The Exchanges

Q elements of LP world is that there's no incentive for you to take a risk if you're in a large pension fund or if you're in a large, Why would you bet on a twenty-seven-year-old Kushner when you could just do a tier two, tier three, you're never going to get fired for doing X brand name? Do you agree with me? And do you think that still exists today?

A Yeah, I mean, I think, I think that when we can, we can walk through the whole LP landscape, but, you know, I am incentivized mean, around performance fees and around, I'm in a financial organization, we're a multi-family office, we manage thirty billion from 200 families, and I, you know, the equity as well as the The carry that I generate. I'm trying to, and I put a lot of my own personal capital in it, so I'm trying to get the best performance and the best risk-adjusted performance possible, and I think that, you know, a lot of, um, Like, state pension plans or larger sovereign wealth, I mean, they structurally have major issues. If you think of, like, some of the big states, right, they can only, they have a rule in their, in their charter that they can't be more than 10% of a fund. And they can't write less than a hundred million dollar check. Therefore, they can't invest in funds that are smaller than a billion dollars. Like, that, That is a structural, like, impediment to what they do. You layer in the fact that there's political considerations and the fact that the people get paid not that well. You're gonna have a lot of turnover. Yeah, I mean, that is, that is the issue with a lot of, you know, the big pools of capital in, in, in the private equity world. Um, if you think of the endowments, I think there's-

AI assessment note: “state pension plans or larger sovereign wealth, I mean, they structurally have major issues.”

Q Can I ask, how much cash do you need to do a direct investments program and do it effectively?

A Well, I feel, I feel really strongly about the need for scale. So this is, we could pivot a little bit in this conversation and like, when I joined SCS, we had seven billion dollars under management. I think that's around kind of the low end that you need. If you're gonna, when you, when you back into what the, what that equates to from a private equity allocation, um, but I think in, I was investing maybe two hundred and fifty million a year, um, at that point in time, now it's, like, about a billion and a half. There's a minimum scale. Like, if you're investing thirty million dollars a year, like, that's not enough money. Unless you want to do something, like, really concentrated, but I, I don't,

AI assessment note: “seven billion dollars under management. I think that's around kind of the low end”

Q For sure. Or, or, or not actually. I think, I think they do that, but they also go like, oh, I want to see the track record and I want to see last fun. How much of an emphasis do you place on track record? Because I think for a lot of LPs, it's, it's quite a crutch.

A Yeah. I mean, I think track record is important. Like it tells you, do these people know how to invest? Like, are they smart? But for me, and I say this often, it's like, maybe it's number four or five on my list of things that are important, like the quality of the team. And we can get into what that means. Um, but like having it be an attractive opportunity, having the team have competitive advantage to persecute that, having the fund be right-sized for that opportunity. Those are like, and, and good alignment with that team. Like those are the key things. And the tracker is like, okay, yeah, they know how to invest because we're not investing in the last fund. We're investing in the current fund.

AI assessment note: “maybe it's number four or five on my list of things that are important”

Q For sure. Or, or, or not actually. I think, I think they do that, but they also go like, oh, I want to see the track record and I want to see last fun. How much of an emphasis do you place on track record? Because I think for a lot of LPs, it's, it's quite a crutch.

A Yeah. I mean, I think track record is important. Like it tells you, do these people know how to invest? Like, are they smart? But for me, and I say this often, it's like, maybe it's number four or five on my list of things that are important, like the quality of the team. And we can get into what that means. Um, but like having it be an attractive opportunity, having the team have competitive advantage to persecute that, having the fund be right-sized for that opportunity. Those are like, and, and good alignment with that team. Like those are the key things. And the tracker is like, okay, yeah, they know how to invest because we're not investing in the last fund. We're investing in the current fund.

AI assessment note: “maybe it's number four or five on my list of things that are important”

Q best of last 1213, what is it, 12 years, um, with SCS, Are there any lessons or observations when it comes to liquidity management on how the best get out? I think a generation has been told about lean in, lean in, and actually liquidity management and liquidity planning and is crucial. Are there any lessons from the generation of managers you've seen and backed? The best do get out.

