Oct 28, 2021 · 1h 13m · capital-allocators
Rashmi Kwatra – Sixteenth Street Capital (Manager Meetings, EP.17)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Institutional allocator Ellen Ellison interviews Rashmi Kwatra, founder and Chief Investment Officer of Sixteenth Street Capital, exploring her concentrated equity strategy across South and Southeast Asia, her journey building an independent investment firm, and the institutional dynamics of due diligence and diversity in asset management.
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 9.1% of the talking time here. How this is scored →
Ted as informed peer 3.9 Guest teaching 3.7 Guest disagreement 1.1 Ted pushing back 1.6
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 52:19 Rebuttal of the China contagion thesis
Rashmi directly pushes back against Ellen's framing that China's struggles inevitably pull down Southeast Asia, calling it a widespread misconception and presenting evidence of manufacturing tailwinds.
Hardest push from Ted ▶ 30:25 Incredulity at turning down anchor capitalEllen challenges Rashmi on why she would reject half of an upfront $50M check, asking if anyone pushed back on her for leaving easy money on the table.
Biggest teaching moment ▶ 52:25 Supply chain shifts from China to Southeast AsiaRashmi educates the listener on how rising Chinese labor costs and geopolitical diversification make Vietnam, India, and Bangladesh natural beneficiaries of global outsourcing.
Ted holds their own ▶ 9:24 Interrogating allocator due diligence base ratesTed demonstrates sharp allocator expertise by pressing Ellen on what comparative baseline and base rate she utilized when evaluating Rashmi's on-the-ground corporate meetings.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Overview: Rashmi Kwatra and Ellen Ellison | 7 | 0 | 0 | 2 | Ted and Ellen discuss the allocator due diligence process on Sixteenth Street Capital. Ted demonstrates institutional knowledge by pressing Ellen on base rates and comparison frameworks for emerging managers. | |
| Rashmi Kwatra's Early Life, Family Roots, and Education | 3 | 4 | 1 | 1 | Ellen introduces Rashmi's background and prompts her on growing up in Thailand within an entrepreneurial Indian family. Rashmi explains how early exposure to value investing and her mother's lack of financial independence shaped her trajectory. | |
| Career Beginnings at Prince Street Capital | 3 | 3 | 0 | 1 | Ellen and Rashmi discuss her transition from Wharton to Prince Street Capital after an internship at Deutsche Bank. Rashmi details how speaking regional languages and deep market research enabled her to secure a buy-side role straight out of undergraduate studies. | |
| The Inception and Launch of Sixteenth Street Capital | 4 | 2 | 1 | 2 | Ellen inquires about the decision to launch an independent firm rather than an internal carve-out at Prince Street. Rashmi explains the need for uncompromised alignment, brand ownership, and long-term 30-year runway. | |
| Securing Anchor LPs and Managing Capital Inflows | 5 | 3 | 2 | 4 | Ellen questions Rashmi's unconventional choice to reject half of an initial $50M seed check to manage capacity. Ellen playfully pushes back on why anyone would leave money on the table, and Rashmi defends paced growth for operational alignment. | |
| Navigating Gender, Youth, and Representation in Finance | 4 | 4 | 2 | 2 | Ellen asks whether youth, race, or gender presented the biggest hurdle when pitching institutional LPs. Rashmi emphasizes that while skepticism exists across all three dimensions, long-term track records and performance ultimately dismantle biases. | |
| Mid-Roll Sponsor Break: Ridgeline | 2 | 3 | 1 | 1 | Includes a mid-roll sponsor break followed by Ellen asking whether post-pandemic DEI dialogue converted into actual capital allocations. Rashmi notes that while conversations increased, tangible allocations driven purely by diversity remain limited. | |
| Investment Philosophy, Concentration, and Valuation Discipline | 4 | 5 | 0 | 1 | Ellen explores Sixteenth Street's portfolio concentration and valuation hurdles. Rashmi explains their five-year operational modeling framework and the necessity of a 25%+ IRR hurdle rate supported by structural macro tailwinds. | |
| Portfolio Construction, Liquidity Barbell, and Strategy Capacity | 5 | 5 | 0 | 1 | Ellen prompts Rashmi on managing liquidity across small-cap and large-cap names across different countries. Rashmi outlines her liquidity barbell strategy, using large-cap liquid holdings as funding currency to capitalize on frontier dislocations. | |
| Macro Dynamics, China Supply Chain Shift, and Market Volatility | 4 | 7 | 5 | 2 | Ellen invokes the adage that when China sneezes, Southeast Asia catches the flu. Rashmi explicitly rejects the premise, explaining that supply chain diversification makes South and Southeast Asia prime beneficiaries of Chinese decoupling. | |
| India's Economic Transition and SME Formalization Megatrends | 4 | 5 | 1 | 1 | Ellen and Rashmi discuss Indian enterprise resilience through COVID shutdowns. Rashmi details how digital infrastructure and formalization of SMEs drove cost efficiencies and expanded addressable markets. | |
| Financial Inclusion Themes and Regional Allocation Strategy | 5 | 6 | 2 | 2 | Ellen asks whether India represents the 'next China' and questions country-level constraints. Rashmi clarifies structural differences, noting India's dual reliance on services and manufacturing rather than pure factory dominance. | |
| Lightning Round: Habits, Influences, and Lessons | 1 | 1 | 0 | 1 | Ellen leads Rashmi through the lightning round covering personal routines, tennis lessons applied to business, reading habits, and core parent lessons. |
Statements from this episode (16)
GP reaction to LP term feedback reveals long-term partnership ability, says Ellison
“And I find the way a GP reacts to term suggestions to be highly revelatory in terms of their ability to be a great partner going forward.”
