Dear Stakeholders:

In each of the last four years, I wrote you a letter discussing our content and business. I then recorded a reading of the letter and dropped it on the podcast.

This year we reversed that sequence. Hank interviewed me about where we’ve been and where we’re headed, then we edited the conversation for our annual letter. Here’s an outline:

Best of 2024

1. Writing: Private Equity Deals and impactful blogs
2. Growth in asset management
3. Best of the podcast in 2024

Heading in 2025

4. Investment activity, including a new SPAC
5. What’s most top of mind for investors
6. Capital Allocators business – Podcast, Summits, and University
7. Our amazing partners
8. Closing questions

1. Writing: Private Equity Deals and impactful blogs

Hank: You wrote some interesting pieces this year. What piece stands out as one that will have legs?

Ted:  My writing volume decreased this year. The exception to that, of course, was Private Equity Deals, although the reality is I finished the book a year ago and it took that long to publish it.

From the blog, The Investment Office Playbook – What Managers Don’t See, The Investment Manager Playbook – What Allocators Don’t See, and Yale Backs Emerging Managers…and Then What? each bridged knowledge gaps between GPs and LPs. The Investment Office Playbook talked about what happens when a new CIO comes into the seat in terms of the timing and pace of deployment. It’s framed as the classic situation where a manager hears, “It’s not you, it’s me.” The piece offers a lens on what’s really going on.

The Investment Manager Playbook is about growth. Dave Swensen taught me that the best money managers run boutique, single strategy firms, don’t gather assets, and choose peak performance over peak profits. While that has worked well for Yale, it doesn’t reflect the world I saw once I left the Ivory Tower Investment Office. Managers need to maintain a thriving business to deliver long-term outperformance. Oftentimes allocators see a small manager they like, invest early, benefit from strong early returns, and then get frustrated when the manager grows without a true understanding of why it is happening. Those two pieces got a good response.

2. Growth in asset management

Hank: I think especially with the Allocator Playbook, we heard from managers that it was an eye-opening behind the scenes peak of what happens inside the investment office. On the Manager Playbook, I heard you say recently that asset management is a mature industry. How do you think about growth in asset management firms given the stage of maturity of the industry?

Ted:  Managers may want to grow because it’s healthy for their organization but there are a lot of sophisticated institutions that can’t grow with them because their asset pool only grows organically. Think about an endowment or a foundation with spending needs and a mature portfolio of alternatives – they have an allocation size in mind and will not have future inflows.

Managers always look for the next frontier for capital. Those new frontiers today are private wealth, the Middle East, some sovereigns, and, in credit, insurance. You’ve seen more interest in figuring out how to tap into these quite different channels so managers can grow and provide opportunities for their talent.

Hank: Where have you seen asset management firms succeed in those new frontiers?

Ted:  You have to take each one separately. Private wealth is the one everyone is watching. It’s driven by brand. You’ve seen more success from larger managers that can get on the private wealth platforms of the bulge bracket banks. There were some astounding statistics I saw from 2023 that around $65 billion in assets got allocated from four large banks to private markets. Compare that to the four or five largest sovereign wealth funds – only $5-$10 billion in total.

So how do you address retail? Blackstone puts Jon Gray on LinkedIn with a series of videos going for a morning run in different locations around the world. That’s a totally different attempt at defining their brand image. In private wealth you face completely different distribution methods. You need hundreds of people visiting regional private wealth managers one by one.

At the other end of the spectrum, raising capital from the Middle East is very different. It requires long-term relationships to serve different investment needs. The large asset owners want strategic partnerships, where a manager can do a lot of different things. Again, this favors larger organizations.

Then in credit and insurance, you see linkups between operating entities and asset managers. It started with Apollo buying Athene and the rest have followed. The insurance liability base matches well with fixed income assets offering incremental yield. It’s an extremely low cost of capital for managers. The challenge is that all these channels favor the large players over the small ones.

3. Best of the podcast in 2024

Hank: Then there’s the podcast. Pretty exciting year. We continue to grow and continue to have marquee guests. I know it’s unfair to ask you to pick your favorite child, but who stands out as a favorite guest that you had on the show this year?

Ted:  It’s totally unfair. It’s so unfair that I need to defer to the audience to choose. I really enjoy the guests I get a chance to talk to and build relationships with. So I’ll offer some thoughts, but they’re heavily influenced by where the audience engaged most.

We had some great guests from across every different area. If you look at legends, Mike Milken came on and then Richard Sandler, his longtime lawyer, came on the next week. Mike talked about his incredible history in the high yield markets, and Richard gave a fresh perspective on Mike’s infamous case from years ago.

On the allocator side, the first episode in our mini-series on Training Grounds discussed Carnegie Corporation with Ellen Shuman, Kim Lew, Meredith Jenkins, and Alisa Mall. Among the allocator conversations this year, that one got the most buzz.