A Yeah, uh, well, I don't, I don't know if anyone did a good job at it, really. I mean, there are a few exceptions. That was my biggest mistake. There was a company that we invested in a two hundred million dollar valuation that had gotten bid up to six billion. And I had people, like, legitimately, like, trying to buy my shares. But I was told it was gonna IPO at 10 to twelve billion in, like, six to 12 months. And the people I was in it with were not sellers. So I, you know, they were, they were longing. You fast forward, I mean, I would sell that at a billion dollar valuation today, and I'm worried. I think it's a little binary right now. I think it could be worth three billion, it could be worth zero.

AI assessment note: “I don't know if anyone did a good job at it, really.”

Q Can I ask, how much cash do you need to do a direct investments program and do it effectively?

A Well, I feel, I feel really strongly about the need for scale. So this is, we could pivot a little bit in this conversation and like, when I joined SCS, we had seven billion dollars under management. I think that's around kind of the low end that you need. If you're gonna, when you, when you back into what the, what that equates to from a private equity allocation, um, but I think in, I was investing maybe two hundred and fifty million a year, um, at that point in time, now it's, like, about a billion and a half. There's a minimum scale. Like, if you're investing thirty million dollars a year, like, that's not enough money. Unless you want to do something, like, really concentrated, but I, I don't,

AI assessment note: “seven billion dollars under management. I think that's around kind of the low end”

Q best of last 1213, what is it, 12 years, um, with SCS, Are there any lessons or observations when it comes to liquidity management on how the best get out? I think a generation has been told about lean in, lean in, and actually liquidity management and liquidity planning and is crucial. Are there any lessons from the generation of managers you've seen and backed? The best do get out.

A Yeah, uh, well, I don't, I don't know if anyone did a good job at it, really. I mean, there are a few exceptions. That was my biggest mistake. There was a company that we invested in a two hundred million dollar valuation that had gotten bid up to six billion. And I had people, like, legitimately, like, trying to buy my shares. But I was told it was gonna IPO at 10 to twelve billion in, like, six to 12 months. And the people I was in it with were not sellers. So I, you know, they were, they were longing. You fast forward, I mean, I would sell that at a billion dollar valuation today, and I'm worried. I think it's a little binary right now. I think it could be worth three billion, it could be worth zero.

AI assessment note: “I don't know if anyone did a good job at it, really.”

Q How do you think about position sizing with that in mind?

A If you think of, like, our vehicle, right, it's about 20, 25% co-investments. Um, so at the full, and we've raised these vehicles every 18, 24 months, but at the high level, it's like a co-investment will be, it will max out around two percent exposure, but it's probably going to be typically, you know, 50 to, you know, one percent. And, and the, the co-investment sleeve, we want to build probably portfolio of 20, 25, but we'll have some like Anderil that we'll like lean into and make that, you know, a 10% position in the co-invest sleeve, which then equates to, you know, two percent in the overall vehicle. So definitely there's a big range. And I would say that having a range of investment size is one of the things that's like the best for me. So I'll write co-investment checks. My typical investment is somewhere between kind of 10 to 25. I'll go up to 50, I'll go down to five. Funds, I will write checks between 20 to like a hundred million. And actually in the seed venture, it's like kind of like five to 15. You showed me an opportunity, like a million, I was like, okay, whatever. Like we just, like a million, but like, but having that flexibility, because I, and I don't even remember

AI assessment note: “a co-investment will be, it will max out around two percent exposure”

Q Can I ask on the direct canvas? I feel there's also a binary approach to the diligence processes attached. People are either like, we're going to do a huge amount of work and take four weeks, as you said, or we're just completely blindly following our managers, which isn't necessary.

