How I Invest with David Weisburd - E94: How to Invest $70 Billion

Episode Date: September 12, 2024

Tony Meadows, Partner at Sinefine sits down with David Weisburd to discuss what initial investment choice could make or break your portfolio, when to dive into early-stage investments, and how strategic timing can turn ordinary investments into extraordinary gains.

$70 billion plan, it wouldn't be out of the norm to put a billion dollars of capital to work in private equity over a one-year period. And so because VC was a part of private equity, we would allocate, say, 15% to VC. You spent 13 and a half years at Peacers. What did you wish you knew when you started in year one? How challenging it could be working with different constituents. You're dealing with not only staff and the different levels there, but you're also dealing with consultants. You're dealing with the board. And a lot of times you're not dealing with them directly, but you could be dealing with the public as well through press or something like that. So there's a lot of potential things that can get in your head over the longterm. I'm not a big proponent of pension plans that give bonuses to their staff

as well, because I think it's difficult to be able to incentivize staff in the short term with a long-term asset class. One-year return doesn't necessarily mean that you're doing a great job just because the market has gone up or down and commercially a bad job. Tony, I've been excited to chat since our friend Ariana Thacker made the introduction. Welcome to the 10X Capital Podcast. Hey, thanks for having me. You don't know how much of a benefit you've been on long drives where I get to listen to multiple podcasts and listen to a lot of people's views and certainly your insight. I always appreciate the questions you're asking. Thank you for the kind words. So you worked at Peacers, which is a public school retirement system in Pennsylvania, which today has over $70 billion AUM. Tell me about your

experience there. So I started in Peacers as an accountant in the finance department. About halfway through my career there, I moved over to investment, started off as an analyst, looking at working with infrastructure, absolute return, private credit, and then obviously private equity in BC. I then began working on co-investments. So during my time there, I underwrote about 36 co-investments worth $800 million of commitments. And then I also sourced, underwrote, and recommended primary fund commitments to the board. And you had 36 co-investments. That's a prolific amount. How did you go choosing those co-investments? The way that we were delegated authority from the board is that we could do co-investments with existing GPs. So you had that underwriting process. You understood the GP strategy and a lot

of the underwriting process was just making sure that the GP was staying within their lanes. I executed on 36. We had a lot more opportunities. We did turn down some from the buyout perspective. It was almost, you know, we could get into our own heads and overthink the co-investments. And honestly, if you have conviction in the GP, you should almost do every co-investment from a buyout opportunity perspective. Do you find that as an asset class, private equity is less adversely selected when it comes to co-investments versus something like a venture capital co-investment? I think adverse selection when it comes to buyout is something that was pre-GFC for sure.

There was a lot of talk about that back then. I think in the present form with most of the high quality GPs that you're investing in, you don't have very much adverse selection. They're doing good investments. It's just a matter of whether you want more exposure or not. BC is a different animal. You're talking about follow-on rounds and things of that nature where you could have a little bit more conflicts there. So that is a little bit different underwriting process. As it related to co-investment, how did you position yourself as the partner of choice

for whether buyout or venture capital firms? One, you have to be able to execute on the deals. And so we certainly executed on deals. You have to be able to respond in a short amount of time. So a lot of times we were given a week, two weeks to be able to perform the underwriting, get a yes, no, because we had delegation still didn't mean, you know, it didn't mean that we didn't do an underwriting

to the fullest extent. We still had a staff IC that we had to present to. So myself and someone else are, you know, would likely underwrite a co-investment, present that co-investment as if it was a primary investment to the IC and certainly get their questions from there and it was nice to have that additional check. All that had to happen within a two-week

time period oftentimes you know sometimes you would get a little bit longer but executing being open to co-investments, one of the feedbacks that we got when we were talking to new managers is, do you actually execute on co-investments? Because LPs tend to say that they like co-investments, but when it comes down to actually executing them, that whittles down to a possible universe. From a governance standpoint, what allowed you to process co-investments so quickly? Talk to me about that. It was really all hands on deck. So the way that private equity specifically was structured was that there was a director and there were four portfolio managers or analysts that were reported to them. And so if I was underwriting a fund for a primary investment, I may end up having to put that aside for a week or two in order to work on co-investments. The way that it was structured to co-investments is that if it was my relationship, so I was overseeing XYZ manager,

