Investing Billions - E249: How LPs Unlock Liquidity Without Selling

Episode Date: November 25, 2025

How do LPs unlock liquidity from private-fund positions without selling at a discount? In this episode, I talk with Alex Simpson, Co-founder of Liquid LP, a platform that provides NAV loans backed by LP and GP interests in private funds. Alex explains how NAV loans work, how lenders underwrite illiquid portfolios, and when borrowing may be preferable to selling in the secondary market. We also discuss how different types of investors—high-net-worth individuals, family offices, and institutions—use these loans for personal liquidity, capital calls, tax needs, portfolio rebalancing, or simply as a liquidity backstop. We also cover underwriting, LTV ranges, recourse structures, timing, advisory boards, and the origin story behind Liquid LP.

Alex, so you allow LPs to loan against their illiquid positions. Tell me about this. And how does one go about loaning against their liquid position? Sure. So we essentially provide NAV loans where LPs in private fund interests can, they can use it to service collateral. So we assess the underlying portfolio. We model the expected cash flows and structure of credit facility or term loan against that.

And this is essentially just a way to unlock liquidity without forcing a sale. And it's just designed to be efficient. and discreet for the LPs. An LP needs liquidity to have the option to do a secondary because this is the second option of getting a Navloan. In which case, should somebody get a secondary versus a Navajo? So essentially, the day discretion. I mean, with a secondary, it's permanent.

So you're exiting at a discount and losing the future upside, where the loan allows the LPs or potentially the GPs to assess the liquidity whilst the retaining ownership in that particular fund position. And it's particularly attractive when someone has convict. on the underlying assets, but simply needs the liquidity for personal other business uses while the investment uses. Give me a sense for your scale and how many of these deals have you done and who have been the early adopters or who have been the counterparties on these loans.

So, I mean, we've structured loans ranging from a few million, up to about $50 million. Our platform is designed many to scale for the needs of ultra-high necks, family offices, small institutions. We haven't really focused on large institutions. So we've tailored more for like high necruous. They've got investments in alts and especially as alts are growing. The general need for liquidity has become more prominent, both from the fund side and both from the investor side. So that's kind of like the vertical we service thing.

We've seen a massive demand through the wealth management channels. That's been a massive need and demand push from us. And that's sort of like where the main focus is being focused on. Give me a sense for the rates in the market today. It really depends on the quality of the underlying collateral. So we look at diversification, the maturity of the fund. The rates generally fall on a high single digits to low to matins depending on the quality. So your blue chip type funds will be on the lower side.

And then the more risky or venture type assets that we'd look at will probably be on the low to matines. And the pricing really just reflects both on the liquidity of the asset and the flexibility that we're providing. That's sort of how we price it. but it's really depending on underlying collateral. What are larger institutions doing versus smaller institutions? But the high-networth investors often, so from a use perspective, they're using it mainly for personal liquidity needs,

but institutions such as pension funds, endowments, larger family offices, they're using these sort of nav loans for the portfolio management, capital calls, and rebalancing. On the one side, we've seen ultra-high net worths are using it more like personal tax, et cetera, and then the large institutions and family offices, It's a lot of restructuring, optimizing the portfolio, potentially finding an arbitrage to retain

the existing positions and receive the upside that they intended, and to reinvest it elsewhere. That's where we think there's a massive difference in the use of funds. To large wirehouses, J.P. Morgan's, Goldman Sachs, they in theory, in least provide these kind of loans. Are you competing against them as a different part of the market? Tell me how you fit into the ecosystem. So directly and indirectly, a lot of the larger banks, such as J.P. Morgan, Goldman, they focus a lot on their clients, we've noticed, and funds that. like on their platform, whereas we're a little bit more bespoke to a large extent.

Also from a timing perspective, client onboarding, our main focus is the lending relationship, but we're not trying to get into the wealth management space, et cetera. So we're trying to be as omniacent and flexible as possible. And that's kind of how we differentiate. Whereas when you go to a bank, there's a lot more comprehensive services you can receive as well. And that's sort of how we come in. But we get, yeah, we get a lot of bespoke requests, and it's very depending on the client,

especially with speed. That's what we find there's a big differentiation in terms of the bespoke speed needs that they have. And how do you balance speed with doing enough diligence?