A No, I'm in the middle. I'm in the middle. Yeah, no, no, it's a great question. This is really important. You have to know you're an LP. You're not a GP, right? I mean, I think there are family offices that actually operate like GPs, but so we only do co-investments right now. I think we'll probably evolve over time, but we only do co-investments with our highest convection managers in their areas of expertise, like deep areas of expertise where they're fully aligned. So when you put, when you put that filter on it, You know, I would say you should want, like, your hit rate should be really high, right? Um, and so I'm not trying to re-underrate if, if a deal, if a manager is putting 10% of their fund into a deal, and they think it's one of their best ideas, I'm not there to, like, re-underrate everything. First of all, the deal has to make sense for our returns, and that typically is at least two and a half X Like two and a half to three and a half X base case that return, um, with a right tail and with a right tail where I can see, I mean, where I hope I can make five X plus and my goal is generally not to lose money. I I've lost money, but you feel like you have one X downside protection. That's kind of the parameters way we do co-investments. If you go at it that way, then what I'm going to do and what's going to make me good, where I have an advantage is I have this huge net…

AI assessment note: “No, I'm in the middle. I'm in the middle.”

Q How do you think about position sizing with that in mind?

A If you think of, like, our vehicle, right, it's about 20, 25% co-investments. Um, so at the full, and we've raised these vehicles every 18, 24 months, but at the high level, it's like a co-investment will be, it will max out around two percent exposure, but it's probably going to be typically, you know, 50 to, you know, one percent. And, and the, the co-investment sleeve, we want to build probably portfolio of 20, 25, but we'll have some like Anderil that we'll like lean into and make that, you know, a 10% position in the co-invest sleeve, which then equates to, you know, two percent in the overall vehicle. So definitely there's a big range. And I would say that having a range of investment size is one of the things that's like the best for me. So I'll write co-investment checks. My typical investment is somewhere between kind of 10 to 25. I'll go up to 50, I'll go down to five. Funds, I will write checks between 20 to like a hundred million. And actually in the seed venture, it's like kind of like five to 15. You showed me an opportunity, like a million, I was like, okay, whatever. Like we just, like a million, but like, but having that flexibility, because I, and I don't even remember

AI assessment note: “a co-investment will be, it will max out around two percent exposure”

Q I think is a real superpower. Which brings me to something that I do want to talk about, which is, like, different types of LPs, because I think a lot of managers aren't quite sure what's actually behind the wrapper. And so when we look at, say, endowments first, Often blue chip, uh, highly respected. What do you think managers should know about endowments as LPs that they maybe don't?

A The endowment's probably like the team, right? You gotta understand like what's going on. Like Notre Dame's endowment, like they all went to Notre Dame. They're very, they've been around a long time. Brian's awesome. Like that, that's a really solid, One, or, you know, look at Harvard have had team turnover in the past, but now they have like a new regime in there. That's great. And they're actually doing a lot of new stuff and you can't paint it with, you know, the same brush. So just understanding the people and like how solid that foundation is, because if on the flip side, like a new CIO comes in, there's a big team change. Like that can, that can, it very stable basic capital, but. There can be team instability. So that's, that's really, I think, the main thing on the endowment.

AI assessment note: “just understanding the people and like how solid that foundation is”

Q What, what are those opportunities? Like strip sales? Like buyouts? How do you think about those?

A No, the secondary side. Like, so, uh, it's been announced. Um, Square Heritage and Brookfield Created a company called Pine Grove that's going to be dealing with a kind of like liquidity in the LP ecosystem. But also, if you thought you were going public this year, and it's going to be like three or five years, like there's probably, with employees, there's, there's, and it could be a win-win, right? You know, you start, if you're, if you're at a company, And it goes, this is for round numbers, like, it's worth twenty billion dollars, right? You had no idea, and you're, you own whatever, you know, now you have, like, sixty million of stock. When you joined, you didn't, you didn't know it was gonna go like that, and if you're selling at 30 billion, if you, if you, if you sell 10 or 20% of your stake at half that to buy a house, You still own 80% of your shares, and your wife's happy, and whatever. You know, like, this can be a win-win. Like, it doesn't need to be a negative. I mean, and I've seen that, actually, that, like, scenario actually play out. The other thing that's interesting about the secondary market is that most of the secondary people are not really comfortable in venture.

AI assessment note: “No, the secondary side. Like, so, uh, it's been announced.”

Q I think is a real superpower. Which brings me to something that I do want to talk about, which is, like, different types of LPs, because I think a lot of managers aren't quite sure what's actually behind the wrapper. And so when we look at, say, endowments first, Often blue chip, uh, highly respected. What do you think managers should know about endowments as LPs that they maybe don't?

