Mar 11, 2024 · 55m · capital-allocators
Michael Leffell – Opening Doors to Niche Private Opportunities at 10 East (EP.373)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Michael Leffell, founder of Portage Partners and 10 East, exploring his career from pioneering distressed debt investing at Davidson Kempner to modernizing private co-investing and fintech. Leffell shares his frameworks for institutional due diligence, crisis governance at PG&E, and building flexible investment platforms that offer access to niche, capacity-constrained private markets.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 22.3% of the talking time here. How this is scored →
Ted as informed peer 3.6 Guest teaching 3.1 Guest disagreement 0.7 Ted pushing back 0.4
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 49:50 Outrage at dismissive vetting of Navy admiral candidate
Leffell expresses visible indignation over California officials dismissing an exceptionally qualified nuclear-certified commander as 'just another army guy', openly calling the behavior offensive.
Hardest push from Ted ▶ 18:58 Ted highlights tension between opportunity seeking and core focusTed directly challenges Leffell on the apparent juxtaposition between pursuing new market opportunities and his strict rule of sticking strictly to what you already know.
Biggest teaching moment ▶ 13:20 The mechanics of purchasing unfunded revolvers during the S&L crisisLeffell explains the counterintuitive mechanics and deep value of buying unfunded revolvers at a 50% discount where the seller funded the discount cash upfront.
Ted holds their own ▶ 18:58 Ted synthesizes and interrogates firm strategy evolutionTed displays allocator expertise by probing how Davidson Kempner systematically distinguished legitimate extensions of its core competency from opportunistic drift.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Introducing Michael Leffell and Monologue on Michaels | 0 | 0 | 0 | 0 | Ted opens with an extended solo monologue introducing Michael Leffell, joking about the recent streak of guests named Michael and outlining his personal involvement as an advisor to 10 East. As a monologue, all host-interaction scores are zero. | |
| Early Life, Montreal Upbringing, and Intellectual Roots | 2 | 2 | 0 | 0 | Ted prompts Leffell on his upbringing in Montreal during the Quebec separatist movement and his intellectually focused household. The tone is reflective and conversational. | |
| Career Shift from Law to MH Davidson & Company | 3 | 2 | 0 | 0 | Leffell recounts transitioning from law school to Kaye Scholer and subsequently taking a leap of faith to join MH Davidson as an entry-level analyst. Ted guides the narrative with brief biographical questions. | |
| Navigating Bank Debt Opportunities During the S&L Crisis | 4 | 4 | 1 | 1 | Leffell explains how the S&L crisis opened unprecedented opportunities to purchase distressed bank debt and unfunded revolvers. He details Marvin Davidson's rigorous questioning style and the fundamental focus on downside protection. | |
| Essential Investing Lessons and Edge from Marvin Davidson | 4 | 4 | 0 | 0 | Leffell outlines core investing tenets learned from Marvin Davidson, including seeking a clear informational edge, reacting to dynamic changes, putting ideas in writing, and capitalizing on forced sellers. | |
| Culture, Talent Development, and Partnership Structure at Davidson Kempner | 5 | 3 | 1 | 2 | Ted highlights a juxtaposition in Leffell's philosophy between seeking new opportunities and sticking strictly to core competencies. Leffell explains how DK structured partnership incentives and gradual capability expansion. | |
| The Decision to Retire and Preserving Intellectual Engagement | 4 | 3 | 1 | 0 | Leffell explains his decision to retire from Davidson Kempner to gain control of his time and avoid burnout, leading directly to the formation of Portage Partners to pursue capacity-constrained niche private market investments. | |
| Rigorous Sponsor Diligence and Identifying Critical Red Flags | 4 | 4 | 1 | 1 | Leffell breaks down red flags when evaluating sponsors, including co-heads without clear decision authority, unwillingness to discuss mistakes, misaligned fee structures, and misleading marketing charts. | |
| Case Study on Medical Devices and Deepening Fund Research | 4 | 3 | 0 | 0 | Leffell uses a medical device fund case study to demonstrate how specialized operators aggregate targeted technologies for strategic acquisition by industry giants. | |
| The One-Page Memo Discipline and Organizational Culture | 4 | 3 | 1 | 0 | Leffell insists that any viable investment thesis must be communicable in a crisp one-page memo, arguing that inability to summarize concisely reflects sloppy thinking. | |
| Solving Alternative Investment Reporting Through Canoe Intelligence | 5 | 4 | 1 | 1 | Leffell describes incubating Canoe Intelligence to solve unstructured data extraction in alternative reporting, and contrasts 10 East's investor-led curation against venture-backed fintech aggregators run by tech founders. | |
| Pursuing Asymmetric Returns in Niche Litigation Finance | 4 | 4 | 0 | 0 | Leffell walks through asymmetric litigation finance deals, specifically financing law firms pursuing mass-tort settlements with high collateral coverage ratios. | |
| Scaling Access and Prioritizing Member Choice at 10 East | 4 | 4 | 3 | 1 | Leffell discusses scaling 10 East via deal-by-deal member choice, then vividly recounts serving on PG&E's board during restructuring and sharply criticizes state officials for dismissive political vetting of a highly qualified military veteran. | |
| Philanthropic Strategy Supporting Jewish Education and Israel Relief | 3 | 3 | 1 | 0 | Leffell discusses his philanthropic allocation framework, prioritizing established intermediaries like UJA Federation to allocate capital efficiently following the October 7 crisis in Israel. |
Statements from this episode (17)
Leffell: Distressed Bank Debt Did Not Historically Trade Before Late 1980s
“Buying bank debt, and bank debt did not historically trade. So these were one-off transactions. It was pretty much a small group of banks and funds that were doing it.”
