LPs

“And the other circumstances, you know, that, that tended to work out back to sort of the alignment is the, when we could point to examples of when a manager did something that was either personally or economically painful to them in their firm to do right by t…”

“Private equity generally, of which venture capital is like, you know, the tiny bit that's generally clustered into that ass glass, I think is going to see a huge pullback in at least new allocations, if not the pace of allocations.”

“I think that secondaries are going to be a great spot for LPs, where there's going to be a lot of people that get out over their skis and are going to need liquidity, and people that have ready pools of capital, I think, are probably going to be well positione…”

“Sometimes investors, Complain that their LPs are very short-term, or their clients are very short-term, but then you read their investment letter, and it starts with, dear investor, this quarter we returned 7.2% versus a, well, of course they're short-term. Yo…”

“Usually just using more debt gives the LPs more risk and more upside for the manager. But with a lot of downside risk”

“We had a deal that was going to happen and broke, and it was our largest position, and I didn't get a single phone call from one of our 50 LPs in a very bad month for our largest position, not one phone call.”

“It's the biggest problem for a GP. But LPs have this issue as well, especially on funds that have a more volatile return profile.”

“Many funds are structured as the greatest transfer of wealth from LPs to GPs.”

“If the entrepreneurs and the employees are not getting the rewards that they need to stay in the business, then this whole business stops. Like GPs and LPs can't make this business go. It is a hundred percent the people making the companies go.”

“Come 2001, The world went belly up in tech, and to their credit, back then, GPs gave the money back to LPs. I know, shocking, right? Can you believe it? And so they did well by their LPs, and they gave the money back that wasn't invested, and they basically sh…”

“Painful secret if people don't know this, so LPs don't see the management company docs. The document that gets shared between the LPs and the GPs is the LPA. So if you ask to see the management company documents, I would be surprised on the GP that will share …”

“LPs ask about attribution, because it's a very blunt instrument to try to understand how a team works”

“I think for a number of years now, the playing field has been tilted for a whole host of reasons, and it's been difficult for LPs in terms of terms negotiations, frankly, in some of the core aspects of the LP-GP relation.”

“What we heard from our LP members last week is that monthly is probably a reasonable expectation. I mean, as long as there is the opportunity to have conversations in the interim. We talked about the notion of biweekly that felt to most involved to be too much…”

“Many LPs have taken is to be targeted in terms of what they care about and really go to their GPs with as strong a message as possible on fiduciary duty or reporting or LPAC rights and try and make sure that what they're asking for is what they see as being mo…”

“We found that a lot of Managers are really good investors, but aren't necessarily as practiced in, in telling their stories and helping connect what they do and why it's meaningful to LPs and other constituents.”

“And so we structured it so that the majority of our capital is longer term capital and, you know, in exchange for that, what we offered was lower fees, a hurdle, and we pay ourselves at the end of three years.”

“And I really believe that it's certainly the model of the future where people will be looking for an increased alignment between the LPs and the GPs.”

“One of the easiest things to get right for LPs, but still the thing that almost everybody seems to get wrong, is being disciplined about pacing, because there's so many structural mechanisms that push us as limiteds To increase our pacing in hot markets, to in…”

“The metaphor that comes up endlessly is that it's a pendulum. Every time I work with a different lawyer, they'll say something about how the pendulum has now swung a little bit more to the GPs or a little more to the LPs, And the reason I hate that metaphor is…”

“Either you grow organic, takes time. You have to hire probably a team of three or four, but if they've not been working together, LPs would not give you credit immediately. A little bit of a first time team, first time fund type of reaction.”

“The incentives are there and LPs at the end of the day, if someone is making them money consistently, Are going to continue to give those funds money and somebody's going to, there's no question about it. No matter what amount of bad behavior there may be, if …”

“What people are looking for changes more rapidly than you'd think, given everyone espouses a longer term view.”

“The other really amazing benefit of that is that it's also the most tax efficient way to invest because you don't incur taxable hits. And we also then, at least in our venture funds can make in-kind distributions as well. And so that passes through all the way…”

“Now, the investment side, I definitely have a pet peeve, which is you would think that with a track record that we have, it'd be actually reasonably easy to raise capital. You would think investors or LPs would be more for it thinking and more creative in term…”

“And I think that dynamic is something if I were an emerging manager would want to be all over studying that, but then bringing new strategies to market and being able to convince LPs what that would have to translate to is larger firms potentially that have ac…”

“I think the thing that we learned that we probably took too long to learn, and I wish we had learned sooner, was just around, like, qualification. There's a lot of people who will take a meeting that can't invest in a fund one, or never have, or structurally t…”

“So it's just no pension fund, no, no big asset management firm can suffer a 80% drawdown and live to tell that tale. Just not going to happen with their LPs.”

“You try to speak with many entrepreneurs. That's probably more important, substantially more important than speaking with LPs, I would say, or GPs.”

“Oh, the asymmetry of terms between LPs and GPs. That's an easy one. That's just wrong. We should find a way to fix it.”

“I tend to think if your framework for return expectations is based on funds in that last cycle, I think a lot of LPs are going to be disappointed. And I think there's a few things that drive that one is. Everything has been repriced five, 10, 20 X upwards sinc…”

“The thing GPs, and I say this to them all the time, they do not understand LPs. Most of them just don't understand where an LP is coming from.”

“What you hear from managers, which is legitimate, is LPs yell at them if they're not investing. Like LPs hate paying on committed capital that isn't being invested, but God forbid they invested at the wrong time because then LPs yell at them for investing at t…”

“This is a tense subject because GPs abuse LPs and LPs abuse GPs.”