As you go through asset classes, in private equity, I had the great opportunity to interview Alex Behring and Daniel Schwartz at 3G. They talked both about 3G and their Burger King deal, which is one of the most successful private equity deals ever. In public equity, Cliff Asness is amazing. If he wasn’t a money manager, he’d probably be a standup comic. When you put the two together, it’s a lot of fun. On the hedge fund side, Ricky Sandler from Eminence was terrific. Ricky’s been at it for 30 years. He’s necessarily adapted his long-short equity investing to different market environments and business conditions.

In probably the timeliest episode I’ve ever done, my old partner Scott Bessent came on the day before the Presidential election and three weeks before he was nominated Treasury Secretary. I like to say that there’s a Capital Allocators boost when someone comes on the show, but I can’t go as far as to say that President-elect Trump picked Scott to be the Treasury Secretary simply because he came on the podcast.

Hank: Ted, I’ll break the news. That was not the reason why he was selected Treasury Secretary.

Ted:  I guess I’d agree. Lastly, we have a stream of guests offering interdisciplinary learning. They’re neither managers nor managers, but guests that I think can help both be better. I’ve had Jen Prosek on a few times, and she is unbelievable at sharing how to deliver a message.

Hank: Going to next year. Who are you excited to interview?

Ted:  At any point in time, I have a list of sixty or eighty people I’ve talked to about coming on at some point in the future. We just wait for the right time. Two of those CIOs who I’ve talked to for several years about it are coming on this year and there’s a manager or two from that list as well.

When I get asked who I most want to interview, I give a very different answer than most people expect. It’s the CIO or the manager I don’t know, but who comes to me highly recommended by a couple different friends and past guests.

4. Investment activity, including a new SPAC

Hank: Have you made any new investments this year?

Ted:  For context, my investment portfolio is a best-ideas approach. It’s closer to a Total Portfolio Approach than an endowment model. It’s also mature, so there’s often not much new manager activity. The new investments I made this year were mostly co-investments. I invested in everything from a sports betting app to an AI company alongside Gavin Baker at Atreides to a European snacks business with Scott Spielvogel at One Rock Capital to a blind pool with Chas Cocke at LB Partners. I also made two direct investments in early-stage businesses related to the industry – 10 East, where I’m also an advisor, and Old Well Labs, which is the very best software I’ve seen to help allocators find and monitor managers.

Probably the most interesting one, which might sound crazy and certainly will sound contrarian, is a new SPAC. I was involved in a SPAC in the heyday three years ago. There was something like 650 SPACs in the market back then. They completely disappeared for a lot of good reasons. Last year, there were only 40 or 50 SPAC IPOs. Far, far fewer, but they still exist.

At the same time, the private equity industry has liquidity challenges. You’ve seen the growth of continuation vehicles and a rise in secondaries. SPACs will not be the next innovative solution; they’re far too maligned from the last cycle. But SPACs are a legitimate exit path for some companies. We have a thesis that many privately owned middle-market businesses need liquidity, and a SPAC is a legitimate solution. We’ve started looking for a company with a real business that is public company ready, generating significant revenue and a hundred million dollars of EBITDA or more with $2-$10 billion of enterprise value. We listed the IPO two weeks ago. It’s Newbury Street Acquisition Corp. II. We’re going to start the hunt in the new year, and it will be a lot of fun to look.

5. What’s most top of mind for investors

Hank: One of the things I’m always attuned to is folks in the institutional community care about what you’re thinking and what you’re hearing. When you think about the topics the institutional community wants to hear about next year, what are those topics?

Ted:  For allocators, what’s top of mind first is the private equity cycle. There’s some discussion about liquidity but allocators aren’t worried. The balance sheet is nothing like it was in 2008. That said, they want to see distributions and are thinking differently about future commitments.

Next are the ramifications of a new economic regime in the U.S. Between the new President, Scott Bessent, and DOGE, there’s an optimism about the potential for a significant geopolitical realignment and movement towards a sustainable U.S. budget.

Lastly, AI is an ever-present question of how it will impact industries, investments, and the inner working of the investment office.

On the manager side, it always starts with performance. That’s first and foremost top of mind. I’ve yet to have a day in my career where people thought it was easy generating performance. Today is no different.

On the capital formation side, fundraising has been hard. The bottleneck in the private markets also affects public market fundraising. Managers wonder how they will replace the capital coming out.

The last big one is industry structure. You’re starting to see consolidation. We just put out a conversation about consolidation on the allocator side. There’s more of that happening on the manager side. What are the implications for an evolving industry structure over time?

6. Capital Allocators business – Podcast, Summits, and University

Hank: How about our business? What are you excited about heading into 2025?