A The endowment's probably like the team, right? You gotta understand like what's going on. Like Notre Dame's endowment, like they all went to Notre Dame. They're very, they've been around a long time. Brian's awesome. Like that, that's a really solid, One, or, you know, look at Harvard have had team turnover in the past, but now they have like a new regime in there. That's great. And they're actually doing a lot of new stuff and you can't paint it with, you know, the same brush. So just understanding the people and like how solid that foundation is, because if on the flip side, like a new CIO comes in, there's a big team change. Like that can, that can, it very stable basic capital, but. There can be team instability. So that's, that's really, I think, the main thing on the endowment.

AI assessment note: “just understanding the people and like how solid that foundation is”

Q Yeah. I'm telling you as a neutral observer. So why is it such an important part of the program for you? And what have been lessons for you from doing the direct co-invest program?

A Yeah, sure. Uh, great question. Um, Well, first of all, like from a fee perspective, and we have like over a hundred, it's maybe a 130 or so direct investments. I think, I mean, essentially no management fee, like 10 basis points blended. And the carry is like seven or eight percent, which is there's a bunch of deals at zero and then some at 10, and then it'll be tiered. And by the way, like I'm totally fine with paying carry on co-investments. But in general, it's a massive savings. But more importantly, I think you get to know You get to know the portfolio better, right? I mean, I know the co-investments, I do. Like, I know those companies a lot better. But you get to, you get to see how managers underwrite deals. And you get to, you know, get to know the people on the team, too. You get to know the, you know, the analysts. So there's, it just, it just deepens the relationship. Um, but I think what's really important is, uh, to build, again, however you know my, like, you build a portfolio of co-investments. Because by the way, like, we've made a bunch of mistakes. Like, You know.

AI assessment note: “Well, first of all, like from a fee perspective... it's a massive savings.”

Q Can I ask on the direct canvas? I feel there's also a binary approach to the diligence processes attached. People are either like, we're going to do a huge amount of work and take four weeks, as you said, or we're just completely blindly following our managers, which isn't necessary.

A No, I'm in the middle. I'm in the middle. Yeah, no, no, it's a great question. This is really important. You have to know you're an LP. You're not a GP, right? I mean, I think there are family offices that actually operate like GPs, but so we only do co-investments right now. I think we'll probably evolve over time, but we only do co-investments with our highest convection managers in their areas of expertise, like deep areas of expertise where they're fully aligned. So when you put, when you put that filter on it, You know, I would say you should want, like, your hit rate should be really high, right? Um, and so I'm not trying to re-underrate if, if a deal, if a manager is putting 10% of their fund into a deal, and they think it's one of their best ideas, I'm not there to, like, re-underrate everything. First of all, the deal has to make sense for our returns, and that typically is at least two and a half X Like two and a half to three and a half X base case that return, um, with a right tail and with a right tail where I can see, I mean, where I hope I can make five X plus and my goal is generally not to lose money. I I've lost money, but you feel like you have one X downside protection. That's kind of the parameters way we do co-investments. If you go at it that way, then what I'm going to do and what's going to make me good, where I have an advantage is I have this huge net…

AI assessment note: “No, I'm in the middle. I'm in the middle.”

Q elements of LP world is that there's no incentive for you to take a risk if you're in a large pension fund or if you're in a large, Why would you bet on a twenty-seven-year-old Kushner when you could just do a tier two, tier three, you're never going to get fired for doing X brand name? Do you agree with me? And do you think that still exists today?