“VCs are always advising founders of businesses, get a partner. You don't want to go through this alone. It's lonely, but LPs are always advising hedge funds. Don't be a multi-manager. Don't have partners. It gets complicated. And so it can be a very isolating …”

“The re-up process was relatively straightforward. That is unequivocally not the case anymore. We would be investing two times more than we have just in re-ups if that was the case. There are a lot of good, not great managers that would have their big LPs write…”

“We've already seen situations where the LPs who are not electing to continue are getting stuffed with fees. We're seeing deal fees that the manager's taking, and because there's not enough management fee, they're not being offset against it.”

“Because of that, I'm not real thrilled when our GPs will raise five hundred million and then raise five hundred million worth of opportunity for direct co-invest. And my pushback on that is, well, so I'm really just subsidizing the other guy who's taking the c…”

“We were certainly asked by some of our potential LPs, well, we would invest if you restrict this part of your strategy to no more than 40% of the investments or no more than x. And we refused to do that. Even at a time we were desperate for capital because we …”

“LPs were just as complicit in all of this as anybody else because fed the beast, invested in the funds, and LPs have a habit of if they find something that's working, you want to put more money in it, but if Putting more money in it means the funds get larger …”

“Private credit managers see nav loans as a gold mine. Private equity managers are testing the waters, and LPs whose capital is at risk are on the lookout for trouble.”

“No matter how you look at it, NAV loans are a late-cycle response to the higher cost of debt and slowing fund flows that will bring uncompensated risk to LPs.”

“I would say for the existing funds, those hits tend to be about two to 300 basis points on returns, net returns to LPs. We're still generating a 10 plus net return to our LPs.”

“The alternatives business found itself with the established firms growing at a much faster rate Than newcomers, and the fact that LPs were becoming increasingly sophisticated, and looking to consolidate the number of their relationships.”

“Every single person who walks into that meeting, they're just enthusiastic people who generally appreciate intelligent people coming to talk about investing, and that has nothing to do with their ability to invest.”

“I think every successful fund manager has been selective about who they accept as clients or LPs. And that's really what it is. It's the stability of your investor base that's going to give you that endurance.”

“And I think a lot of fund managers, when they get into problems with their investor base, with their LPs, it's because they have given their LPs, their investors, a false definition, a false sense of what the risks are going to take. You might have a fund mana…”

“Well, I think one of the biggest things is that there is so much money trying to invest in this endowment model, yet there's only so much capital allocation within these firms, especially the top tier firms. And so in some ways, yes, we'd love to collaborate w…”

“Most LPs were very concerned about asking the GP for the right to sell, because every transaction, you require the consent of the GP. And often then, less so now, that was in the GP's sole discretion. In some ways, it was considered similar to asking a spouse …”

“The new investors typically make a commitment to the new vintage funds, and the GP is deeply involved in the diligence on the existing portfolio, which typically generates a better price for the LPs. Those transactions tend to be a win-win.”

“Nav loans raised to support portfolio companies are often much more acceptable to LPs, particularly in a situation where the fund has no more unfunded capital, but the GP needs to grow their portfolio or they need to defend their portfolio.”

“NAV loans that are raised against a portfolio to send capital back to LPs, very unpopular. Very high priced. Many LPs don't like them. They can raise capital cheaper themselves. So those are not popular.”

“So I will sell my old funds to reinvest in the new funds so I can generate co-investment business. And old funds don't generate co-investment business. Many LPs these days have very active co-investment program, so they would do it for that reason.”

“One thing that has happened since the pandemic, for instance, is that LinkedIn went from being perceived as a job seekers space to a real thought leadership news breaking platform to serious business people, partially because the pandemic forced us all to find…”

“And one thing that has definitely changed a lot is the math is all that counted in the past. Meaning if you were performing, you didn't even have to really talk to your LPs. They were writing checks. Now I interview LPs on panels and I ask them for the GPs in …”

“And what's happened in the world of the LPs is I think a lot of LPs have decided I rather work from home And then go to the conference and bang out a lot of meetings and then go back work from home.”

“They care about their personal brands. They've been under fire. A lot of the university endowments have had to face really treacherous media and attacks.”

“A lot of LPs of longstanding relationships going 3040 years back to the firms that are still on the short list of what are the best BFC firms in the world have gotten returns that are quite a bit south of The IRRs that reported in those manager records.”

“You don't want to be the person at dinner pitching everyone your fund. If you want to turn off LPs, just do that.”

“So professionally, I wonder how any LP could agree to terms where there's an American waterfall. Okay, and for those who are uninitiated on this topic, an American waterfall pays the GP a carry on a deal-by-deal basis. Okay, imagine the absurdity of this in an…”

“By and large, managers have never been good at understanding the LPs. And by the way, I would say LPs have never been good at understanding the demands placed on managers. There's just a knowledge gap between the two.”

“There are some secondary funds that are going to do really well because LPs are overexposed, don't have DPI, don't have returns of cash coming in from their managers, are going to divest from some of the ones that are wrongly positioned.”

“Building respectful collegial partnerships with LPs is really hard, harder than investing.”

“Sourcing to me, whether you're a GP or an LP, too few LPs, Take the GP mindset. As an LP, you better have a GP mindset, and you better source. You better be out there finding opportunities.”

“It's gotten so prevalent to where we almost never trust the hard cap, and that's almost perverting the word at this point.”

“Since 2022, liquidity has been negative cash to LPs of about two hundred billion capital calls in excess of distributions.”

“The thing about AI, we're no longer going to rely on the GPs or our money managers to tell us how the J-curve is operating. I can now look through our own portfolio and see where that J-curve is.”