I'm underwriting the co-investment opportunity for that GP. Whereas a colleague of mine may have a different relationship, he would only underwrite the co-investments to that relationship. So you have that familiarity with the GP. And a lot of times it's not a surprise that the deal is coming forward. It depends on the timing. Sometimes they were done at close. Sometimes they were syndicated deals post-close. And so that certainly dictated the amount of time that you needed to spend on the deal as well. You were decentralized in that you organized at PCERS around the GP relationship. When it comes to the economics of the co-invest, what was the median terms that you would get at a pension fund investing with your GPs?

For the most part on buyout deals, there were no fee, no carry. And so that was the main avenue. We did have some co-investments that would have, say, an admin fee. So you would have a one-time charge at the front end. It might be 1% of the deal or 2% of the deal. And then you would incorporate that in the commitment. But for the most part, it was no fee, no carry plus expenses, which is typically the financial reporting, the auditing, and things of that nature for that co-investment vehicle. Is that a function of your check size? You were writing $100 million plus checks into the GPs,

so you were able to dictate that. Were all LPs getting the same economics? No. I mean, for the most part, the GPs that we were investing in, that was the common structure was no fee, no carry. For other asset classes, real estate, for instance, it was more on a GP by GB basis. And a lot of times that they would have some sort of fee structure along with that. But for buyout, by and large, it was just market that it was no fee, no carry. You're a portfolio manager in the private equity group. You're at Peacers for over 13 years. Talk to me about the portfolio construction within private equity at Peacers. It was something that was a little bit more of an art form than science. It was something I was working on in my latter days as well to try and refine that.

But by and large, the majority of our investments from the buyout perspective were middle market. So you would go from, say, a $300 million fund at the very low end, And that was few and far between. And those were usually legacy portfolios up to $10 billion funds. We would have exposure to larger funds. So the kind of way that you looked at the universe or I looked at the universe was sub-billion, billion to three, three to seven, seven to 10 and 10 and up. And you kind of bifurcate that buyout universe in that way. They all have different attributes. So a sub-billion dollar fund is likely going to be investing in EBITDA multiples a little bit higher, but from a total EBITDA, it's likely going to be 15 million or less. And so when you take a look

at those smaller companies, it's just a different strategy. It's very similar to VC in that small buyout. There are a ton of small buyout GPs. You can have a lot of volatility in return. So manager selection becomes that much more important for the small buyout than you do with say $20 billion plus funds. There's a very limited universe of $20 billion plus funds out there. That's the kind of way that we kind of look at the universe was just from those size perspectives and that was information that we were getting from consultants as well. That was the kind of way that we kind of look at the universe was just from those size perspectives. And that was information that we were getting from consultants as well. That was kind of a way that they saw their universe. And so we just adopted the way they saw that universe

and attacked it the same way. Did your strategy around check size change by the size of the fund? You mentioned you had as small as a $300 million fund and you had a $10 billion fund. How would you size your checks in those cases? Yeah, those $300 million funds again were pretty old. In the present day, I would say that it was likely not less than a $500 million fund just because of the concentration limit. We couldn't be an LP that was greater than 30% of a fund size. And most times we're writing $100 million checks. And so if you take a look at it from a historical perspective, most of those commitments that we made were around a hundred, 150 million. We had a couple that were a little bit less and we had commitments and this