A Yeah, I mean, I think, I think that when we can, we can walk through the whole LP landscape, but, you know, I am incentivized mean, around performance fees and around, I'm in a financial organization, we're a multi-family office, we manage thirty billion from 200 families, and I, you know, the equity as well as the The carry that I generate. I'm trying to, and I put a lot of my own personal capital in it, so I'm trying to get the best performance and the best risk-adjusted performance possible, and I think that, you know, a lot of, um, Like, state pension plans or larger sovereign wealth, I mean, they structurally have major issues. If you think of, like, some of the big states, right, they can only, they have a rule in their, in their charter that they can't be more than 10% of a fund. And they can't write less than a hundred million dollar check. Therefore, they can't invest in funds that are smaller than a billion dollars. Like, that, That is a structural, like, impediment to what they do. You layer in the fact that there's political considerations and the fact that the people get paid not that well. You're gonna have a lot of turnover. Yeah, I mean, that is, that is the issue with a lot of, you know, the big pools of capital in, in, in the private equity world. Um, if you think of the endowments, I think there's-

AI assessment note: “that is the issue with a lot of, you know, the big pools of capital”

Q Peter, final one. Where's Peter in 2033? What did 10 years out look?

A Well, in 10 years, my son, Reed, will be 16, so I'm living outside of Boston, you know, doing what I do, I think. Uh, I think the more interesting question is like, where did, where did that go when Reed goes to college? One thing I love about the LP life, being an LP, not being, being at that 10,000 feet or 30,000 feet, not like in the trenches on the deals, because I don't take board seats or anything like that, is like, I think this is something that I can do, like, Into my seventies. Like, I, I think I can maybe not be, um, quite as engaged on the front end as I am today, but like, I think I can continue to do this for a long time and do it, do so in a way that You know, lifestyle-wise, I can take more time and, you know, enjoy travel, which I love and all, you know, but I get so much positive energy from what I do and partnering with people like you that, like, I don't see myself ever stopping this, or at least not for the next, well, I'm 42, so probably the next four years.

AI assessment note: “in 10 years, my son, Reed, will be 16, so I'm living outside of Boston”

Q Yeah. I'm telling you as a neutral observer. So why is it such an important part of the program for you? And what have been lessons for you from doing the direct co-invest program?

A Yeah, sure. Uh, great question. Um, Well, first of all, like from a fee perspective, and we have like over a hundred, it's maybe a 130 or so direct investments. I think, I mean, essentially no management fee, like 10 basis points blended. And the carry is like seven or eight percent, which is there's a bunch of deals at zero and then some at 10, and then it'll be tiered. And by the way, like I'm totally fine with paying carry on co-investments. But in general, it's a massive savings. But more importantly, I think you get to know You get to know the portfolio better, right? I mean, I know the co-investments, I do. Like, I know those companies a lot better. But you get to, you get to see how managers underwrite deals. And you get to, you know, get to know the people on the team, too. You get to know the, you know, the analysts. So there's, it just, it just deepens the relationship. Um, but I think what's really important is, uh, to build, again, however you know my, like, you build a portfolio of co-investments. Because by the way, like, we've made a bunch of mistakes. Like, You know.

AI assessment note: “it's a massive savings. But more importantly, I think you get to know the portfolio better”

Q Can I ask, do you think the incentives are aligned in terms of wealth managers today, in terms of private banks today, and how that plays out in the ecosystem?

A Yeah, uh, no. So this is amazing, it's amazing to me, So if we go back to the founding of SCS, our founder, CEO, Pete Mattoon, or now executive chairman, the force of nature, he was at the, this firm called Scudder Stevens and Clark. He opened offices all over the world, um, like Latin America, I think, you know, and at like the age of like 42 or 43 or 44, he made like 30 or forty million bucks. So he had a nice like wealth creator and he was like trying to figure out like What he wanted to do with his money, and also, like, what he wanted to do, like, for his life, like, his next act. And he looked, he's like, there is a gap in the market. There's all these, like, You know, investment banks that sound smart, but like they're totally conflicted and are pushing product. And then there's these like really aligned, um, you know, small boutique, you know, people that are really good at like trust and estate stuff and like, but they're not, they don't know much about investments. What if we do something in the middle? That was his thesis. And I think that this is basically, it's one of those things like the pitch deck, like You know, it could be refined, but like, it's still still solid. It's still totally there. It's amazing to me that the wealth management industry, multifamily, that it continues to be, you know, so fragmented, so underserved. But if you think of like, if you're a…

AI assessment note: “they're totally conflicted and are pushing product.”

Q Do you not lose your ability to do directs then? You hand over that relationship, you hand over that mandate, and with that you're not going to get the relationships and the touch point to give you access to do the directs.