Podcast

Ted:  It starts with the hub: the podcast. Capital Allocators crossed 20 million downloads. That’s a multiple more than I ever imagined, and we’ve basically stopped counting. We have about 100,000 listeners as measured by Apple and Spotify. Then there’s Investment Management Operations, which I love. If the podcast is a challenging business because you share conversations for free with a finite audience, why not do it with an even smaller potential audience! And yet IMO quickly found its thousand true fans.

There are two main drivers of the podcast business – ad sponsors and premium content. I’m doing back flips that my great friends at WCM will be our lead sponsor next year. Paul Black came on the podcast years ago. In fact, when I appeared on Patrick O’Shaughnessy’s Invest Like the Best this year, I answered Patrick’s closing question (What is the kindest thing anyone’s ever done for you?) with something that Paul did for me since I had last been on ILTB. I have special and warm feelings towards WCM and am very grateful to be partners with them. WCM is a unique organization, and they’ve been incredibly successful. We’ve continued about a dozen sponsored insights each year. These are episodes with managers who want to come on the show. We think they’d be great guests, and they have their own reason and timing for wanting to appear.

Our premium members also support the show and receive things like transcripts, a weekly email, and our LLM trained on the transcript library. It’s been a steady, slow growing source of income for a long time.

Capital Allocators Summits

The next big leg of our business is our Summits. We gather very high-quality allocators and managers and do it in a way that leans into the relationship side of the business alongside the investing side. We’ll host our third annual CIO Summit in April. It filled up within two weeks of our invitations going out. We’ll have our Senior Decision Makers (SDM) Summit in June.

We’re adding a Small and Emerging Manager (SEM) Summit in September. Like the other ones, we have a twist in how we’ll do it compared to others. Back in my years at Protégé, one of our favorite one-liners was “Everyone wants to be first to be the second investor.” At our small and emerging manager event, the managers we invite will only be ones recommended to us by an allocator who invests with them. That way every manager who comes has already been vetted and has buy-in from someone in attendance.

The dirty secret no one wants to say is no allocator actually wants to meet with the massive number of small and emerging managers. They only want to meet the good ones!

Hank: Why don’t you share a little bit more about the structure of the Summits because we don’t often talk about them publicly.

Ted:  Most events in any industry match buyers and sellers. In the investment industry, it happens in two ways. One, the sellers go on stage, and the buyers sit in the chairs. The problems with that are it’s not very engaging to go sit in a chair for six hours, especially now we have phones in our pockets, and you no longer need to travel across the country or the world to hear great speakers on investing. You can hear them anytime you want on YouTube or a podcast. The second style is a capital introduction event. Our good friend and partner Ron Biscardi at iConnections does an incredible job with those. Global Alts is coming up and that will be amazing.

Our Summits decidedly do neither one. Fortunately, the podcast allows us to convene great people. Then, we catalyze their engaging with each other. We do it through a combination of structured and unstructured time. Our structured sessions are all small group discussions about topics of interest to them. We have a team of facilitators that are phenomenal people in the industry who help guide the discussions. Then we have unstructured blocks of time, including lots of breaks. seated meals, and activities. We gather for two days and find it creates very engaging relationship development, which is probably the most important aspect of capital flowing over time.

Capital Allocators University

Hank: The Summits are one flavor of gathering that we’ve put together. Why don’t you share a little bit more about what else we’re doing in convening people in this industry.

Ted:  The other big area is education. We created Capital Allocators University with Rahul Moodgal during Covid. We teach disciplines people learn in almost any business, as long as that business isn’t investing. Think of things like decision making, leadership, management, and interviewing. We bring together a group of allocators and give them time to interact with each other. The right person for CAU for Allocators is someone just below our Summits, say 5-15 years of experience as an allocator.

This year, we added a new course for investor relations and business development professionals. We shared how allocators view the process of picking a manager, how a manager can go about building relationships, and how to develop a brand. We had a panel on conferences which was so good that we’re going to replay it on the podcast, and we had a panel of CIOs sharing what not to do and telling war stories. And again, we allowed lots of time for those investor relations professionals to meet each other and share ideas.

Hank: There was a buzz in that room.

Ted:  There was. You don’t know what will resonate when you do something for the first time. But after a day and a half, the guests really engaged with each other.

Hank: It’s rare to get investor relations people in the room together without a capital raise component. When you had 50-odd people in those roles opt into spending time with us in a room without a capital raise component, it was pretty special. It’ll be exciting to do it again next year.