is public information. You can see them out there, but there was one GP that we made a $300 million commitment to. Again, it was kind of more art than science. And so, you know, certainly the length of the relationship, the familiarity with the GP all came into play when you're making a $300 million commitment to a GP. And your minimum investment being a hundred million, did that make it really difficult to invest in venture capital? Talk to me about the challenges of having too much capital when it comes to investing into venture capital. When you look at the portfolio construction and you take a look at the budget here, so $70 billion plan, it wouldn't be out of the norm to put a billion dollars of capital to work in private equity over a one-year period. And so because VC was a part of private equity, we would allocate say 15% to VC. So now you're looking at $150

million a year, $100 million check size. You're only looking at one commitment a year over a three-year period. You might be able to do three or four if you're able to straddle budget years. Conversely, you take a look at buyout and we were a lot more diversified on the buyout side than we were on the VC side if we're going to be doing those VC investments. It also limits the universe because, again, you would likely have to have a minimum fund of $300 million, $400 million, $500 million because even though you can be a 30% LP of a fundraise, as you know, most GPs don't want one LP being 30%. So it's usually GPs don't want more than 10, 15% of a fundraise. And so that also dictates the fund size when you back into that. From a pension plan perspective, if you can't properly diversify VC, which, you know, you should

be diversifying and we can get into early stage, late stage, multi-stage strategies and things of that nature. Is your money better deployed to VC direct deals? Is it to fund of funds? Or do you just eliminate VC in general saying, I can't get that diversification, so maybe my money's better spent at the buyout spectrum? I had the former CIO of Calipers, and he mentioned that funds like Sequoia, at least historically, have shied away from pension funds.

Did you come across that where venture funds did not want to take pension fund capitals? That's still something that goes on today. I've never personally had conversation with Sequoia. It is funny how much sometimes just that kind of sentiment dictates your investable universe. So because I constantly was told there's no way Sequoia would take my money, it was like, okay, well, why bother reaching out to Sequoia? Because everyone's telling me that they're not going to take my money. It could be true. It could be incorrect. It could be an antiquated thought. There was a GP that, you know, from our strategy here, our perspective was that there's no way

that they even want to have a conversation with us. And we reached out to them. They were excited to have the conversation with us. And it's just something that I've learned from the past is don't go by market sentiment. Don't go by, you know, the rumor mill and things of that nature. Always talk to everybody that you can. Reach out to everybody and it'll be, you know, it could surprise you, you know, where that conversation could lead you. So to go back to like Sequoia or Andreessen or, you know, some of the other names out there, I can't speak to that because I never addressed them directly just because it was

just kind of pounded in my brain that they weren't going to take our capital anyway. But it wouldn't surprise me if they are open to it. You know, I think the world has changed a little bit. FOIA laws being what they are, every state is different. I don't know that there's still that concern that that information will get out there. I would think that the larger GPs would want pension plans in there because it's larger checks. You have fewer LPs in your LP base? On the surface, it sounds like you would want those larger checks, but maybe the headache's not worth it either.

You spoke about some of the cons, but what are some of the pros and what positions pension funds in a powerful position to invest into either buyout or venture capital? Well, first and foremost are the returns. I mean, if you can get a top quartile GP on your roster, you're going to be super happy with those returns. The opposite side of that is, can you cover enough of the market to be able to identify those top GPs? And so that's where that rub ends up being. For me personally, I mean, I find VC exciting because it's, you know, very forward thinking asset class. It's a lot more forward thinking than, you know, obviously buyout and some of the other strategies out there. You can certainly help fund these change agents that are constantly finding founders that are changing the

world for the better. Again, whether it's environmental, whether it's health, whether even software, things of that nature, it's just, I don't know. I find it super exciting. You were at a pension fund and you built out a great venture book. How would you advise pension funds in 2024 to go about building out a great venture book? You certainly want to be intentional with how you're spending your time and building that portfolio. So if you take a look historically as to the outperforming asset classes, it's, it's going to be health care, it's going to be IT, it's going to be financials. It doesn't mean that you're not exposed to consumer or industrials or some other asset class within VC. You're likely going to be concentrated in those asset classes, though, because those are the ones that have historically driven performance.