A Well, most of these, uh, bigger pools of capital don't do a lot of direct investing anyway. Do you think they should? I mean, I think direct investments are a really important part of a portfolio, right? And so, I mean, I don't, I think it's difficult if you're meeting quarterly for an investment meeting, you can't do, you can't do a lot of direct stuff, right? I mean, I'll give you An example, and we kind of in the prep for this, you know, mentioned a situation with a London manager, Tenzing, where there was a co-investment. I was on the LPAC and basically very track. It's going to work out. It's going to be like a Forex plus deal. Um, but one of the LPs, so Tenzing reaches out. It's like late July, early August. Short time fuse on the thing. And they're charging, uh, carry. They're charging a 10% carry on the deal. I respond. Um, a single family office here in London, one of my favorites, Bergall, responds. We do the deal. And one of this, it's actually kind of a fund to fund, it's like a fund to fund slash like consultant allocator, you know, takes like four weeks to get back. And then in the ELPAC, like six months later, the, the GP got chewed out for, you know, not giving them four weeks to do their due diligence and for charging carry. And they, they kind of neglected, they, they didn't mention the fact that like they didn't respond for two weeks because they're probably …

AI assessment note: “most of these, uh, bigger pools of capital don't do a lot of direct investing anyway.”

Q But my point being, like, the best scale, and so Do you churn because they scale? Because Thrive are great, Andre.

A No, I'm more talking about buyouts. So, and you know, this is, you're a VC guy, right? But like, my world is, right now, I'm spending like, the vast majority of my time on lower middle market buyouts. And I'm so excited about like the, the opportunities that I'm seeing. And actually, I'm going to generate like venture-like returns. In small cap, EBITDA positive businesses, right? So in my barbell approach, the way I do it is, in venture, it's probably, it's like, 50, 50, like, franchise versus emerging. It might even be like, 70% franchise, 30% emerging. Actually, I think, yeah, those are the numbers, right? And we actually, we, we realized that when, like, people like Josh Kushner or Neil Mehta, they went from being emerging to being franchised. And that's why we backed, You and, you know, I, I, you know, a lot of Gil, Oren Zev, Ray Tanzing, there's like the OG, like older, and then, but then the Lockie Grimms, the Josh Buckleys, the CEOs like Jack Altman, who introduced me to Zach Bure. We realized that if we just invested with Thrive, it was going to be more and more growth because those funds are 80%, 70, 80% more later stage. So we had to backfill that. And then there's advantages to that too, which is, Your, I think the absolute return, if you build, you got to build a basket, right? But the basket I think can do five X of those seed funds versus what do I think? Like a f…

AI assessment note: “if we just invested with Thrive, it was going to be more and more growth”

Q What, what are those opportunities? Like strip sales? Like buyouts? How do you think about those?

A No, the secondary side. Like, so, uh, it's been announced. Um, Square Heritage and Brookfield Created a company called Pine Grove that's going to be dealing with a kind of like liquidity in the LP ecosystem. But also, if you thought you were going public this year, and it's going to be like three or five years, like there's probably, with employees, there's, there's, and it could be a win-win, right? You know, you start, if you're, if you're at a company, And it goes, this is for round numbers, like, it's worth twenty billion dollars, right? You had no idea, and you're, you own whatever, you know, now you have, like, sixty million of stock. When you joined, you didn't, you didn't know it was gonna go like that, and if you're selling at 30 billion, if you, if you, if you sell 10 or 20% of your stake at half that to buy a house, You still own 80% of your shares, and your wife's happy, and whatever. You know, like, this can be a win-win. Like, it doesn't need to be a negative. I mean, and I've seen that, actually, that, like, scenario actually play out. The other thing that's interesting about the secondary market is that most of the secondary people are not really comfortable in venture.

AI assessment note: “No, the secondary side. Like, so, uh, it's been announced.”

Q Why do you think the bar is low for competition in the LP world?