And what are exactly are you diligently on these assets? We get an overview of the underlying portfolio companies but we don't do a deep dive into each single one. We read it so we have a lower LTV to kind of counts

a little bit of a risk, hence while we're not taking much of a discount on the assets. But, y'all, we've got an amazing team that goes through a deep-dop a deep dive in terms of like a documents that received through the underwriting process

and then we take a conviction on that based on the giving them an LTV rented terms as mentioned before like previously. What are the LTV rates today? Anything between 20 up to 40% we've done. So depending on the use of funds, depending on the

unlike collateral, we've stretched it between, depending on the interest rates that they're looking to get, we've changed it quite a bit. So we've got a whole standardized model, but we've also got very bespoke ones, and that really depends on a client-by-client face. So you may have 10 million in assets. You could loan out 2 to 4 million depending on various factors

and depending on whether you could underwrite the underlying assets. Correct. And the idea being that if you have $10 million, as you mentioned, Sequoia, or a blue chip, Andrewson Horowitz, then you more or less know that it's unlikely to go down more than 60, 80%. You have that comfort for yourself, and you're really looking to diligence the underlying, whether they own the assets is kind of like

the ownership versus the actual portfolio. Correct. And we also have to have a look if they've got existing pledges or other credits liabilities. So we've got to just assess them from a personal perspective just to make sure that all of that is in place to make sure that we can retain the funds, the principal, the interest of the time. You mentioned high single digits, low teens.

What are some of the drivers? So what do you need to seek to get them the high single digits? And what do you risks it to you as an investor and as essentially a holder of these assets. Back we could all the funds, vintages, sort of quality. So we've kind of built out our own analysis of a range of different funds in the markets. And we work backwards from there. That's kind of our dictation. But every use case is different. Like we've had clients with one or two fund positions and we've had a client with up to 30. So depending on the portfolio, that that's kind of why it becomes like more of a client for a bespoke type solution from

cash redemption, private equity and private credit would be easier to get towards those, that price range, and we work in towards getting on other, other asset classes like VC towards that price range at the time as well. Because VC is more volatile. Yeah, longer term, we found that that's sort of where our range is fitted, but over time we look at to bring down the price overall as much as possible for all asset falses. What should larger institutions do today in order to gain liquidity? How do they solve their liquidity issues?

From a large institution side, you've seen a range of different uses. Like, Nav loans are very permanent. This is nothing, it's not really a new concept. There's amazing players out there in the market. Larger credit funds and banks that do this too for the institutions. But from like a rebalancing perspective, like Navloans can be quite a useful tool for them, just to rebalance their portfolio, get some cash in, keep, retain the positions that they've got. Just being aware of if they can pledge their assets going into an investment or what they have

on the existing portfolio, that would be quite a useful data. point for them to understand. On the secondary funds, it's really on a case. I can't speak on whether they should go through a secondary process, but in any sort of given liquidity situation, the premise of just knowing that you can attain liquidity, whether it be through the secondary market from a sale or through a loan, is quite a positive data point just to understand whether you can or can't. And then from there, it really depends on through the process. Like, of course, it's at their discretion. Sometimes it's more preferable to get rid of the assets, go through a discount, the tax, et cetera.

And that process is done because if you go through general liquidity process, there is the opportunity cost, there's a time, there's a process. That's why we've seen a lot of reception on the loan front because you don't have to go through and find a buyer or go through, you know, a brokerage firm, et cetera. Whereas if they can actual fit certain criteria and you're happy with the pricing, you can keep that and just get a loan against it.

We've seen quite a big speed difference on like the NAB loan perspective versus the sale. Are these typically recourse loans? non-recourse loans, and tell me about that dynamic. Certain bleach of assets that we're extremely comfortable with, they'll form on the non-recourse side. For certain assets, there may have limited recourse through a full personal guarantee, which a lot of ultra-hine inputs are very comfortable with in the space

based on their background, especially working with facilities and credits. So, yeah, it depends on the underlying cadetral, but we've been negotiable with a lot of use cases and a lot of channels that we've built deep relationships with. And it's always been curious to me, that these loans that underwriters aren't looking at the purpose of the loan, for example, buying a yacht on one side versus making an investment. In theory, the investment has values should go

up. And oftentimes these are the best opportunities where people are willing to take out loans. Why do you think that the purpose of the loan doesn't play more into a fact, and more as a factor? And perhaps I'm missing this point. It is purpose of the loan kind of a big factor. As a massive driving factor, we've seen most of our adoption happens through third parties who manage the wealth of a lot of these LPs or sometimes GPs, whereas either from a tax accounting or wealth management perspective, they see the opportunity to get leverage against illiquid assets. It's a very valuable tool for their clients. So that's where the purpose is derived, whether it's for rebalancing a portfolio, being