Then you want to take a look at from a stage perspective, you know, how much do you want to be exposed to early, late? You want to leave room for GPs and invest across strategies or across stages. Do you want to be exposed to growth equity? The high upside is not there for growth equity, but you know, you certainly have a, you know, a little less volatility, a lot less volatility from a growth equity standpoint. So being really intentional on that portfolio construction, the way that you want to see that manifested, and then you have to put in the time to be able to meet with GPs. That's the one thing that I found difficult from a pension plan perspective is that from a very established pension plan, you have monitoring,

you're approving capital calls and distributions, and you're also doing monthly or quarterly reporting. You have all these other things that are coming into play. Can you cover enough of the market to be able to identify and select the top GPs? You have to be intentional with that, whether it's a dedicated in-house staff, whether it's using consultants, whatever the avenue is, don't be satisfied with median performance from a VC asset class. And where did you find the sweet spot in terms of your

entry point? I would say multi-stage. So take Insight Partners or Summit or Oak HCFT that are, they're all investing in early through growth equity. And so that's where we would spend most of our time. From a pension plan standpoint, yeah, it's difficult to do a fund one just because of the underwriting internally, as well as, you know, getting that buy-in from consultants. Some consultants will have focus on emerging managers and therefore the underwriting could be a little bit easier. ones won't recommend any fun one so that could be a difficulty doing that from a buyout perspective I had just recommended before I left well you know end up getting passed on to someone else but it was a fun too and so

it was very different fun too because you had you know a really a stop long established track record from a previous GP. You had three people coming together that you already had that buy-in, that the team dynamics were really good and strong, and you had confidence in that. And so those are a lot of the underwriting that you would have difficulty from a pension plan perspective is just surety of team. You always have to kind of, you know, there is this outperformance for fund one dynamic out there. But what I don't think a lot of people appreciate is that fund twos can underperform because you have different dynamics happening on fund two before the team kind of, you know, wrangles together and then starts outperforming fund three, four, and five. What's the reason there?

I've had some conversations with some GPs on fund two as to why their performance had lagged. Some of the sentiment was, you know, you had team dynamics from a fund one perspective. You had everybody coming together, feeling really strong, very motivated, and, you know, all on the same page, and they just want to be the best that they can. And so they do that. They come together. It's a great team dynamic. And then three, four, five years into a firm cycle, you start getting egos that are coming into play. People tend to want to do this deal versus that deal,

or you have different dynamics that are happening that can pull a team apart and actually hurt performance. So what you would actually see is that from a fund three, there may be a revamp of the GP. You know, so one team member may leave. They may add someone else. Those are some of the things that happen at a fund two. Absolutely.

I've seen a lot of pension funds access first, second vintages through programs, through fund of funds. Did you ever consider that at Peacers in terms of instead of writing $100 million checks, you know, being part of these programs at different fund of funds or consultants? Yeah, definitely. It was something I was taking a look at, you know, in my last year there was possibly outsourcing two strategies. One, you know, I mentioned before, small bio.

So sub, say, before, small buyout. So sub, say, sub $500 million funds I can't access directly. We're certainly looking for a solution there, and there's some really good providers out there that do that. Some have been guests on your show. And then certainly from a VC standpoint, now, PISRs themselves didn't have a mandate for emerging managers or diversity or anything like that. It was just part of the process is that, you know, you may allocate to emerging or diverse, but it wasn't, you know, a dedicated amount of capital. But from a VC standpoint, again, when we talk about like early stage, there are so many early stage VCs. Do you have the ability to cover enough of the market to