New for 2025

Hank: Where else do you see us heading into next year and even thereafter,

Ted:  We always have ideas to help serve this community and create experiments to test them. One new one is strategic investing – making some small investments into tech startups that are developing tools or services to serve the asset managers and allocators. If you think about the allocator community, allocators have infinite budgets to spend on money management services and next to no budget to spend on professional development. Now that’s good and bad. The good part of it is there is a lot of white space for valuable tools and services that can improve efficiency and performance that don’t exist because they had no budget. The bad side is of course if there isn’t a budget for the product, it’s hard to build a successful business no matter how good the product is. AI has opened everyone’s eyes to doing things differently, and I think allocators spending budgets are opening.

I’ve seen a lot of these deals over the years through my friend Ashby Monk, who runs the Stanford Global Projects Institute and a venture fund called KDX, where I’m an LP. There are one or two we’ve identified where I think we can add value on business development. We’ll share more about two businesses over the next couple months.

7. Our amazing partners

Hank: So we’re going be busy. We have a lot of help. Why don’t you give some insight into our partners through all of the work we’re doing now and all of what we’re planning to do next year?

Ted:  We’re a team of four, and when I tell people that, most are blown away because we’re able to do a lot. It’s you and me, our long-time teammate Morgan, and Ahana who joined us last year out of Notre Dame. The only reason we can do that is in almost every area of the business we have extraordinary partners. Our partner relationships go back to the beginning of the podcast. We have a great production team. We have a great website developer. We outsource our accounting. We’ve been blessed to have the support of team members at both iConnections and Prosek Partners to help run our Summits, most notably Jackie Dorman at Prosek and a couple of their team members. They do an incredible job and bring great energy to the gatherings. We also have a power duo, Jen Wilson and Lois Wilkins, who have a boutique event business and are extraordinary helping us find great locations, working with the venues, and coming up with great ideas.

Our newer external relationships are in data management and presentations. We didn’t originally think of the Summits as a data exercise, but now we need to track things like who we invited, when we sent invitations, whether they responded, and all of those things from past events too. That went from an Excel spreadsheet to an unwieldy Excel spreadsheet to now on Airtable with the help of a consultant. On presentations, my executive coach Matt Spielman, introduced me to Bernie Hogya, who is unbelievable at taking whatever chicken scratch presentation I put together and making it not only beautiful, but also easier to deliver.

I love saying all that so that anybody knows if they’re looking for help in any of these areas, we have A++ partners and are more than happy to make introductions and help them grow their businesses. They all deserve it.

With these incredible outsourced relationships, we’ve been able to do a lot, but we think we can do more with more help internally. The more I’m able to get out on listening tours to understand what’s happening, and the more you, Hank, as CEO can drive the business, the more we can do. So we’ve kicked off a process to bring in a Head of Business Development so that we can continue these fun new initiatives going forward.

8. Closing questions

Hank: It’s fun to recount 2024 and all that we accomplished, and I’m excited for next year. I want to close with different rapid fire closing questions. What did you learn this year?

Ted:  I learned the most this year from leaning into what we’re doing and making it better. Those areas are around hospitality and storytelling. I am a huge fan of the book Unreasonable Hospitality written by Will Guidara. I had the opportunity to meet Will earlier this year. He exudes the same warmth and energy in person that he does in writing about making people feel great about experiences. Having a chance to meet him and talk to him about our events inspired me to find small ways to make our experiences better and better. When you start doing it, you realize that you can build a process around taking special one-off and repeating it.

Hank: Can you give an example of that to highlight what you mean by a process of unreasonable hospitality?

Ted:  Will talks about finding moments that recur and scaling them – like a birthday celebration in a restaurant. When we did our first Summit, a friend told me that one of the best gifts he had received at a conference was a book giveaway where they asked everyone for a book recommendation, bought all those books, and did a book swap. We tried it, and everyone loved it so much that we’ve not only continued doing it, but we include it in our registration form.

Then we found other ways to make the giveaway special. We put a little note in the book that lets the person who selects it book know who recommended it. They can then connect with them about it either at the Summit or later when they’ve read the book. It’s a fun, exciting, special thing we now do every time.

Hank: Last one, and this one’s familiar. What do you know now that you wish you knew a lot earlier in life?

Ted:  The answer I’ve given to this hasn’t changed. It’s the value in asking for help. That said, I’ve seen the power of it accelerate the last couple years, particularly when we started the Summits. The Summits wouldn’t exist without everyone else – the engagement of the investors who choose to spend their time with us, our partners at iConnections, Prosek, and all my friends who facilitate. Every single time we have to ask. We ask someone to attend. We ask managers to recommend their clients. We ask allocators to recommend their managers. It all spins like a flywheel. I have gotten this deep appreciation that it’s okay to ask for help, and people want the opportunity to help and repay the favors that I absolutely love spending my life giving.

Hank: Well, Ted, this is a blast and I’m excited for 2025.

Ted:  Thanks Hank. I can’t close without expressing both how grateful I am to have you along as my partner for the ride and how excited I am to put you on stage, so everyone gets accustomed to hearing your voice.