Ellison: University of Illinois layered $5M monthly into Sixteenth Street Capital
“We were going to start with a fairly good allocation, but we thought we'll stay about 10 to 15% of her total fund assets. So I started layering in, I think I did like five million every month for the first five, six months.”
Kwatra: Internal fund incubations fail over size and brand ownership caps
“The first step was to launch maybe with Print Street, but it became very clear that launching a fund within a large organization wasn't going to work for the long term, which is all that matters to me. Size was capped. There was not full ownership of the brand…”
Kwatra launched Sixteenth Street Capital with $10 million on day one
“I launched day one with ten million dollars, primarily my own capital and capital from my former partners and fund managers in the region, but I reached back out to one of the investors that was not a Prince Street LP that was interested in coming in day one w…”
Kwatra rejected half of a $50M anchor offer due to market volatility
“I only took twenty five million of it up front, and then ended up calling for twenty five million at the end of 2018, because it was turning out to be quite a volatile year and start to the fund, and I think really did right by them long term, as well as all o…”
Kwatra launched firm after seeing no other women of color in space
“When I thought about it, I couldn't think of one other investor who was a woman doing exactly what I was doing. Nobody in the public markets that looked like me, and I said, it's about time that we have a few more of us.”
Kwatra has seen zero allocations driven purely by female manager mandates
“I definitely have not seen an allocation because somebody was looking directly for a female manager, and I would think that if some of that is closer to action stages, then we would be a great candidate.”
Sixteenth Street concentrates 50% of its portfolio in its top five stocks
“Hold approximately 20 holdings, but our top five can make up 50% of our portfolio, top 10 usually about to 70%”
Kwatra: Sixteenth Street Capital requires an IRR hurdle rate north of 25%
“We do have quite a high IRR hurdle rate. It's north of 25%.”
South and Southeast Asia benefit from Chinese economic turbulence, says Kwatra
“I think it's actually a misconception that if China goes through difficulty, so does South and Southeast Asia. I think actually South and Southeast Asia are big winners when we are seeing turbulence”
Kwatra: High labor costs make garment manufacturing infeasible in China today
“It's firstly not even feasible today, for example, to make a t-shirt in China. The labor costs are just too high, but it is feasible to create a factory for garments or for washing machines in Bangladesh, in India, in Vietnam.”
Training bottlenecks restrict Vietnamese IT outsourcing firm to 25% annual growth
“We own a company in Vietnam. It's an IT outsourcing company, and the company cannot hire enough developers to meet demand, so they're growing 25% a year because they can only train that many developers”
Kwatra: South and Southeast Asia offer China's prior decade J-curve growth
“China's already large. It'll grow fine. But do you get that same J curve effect? Probably not. And that's where these markets are today.”
Access to credit naturally drives informal businesses into the formal economy
“If you create systems for people to be in the more formal economy and show them the benefits such as giving them access to credit, the shift happens automatically.”
Kwatra: India's growth will rely heavily on services alongside manufacturing
“India will have to rely on manufacturing and services. It will take a long time for, we're seeing their manufacturing capabilities increase, so it'll be a combination, but services will also be a big offering for India. Luckily, Indians speak English. They've …”
Kwatra: Sixteenth Street Capital holds approximately 40% of its portfolio in India
“So we have about 40% of our book in India, and it's the fact that ultimately we are looking for great companies that have long runways to really compound capital, and today India is a deeper market. There are more than 3000 listed companies, and so our ability…”