be able to select those top tier managers? We spoke last time, Hamilton Lane put out a chart that bifurcated emerging versus established manager returns. Tell me about that. Yeah, did you? I'm curious on your thoughts before I get too carried away. There's somewhat of a paradox that I found in venture capital where there is high persistence on return. I believe there's a University of Chicago study that showed that the persistence of top quartile performance is roughly in the 50s percentage, statistically significant. The paradox there being that emerging managers tend to be the ones that return in the top decile, in the top 10%. So if you want to get top quartile, you try to get into the very

difficult to access VCs. But if you want to get top decile, you do have to take some risks. What have you found in your data? I love the data myself because it actually speaks to our strategy. So when I found that and came in my feed and then you asked the question, I was like, shit, we're all on the same page here. So I'm happy you brought it up. But yeah, I mean, it's done on IRR basis. I was not surprised by the volatility. You know, I would think that established GPs would have less volatile returns. And so that's what that's showing there. But what I was surprised as is that they had higher median and higher quartile for established GPs. Because to your point is kind of contra what people have always thought. And I do think that if you look at returns from a fund size perspective, and oftentimes people

use fund size as a proxy for established or emerging, because this is the first time I've ever seen established versus emerging. And certainly I'm familiar with the persistence discussions as well. So I found it interesting and it was a bit of confirmation bias on our end because we're going to be allocating to establish as well as emerging managers. And so my thesis was that I would have less volatility. I think selecting the best emerging managers is tougher and you should be compensated for that. But if it's not necessary to your investment thesis, why not allocate some to established GPs? After working at Peacers for 13 and a half years, you joined as a partner for a fund to fund called Sine Fine. Tell me about the impetus for joining

Sine Fine. My partner and founder, Yasmeen, started a firm a couple of years ago. And when she left Drive Capital, what she wanted to do was start something that was focused on women in VC. And so what that looks like today is having a fund to fund where we're going to be dedicating capital to women-led and co-led VC firms. We want to make sure that the GP proportion is equal. And so if there's one woman on a four-person GP that she's 25%, she's not 5%. And so it really started for me, if I were to take it back to why I joined, it started for me when I was at Peacers. I had a couple of different investments. One was a top performing GP and it was the first commitment that Peacers had made to a women-led or co-led private equity firm. And so I found that interesting. It wasn't part of the investment thesis. It was, hey, this

is an awesome multi-stage VC growth equity firm who happened to be led by women. And so that was, that was the first investment that I had made there, you know, regarding women. And then a couple of years later, I did an investment with Insight. You had a couple of guests a couple of weeks ago. So Insight Vision, I led our investment there. The thesis there was to invest in diverse and women-led GPs. And again, part of that fund to fund was that it was going to be accessing GPs that we can't access because they're typically smaller. They're typically early stage. They're typically emerging managers. And as I worked with underwriting that fund level commitment, I had GP conversations.

And then I really became enamored with the asset class. From that perspective, the opportunity set diversity that's embedded within the GPs, just the different lens that they were investing with. It was something that I thought was underutilized from an investment standpoint. And I was like, why not lean into diversity? Why not promote diversity? This does drive returns. And so it was something that I had been taking a look into. And so I had conversations with Diaz and it just made sense for us to team up. For somebody to qualify as an investor into Sine Fine, tell me about the criteria there. So it's really only one qualifier. The qualifier is at the GP level. There's proportional ownership

at the GP level. Other than that, we'll be intentional with our portfolio construction. We're going to have a portion that's going to be too early, late, multi-stage, possibly growth equity if the opportunity set is there. We certainly want to be investing mostly in the US, but there are some good European opportunities that we find, possibly LATAM. But those are not only qualifications. We expect that half our capital will be to establish GPs and the other half would be funds one through call it four. And the way that we take a look at that universe is really by experience. And so what you're doing from an underwriting perspective is, you know,