A Well, I think it's structural, um, because a lot of the big, a lot of the big pools of capital have very bureaucratic structures and low pay. So that's the big one. Funded funds are transactional. They're trying to raise their next funds. You know, they're often, like, trying to, like, cut a deal, like, get, like, a, like, they want to look good early, and I'm like, I don't really, I'm thinking about this, like, I only have so many bullets, I'm thinking, like, 20 years. Multiple funds. Doing an attractive deal. With a B plus, like, B plus A minus manager versus doing, playing the long game with an A, like, just play the long game, right? And that will come, I don't know, did I answer the question?

AI assessment note: “big pools of capital have very bureaucratic structures and low pay.”

Q Do you not lose your ability to do directs then? You hand over that relationship, you hand over that mandate, and with that you're not going to get the relationships and the touch point to give you access to do the directs.

A Well, most of these, uh, bigger pools of capital don't do a lot of direct investing anyway. Do you think they should? I mean, I think direct investments are a really important part of a portfolio, right? And so, I mean, I don't, I think it's difficult if you're meeting quarterly for an investment meeting, you can't do, you can't do a lot of direct stuff, right? I mean, I'll give you An example, and we kind of in the prep for this, you know, mentioned a situation with a London manager, Tenzing, where there was a co-investment. I was on the LPAC and basically very track. It's going to work out. It's going to be like a Forex plus deal. Um, but one of the LPs, so Tenzing reaches out. It's like late July, early August. Short time fuse on the thing. And they're charging, uh, carry. They're charging a 10% carry on the deal. I respond. Um, a single family office here in London, one of my favorites, Bergall, responds. We do the deal. And one of this, it's actually kind of a fund to fund, it's like a fund to fund slash like consultant allocator, you know, takes like four weeks to get back. And then in the ELPAC, like six months later, the, the GP got chewed out for, you know, not giving them four weeks to do their due diligence and for charging carry. And they, they kind of neglected, they, they didn't mention the fact that like they didn't respond for two weeks because they're probably …

AI assessment note: “most of these, uh, bigger pools of capital don't do a lot of direct investing anyway.”

Q Well, how do you feel about the compression and deployment timelines? You know, we saw people move from three years to 12.

A It's so obvious in retrospect. Right. I mean, but I, I just want to know. What does that mean? So Warren Zev, for example, we, we both know and love. He's just very transparent about what he's going to do. So I would size my commitments accordingly. So it's like, if you tell me you're going to put out your fund in six to 12 months, I'm just going to size you at a half bite. Understand expectations on what you're doing. Um, But a lot, I mean, the vast majority of my managers basically were putting out their, put out their funds in 20, 20, 21 in like a year. We now look back on that, and it's obvious. At the time, I said SPACs were gonna, I made the comment, like, I was like, 85, 90% of these SPACs are gonna be a disaster. And it turns out I was, I was wrong. I was too generous. So I'm not, but on the fun size, I mean, on the deployment piece, I think I was less, uh, perceptive of, you know, I mean, you kind of realize like, wow, this is crazy. It's not going to go on forever, but like.

AI assessment note: “if you tell me you're going to put out your fund in six to 12 months”

Q Can I ask, do you think the incentives are aligned in terms of wealth managers today, in terms of private banks today, and how that plays out in the ecosystem?

A Yeah, uh, no. So this is amazing, it's amazing to me, So if we go back to the founding of SCS, our founder, CEO, Pete Mattoon, or now executive chairman, the force of nature, he was at the, this firm called Scudder Stevens and Clark. He opened offices all over the world, um, like Latin America, I think, you know, and at like the age of like 42 or 43 or 44, he made like 30 or forty million bucks. So he had a nice like wealth creator and he was like trying to figure out like What he wanted to do with his money, and also, like, what he wanted to do, like, for his life, like, his next act. And he looked, he's like, there is a gap in the market. There's all these, like, You know, investment banks that sound smart, but like they're totally conflicted and are pushing product. And then there's these like really aligned, um, you know, small boutique, you know, people that are really good at like trust and estate stuff and like, but they're not, they don't know much about investments. What if we do something in the middle? That was his thesis. And I think that this is basically, it's one of those things like the pitch deck, like You know, it could be refined, but like, it's still still solid. It's still totally there. It's amazing to me that the wealth management industry, multifamily, that it continues to be, you know, so fragmented, so underserved. But if you think of like, if you're a…

AI assessment note: “they're totally conflicted and are pushing product”

Q Why do you think the bar is low for competition in the LP world?

