a pretty good time for them. They're doing well. I really love spending time with my wife. We are. Big tennis players enjoy playing tennis together and spending time together. And professionally, I love nothing more than connecting the dots between people in the industry to create some compounding of value. It just excites me, and I don't have to get anything out of it. It's bringing two people I know together where they can help each other. I'm in a fortunate position to get to do that over and over and over again, and I just love it. Well, good thing you get to do it as often as you do. That's for sure.
Speaker 2Well, Ted, it's fun to do another year in review. It's fun to hear what you're hearing. It's fun to hear your update on the business. Beyond excited for what's in store in 2026, beyond grateful to get to work on this business
Speaker 1together. None of this is going to happen without you, and you're pretty damn good on the mic, so we're going to have to get you back out more in front of the mic next year. We'll see about that. Thanks for listening to the show. If you like what you heard, hop on our website at CapitalAllocators.com, where you can find access past shows, join our mailing list, and sign up for premium content. Have a good one, and see you next time.
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