trading qualitative information with quantitative data. And the more quantitative data you have, the better you can get an understanding of their strategy, the way that they have discipline, their investing style. So the more commitment you have there, and that goes to, you know, what we're talking about with Hamilton Lane, I do see that there's a different return spectrum that from that allocation established versus emerging, but we definitely wanna be able to support both. Which vintage is the hardest, Fund 1, Fund 2, Fund 3? I've been talking to people

and they seem to think that Fund 3 seems to be the hardest vintage because in the current environment. So I would say, I would lean back to that, that it's probably more fund three if you don't have fund one DPI. Because from a fund two perspective, it's still just making sure,

hey, we'd like to fund one, let's re-open fund two, as long as things haven't changed. And they've shown that they're gonna be disciplined with their investing style and they're doing everything that they said they were gonna do. So from a fund one fundraise,

you're telling LPs, hey, we're going to do X, Y, Z. And the reporting from them should just be, hey, we told you we were gonna do X, Y, Z, and this is what we did. And then if you have deviations, that's where you end up running into trouble. But if you did everything that you told your LPs and fund one, fund two raise should be fairly easy.

Fund three is just, I think in the current environment, fund threes are tougher to raise just from a DPI perspective. Absolutely. Similarly, it could be said about raising venture. Sometimes series B could be more difficult because series A, you could still sell the story. You invested at piecers, presumably mostly in male GPs, just statistically speaking, and now you focus on female GPs. What are the main difference between male GPs and female GPs in terms of how they source, how they generate alpha? Tell me a little bit about the stylistic or qualitative differences in female GPs. I don't see that there's too much of a stylistic standpoint. They're still going to be alpha people, right? I don't see that there's too much of a stylistic standpoint.

They're still going to be alpha people, right? They're the ones that are going out there and they're just driven from an internal perspective. They're not, at least when they start, they're not in it for the money. They're not in it for, you know, the glory and things of that nature. They're in it because they think that they can outperform everyone else. It's a very competitive nature. And so they're just people out there that have that competitive edge. And those are the ones that you really wanna focus on. They don't give a shit what I think. They have an investing style.

They're moving forward. They're doing everything they can. Now, when you take a look back and perhaps we'll get into it is from a different perspective, is that because that universe of women, and this can go into other diverse GPs as well, because there are so few women that when they're being promoted, you're almost always selecting the very best. And so from a counterpart standpoint, from a typical white man, they're usually outperforming

that typical white man because they've had to overcome a lot of possible stigmas, you know, in their process. And so they have, for lack of a better term, a lot of them will have a chip on their shoulder because they're like, I'm going to show you, you know, and so, you know, that's, that's just what I'm seeing. But any outstanding person, you know, whether it's sports, whether it's, you know, that's just what I'm seeing. But any outstanding person, you know, whether it's sports, whether it's, you know, from a founder perspective, they always have that chip on their shoulder.

Absolutely. They've had to overcome more obstacles, whether it's a person of color, immigrant, or female, for them to even get to the point where they could be promoted. They have to be so exceptional just to get in the room. You mentioned something interesting around the daughter effect for male GPs and LPs. Tell me about that. It was a lot of research that I had done on bias and researching, send me down this rabbit hole, the daughter effect. And so I started reading articles by Siri Chalazi from the Harvard

Kennedy School and her research, she often cited research from others. And the daughter effect was a discussion from Paul Gompers and Sophie Wang in a working paper in 2017. But more broadly, the daughter effect is as it sounds. It relates to when a man has children and what Gompers and Wang found or what they were trying to study there was the impact of VC firms and how it had a potential cascading effect. So again, historically, VC firms have been run by men. When these men have daughters, they tend to reduce their bias towards women, leading to more female hires. Since the pool of female investors are relatively untapped and it's a lot more finite, those hires

tend to be of higher quality than their male counterparts. That higher quality of hires leads to higher returns because introducing people with diverse backgrounds reduces probability of correlated errors. You have diverse backgrounds that lead to wider deal flow, increasing the deal quality. I will say that they do caveat the paper by stating that implementing blunt gender quotas may not have the same positive outcomes. These are things that just happen through genuine removal of bias. You're saying, oh, I have a daughter,, I see this whole other avenue that is possibly open to me. And it has that cascading effect that I mentioned. You know, some of the other biased behaviors I was, you know, looking at was homophily or the halo effect or the, you know, opposite, which is the horn effect, confirmation bias, peak and rule.