A Well, I think it's structural, um, because a lot of the big, a lot of the big pools of capital have very bureaucratic structures and low pay. So that's the big one. Funded funds are transactional. They're trying to raise their next funds. You know, they're often, like, trying to, like, cut a deal, like, get, like, a, like, they want to look good early, and I'm like, I don't really, I'm thinking about this, like, I only have so many bullets, I'm thinking, like, 20 years. Multiple funds. Doing an attractive deal. With a B plus, like, B plus A minus manager versus doing, playing the long game with an A, like, just play the long game, right? And that will come, I don't know, did I answer the question?

AI assessment note: “because a lot of the big pools of capital have very bureaucratic structures and low pay”

Q Do you think people overemphasize how stable endowment fund money is?

A There is that herd mentality, right? And so, and there's currently, like, the seed manager, and I'm like, you kind of want the different food groups. Like, you know, you want to have your endowment, your single and multifamily office, which I'm biased, but I think is the best, um, maybe a fund of funds that can be, like, they're really good people and be thoughtful because, I mean, for example, like, I don't wake up every day thinking about, like, venture and stuff, and so if you, if you have a venture specialist fund of funds, like, they're gonna be, there's things they're gonna do that can be more thoughtful than, than, you know, more diversified pool. If you get money from endowment A, endowment B, endowment C, endowment D, that all, like, are very close to each other and talk to each other, and then one of them leaves, Then they might all leave. So having diversity of, like, mindset, and you could probably, I mean, there's a crew of LPs that I do stuff with, I mean, but I think we think generally independently, so maybe you need to be thoughtful and like, oh, they all do a lot of the same things together. Maybe, like, it would be a problem if

AI assessment note: “and then one of them leaves, Then they might all leave.”

Q How do you manage them at scale, Peter? You are like, you're also a real partner and friend to us. How do you do that?

A I work hard. Yeah. I have good teammates. Um, I have a really, you know, Kyle, who you know, you got, but, uh, it's, it's a lot. There's a balance between, cause I've, you know, a couple of, I have an 11 year old daughter, six year old son, trying to balance family and work and all the travel. Um, but I don't go to that many, I don't go to every annual meeting. You know, it's like, you have to pick your spots and I wish I could do more than I do, but like I, you know, there's the balance between that and then Um, if you have too many cooks in the kitchen, you can't, you know, so I'm, I'm working on like the time piece is like the thing I'm constantly working on.

AI assessment note: “I have good teammates... you have to pick your spots”

Q But my point being, like, the best scale, and so Do you churn because they scale? Because Thrive are great, Andre.

A No, I'm more talking about buyouts. So, and you know, this is, you're a VC guy, right? But like, my world is, right now, I'm spending like, the vast majority of my time on lower middle market buyouts. And I'm so excited about like the, the opportunities that I'm seeing. And actually, I'm going to generate like venture-like returns. In small cap, EBITDA positive businesses, right? So in my barbell approach, the way I do it is, in venture, it's probably, it's like, 50, 50, like, franchise versus emerging. It might even be like, 70% franchise, 30% emerging. Actually, I think, yeah, those are the numbers, right? And we actually, we, we realized that when, like, people like Josh Kushner or Neil Mehta, they went from being emerging to being franchised. And that's why we backed, You and, you know, I, I, you know, a lot of Gil, Oren Zev, Ray Tanzing, there's like the OG, like older, and then, but then the Lockie Grimms, the Josh Buckleys, the CEOs like Jack Altman, who introduced me to Zach Bure. We realized that if we just invested with Thrive, it was going to be more and more growth because those funds are 80%, 70, 80% more later stage. So we had to backfill that. And then there's advantages to that too, which is, Your, I think the absolute return, if you build, you got to build a basket, right? But the basket I think can do five X of those seed funds versus what do I think? Like a f…

AI assessment note: “if we just invested with Thrive, it was going to be more and more growth”