Leffell: Davidson Kempner acquired unfunded revolvers while being paid 50 cents
“To try to explain to somebody that you were buying an unfunded revolver at 50 cents on the dollar, and the seller was going to give you 50 cents, so forever unfunded, you just pocketed 50 cents, was pretty entertaining, and we ended up doing it.”
Leffell: Physical edge of faxing SEC filings is dead in modern markets
“So in the early years, we would have someone stationed at the SEC, and when a company we were following filed something, this person or company would take it and fax it back to us, and We had those rolls of fax paper that if you didn't read it quickly enough, …”
Leffell: Committing investment theses to writing creates crucial institutional accountability
“The third thing would be always commit things to writing. That was one of the early disciplines we took on because having something in writing creates accountability. There's no he said, she said. The analyst has committed something. You know what was said and…”
Leffell: FDIC gave away SVB and Signature Bank assets at advantageous prices
“We saw a similar situation recently when Silicon Valley Bank and Signature Bank went bust, and the FDIC took over their books. The FDIC was selling it. They were giving it away at very, very advantageous prices.”
Leffell refuses any investment opportunity if counterparties rush his decision
“The other big coaching thing here is never rush. When somebody is rushing you to make a decision, back then it was enough to say I'm not doing it, and to this day I won't do it. If somebody's rushing me that you have to act now on a new idea, say what was tomo…”
Leffell: Davidson Kempner pooled partner profits to prevent desk capital hoarding
“Every partner in the firm did well if the firm did well, and did poorly if the firm did poorly. And the hope there was that If merger arbitrage is having a gangbang year, then the guys in distress where I was would not glom onto capital for mediocre ideas. We …”
Leffell: Large private fund incentives drive indiscriminate capital deployment
“Some of the large investors are geared to certain strategies that incentivize them to write huge tickets irrespective of the market environment. In a way, that's indiscriminate capital deployment, which is really a big no-no in investing.”
Leffell: Aging VC and PE funds will soon create forced-selling opportunities
“Whether it's banks or fund selling, we're going to see opportunities where venture capital and private equity funds are winding down. They're at their ten-year Limit. Maybe they can get another year. They're gonna have to sell things.”
Leffell: Newly matched co-founders pose high risk of a six-month breakup
“First off, if we're looking at a sponsor and there's two partners and they've never worked together before, that's something I'm always apprehensive about. I think that one of them will not be there in six months, and I don't want that institutional risk.”
Leffell: Intelligent investment ideas must fit on a single page
“I think quite frankly, if somebody cannot communicate an intelligent investment idea in one page, they should go back and do it again. There's no reason certainly for an intelligent executive summary to be more than a page long, and I'm not talking about eight…”
Leffell: VC-backed alternative investment platforms are run by techies, not investors
“Those firms had all raised a lot of money from venture capitalists, and none of them were investors. They were all techies. And the key difference from them to what we do is the quality of our investments were materially better.”
Leffell personally co-invests in every single 10 East deal
“Some people think this is highly relevant, but I personally invest in everything that we do.”
Leffell: 10 East refuses investments in China, Latin America, and Russia
“We're not going to invest in China. We're not going to invest in the Far East. Not going to go to Latin America. Certainly not Russia. We will only invest in places where the rule of law is recognized.”
Leffell: 10 East achieved 20% return financing a Boy Scouts litigation firm
“So we were able to make a loan to a law firm And we were secured by the value of the claims that they were amassing. I think we had nine to one collateral coverage, and it generated a better than 20% return in a year and a half.”