These are all different biases that we have as allocators when we're speaking to potential GPs. Horn effect being the opposite of a halo effect? Yeah. So the halo effect is you have this initial positive impression. This person is just awesome weather, you know, for whatever reason. The opposite is true is that no matter, you know, certainly on a political spectrum, you could say no matter what this candidate says, there's no way I'm going to like them. It doesn't matter. The opposite is also true, whereas you have this wonderful effect that, you know, wonderful impression, no matter what anybody says, they're not going to be able to sway you. Congratulations, 10X Capital podcast listeners. We have officially cracked the top 10 rankings

in the United States for investing. Please help this podcast continue climbing up in the rankings by clicking the follow button above. This helps our podcast rank higher, which brings more revenue to the show and helps us bring in the very highest quality guests and to produce the very highest quality content. Thank you for your support. Talk to me about your portfolio construction. You mentioned that you invest in both emerging as well as established managers. How are you constructing your portfolio at CNAFINAE? I'm pretty focused on cash flow profiles and return profiles. So as you go through the modeling exercise, there are certain benefits to each of the stages. And so when you're looking at

that portfolio construction, you can certainly say from a return perspective, I only want to do early stage because early stage I have the potential to, you know, high upside. The problem with early stage is that there are so many early stage VCs out there. How can you cover that market? And how are you understanding, you know, what is good, what is bad, and do you have the wherewithal of making genuine great selection from a GP perspective? And so when you take that consideration, okay, how can I mitigate some of those factors? Well, one, you can, you know, dedicate capital to

established GPs with a longer track record. So that helps mitigate still allocating to early stage, but also mitigating that with not doing all emerging managers, because again, manager selection can be so tough, funds one through three, that you want to help mitigate that exposure as well. From a earlier late stage, I mean, certainly, you know, we've seen during COVID, evaluations have gone crazy. So you want to be cognizant of your exposure to early or late stages as well. Late stages GPs, you know, there's fewer in number. So again, I think you can cover the universe a little bit easier. You can have a better understanding of that investable universe and have better manager selection. And so that's the way that we kind of see the world is we think

that 40, 45% is going to be dedicated to early stage. 25 to say 35% is going to be to late stage, possibly growth equity if it's really compelling. And then another 25% to multi-stage. How do you think about time diversification, vintage diversification? And another thing I love talking about, so what we would want to do is we want to take a look at a three-year investing period. We don't want to take a look at a one-year investing period. I want to select the best GPs that are coming to market over a three-year period. So say 25 through 27, in my funnel, I want to look at all the early stage GPs and say, okay, who's coming to market over the next three years?

And then we'll take a look at industry exposure and have those GPs in each of those funnels. So we're making the best healthcare investment, best IT investment, best financials over that three-year period from a stage and industry perspective. So while I want vintage year diversification and to the point that I would like it to be equal because I'm a very, we didn't talk about it earlier, but from a VC allocation perspective, I'm very much in belief that it needs to be an evergreen asset class. You have to dedicate a certain amount of capital consistently to be exposed to those outstanding vint certain amount of capital consistently to be exposed to those outstanding vintages because you are going to be exposed to bad vintages. And don't compound the issue by being under allocated to outstanding vintages when you've been exposed to a bad vintage.

So we'll try to equal weight over a three-year investing period to the best that we can. But if it means that we're overweight one vintage year because we're selecting the best GP and that vintage, then we'll make that decision. Presumably, if your investment period is three years and then VC's investment period is, let's say, three years, then you're really getting exposure to five vintages because year three, you're getting exposure to year four and year five. You're absolutely right. I mean, we're going to be exposed for, you know, 25 through, you know, what, 29, 30. And so from a deal level perspective, we're going to have a good chunk of allocation diversification from a vintage year standpoint. You spent 13 and a half years at Peacers. What did you wish you knew when you started in year one? That's a good question. You know, I think how challenging it could be working with different constituents.

So we didn't get to talk to it too much. But, you know, you're dealing with not only staff and the different levels there, but you're also dealing with consultants. You're dealing with the board. And a lot of times, you know, you're not dealing with them directly, but you could be dealing with the public as well through press or something like that. So there's a lot of potential that things that can get in your head over the long-term. It's typically not any one issue that is a big problem, but over the long-term, those micro issues could just say, my quality of life may be better off spent somewhere else. If you had to remove one friction as working out of pension funds and constituents check sizes,

what one friction would lead to higher returns for the asset class? From a sourcing perspective, the way that most pension plans source their investments are through like what we had, which was if we had the relationship, we would manage to re-up. If we had, you know, recommendation, we were the ones that ended up monitoring that recommendation. I think actually, and I've talked to some pension plans that do this, they will have a separate sourcing and recommendation team than they do have for a monitoring team. Because you do have a lot of, from a monitoring perspective, you could be too in love with the GP. You have that close relationship. You can have conflicts of interest there. I think having a different sourcing team that is, you know, you would have

to take a look at that structure because I'm not a big proponent of pension plans that give bonuses to their staff as well, because I think it's difficult to be able to incentivize staff in the short term with a long-term asset class. One year return doesn't necessarily mean that you're doing a great job just because the market has gone up or down and commercially a bad job. But separating out the sourcing and recommendation team from the monitoring team, I think would add a lot of value. Just to double click on that, is that there's a bias to advocate for your own fund, even if it may or may not still be a great fund? Absolutely. No, there absolutely is that possibility. You know, we're all humans.

And while I'm doing the best I can right now to eliminate or at least be aware of my bias, not all people out there do the same. How were you evaluated as a portfolio manager for private equity? Talk to me about how pieces would go about evaluating how well of a job you were doing. Well, it was done internally. Just like any other structure, you have an annual evaluation by your immediate supervisor. So it was done from that perspective. The annual increase was actually done based on the fund total fund performance. So it was kind of again market driven and you know more than anything else. TVPI, your marks. No, I mean I think that would be

probably a better way but you would have to do it over long term. But no the annual was annual was just done on what was the total fund return from a performance perspective that was done by the general consultant. Is it similar to how GPs have their own attributable track record where you had your attributable track record in the funds that you sourced? Or was there more of a pooled return? Well, again, yeah, the private equity team didn't have a separate compensation structure. It was the entire investment team. So it was based on the entire fund. So, you know, you would certainly make your case to your supervisor. I've done X, Y, Z over the past 12 months.

And, you know, that would turn into, you know, whether you were on par with everybody else or you exceeded expectations or whatever the structure was there. But yeah, I mean, the compensation was just completely differentiated from, you know, your actual performance, which I found difficult. What would you like our listeners to know about you, about Cine Fine, or anything else you'd like to shine a light on? You know, we're here to be value creditor to the VC universe. So hopefully, you know, if you're a GP or an LP,

we certainly welcome the conversation. Take a look at our website. What we're trying to do is cover the entire women-led and co-led universe. So we have a page now that is listing every GP that we've spoken to. So now that's over 200 GPs so far this year and it'll continue to grow.

So if you have a focus on women-led or co-led VC firms, you're not sure where to even identify who they are. Certainly welcome a conversation. Always love diversity of thought and everybody's perspective. Thanks for taking the time to chat. Look forward to sitting down very soon. Thanks, David. Appreciate you having me. For more ideas on how to raise venture capital in this market, make sure to subscribe below.