the CIO of a family office, whether it's just wealth management and diversity for an individual or a family office to get personal liquidity or to make other investments that are very timely to find an arbitrage or for tax. We've seen the purpose definitely drives the need. We've also seen just some use cases where we've given terms to individuals and families just for them to understand what they can get. They may not need it at the point. They just want to have an indication of what funds would be accessible through us

and that they can get liquidity to make them a little bit more comfortable keeping the assets. I definitely think purpose drives the need for liquidity, but also just having this as sort of like an insurance policy to know that you can get it for certain assets that you have gotten an investment with, it gives you a little bit of insurance policy personally to know that these can be leveraged if the need for liquidity comes. Said another way, it increases your risk tolerance,

it decreases your fragility, knowing that you could always borrow maybe at a higher rate than you would like, but you could always borrow some standby loans if something happens if you have a capital call and expectably and things like that, it makes investing less fragile. 100%.

A big use case and specifically in venture, but also in other classes, like private equity today, less so in private credit, is GPs are having trouble making their GP commits because the time to DPI is a long amount of time. For the use case of a GP, let's say they're on a fund three, and their first two funds have not gone liquidity. Talk to me about how a GP can leverage their previous both GP commits as well as carry in order to underwrite their GP commit in the third fund and just some lessons learned from that. Our main focus has been on the LP front, but of course, naturally, we've received

a lot of demand from GPs, especially some GPs that are LPs of funds. So we don't, we don't focus on carry. That's just not part of our core business model. So we focus on fully funded positions. We've seen a range of different solutions on the GP front. We try not to push just our products. So we, they've got a range of different solutions. I mean, some funds have got continuation vehicles. They've got existing subscription lines. So depending on the use of the funds, but the main use case is just more on the personal side where GPs have come to us, either to get a personal loan for personal reasons or making other investments, as a lot of their network is tied in their illiquid vehicle that they started or co-founded.

And then we also seen a lot of use cases where there isn't as much DPI as expected, which happens normally in the private markets. And a lot of GPs have come to us to kind of get the LP sum liquidity in the interim, which LPs consent for, or they would like, and they would like to retain their position in the first. fund. So we've seen a range of uses. So we're just a tool. We're kind of like just an open manner tool that they can have on hand for their use, but it's really, there's a range of uses that they might get it. And there's some that we probably don't know to the states. And I want

to stress test the model a little bit. So you said 20 to 40 percent LTVs, oftentimes for GP commits or, you know, it's like the house car baby, you know, it's like these small purchases that people need to make at some point in their life cycle. And take into the extreme, let's say you have a portfolio of 500 startups or many different assets. Is there always a amount of money that you would loan against? Could you push that down to like 5, 10 percent? So for somebody to fund their GP commit? Or is it kind of binary? We like these assets and not. And then it's within this window of 20 to 40 percent. It's a mixture. So we do have a more standardized approach where it does fits within that 20 or 40, but we are flexible. Our loan ranges have been roughly between

wind up to $75 million we can take in. But for certain cases, we can lower the LTV, like you mentioned, to lower build the risk. So if we're comfortable with the individual or the borrower and sort of the asset cars from an underwriting perspective, we can be a little bit more flexible on a bespoke basis. I know you're very asset-driven, but behaviorally, it must matter to you, the borrower, their credit score, their track record of paying off their loans. How much is that factor into the process? It definitely has a strong factor.

We don't go through, we don't change the credit score or anything like that as these aren't consumer loans. But we focus on just understanding, A, the use of funds, their history from a personal balance fee perspective, that is important. So we do take a view on the personal financial statements or the statements of the family office to understand what existing leverage has happened. Previously has been paid back. So there is a bit of a track record in terms of managing financing or what other pledges have been. So yeah, that is a good indication. To understand the use of funds, even though we don't limit it, is quite important. So whether it's to make another investment to know whether the investor's going to happen,

or whether it's for personal uses, guard for a bit of divorce or if they need it for like an family emergency. It's important for us to know the use of funds. Just understand that will this principle amount be used at the given time all up front or will it be used over a period? And do they have other methods to bring an income, either to pay them? the interest or we could do sort of like a reserve interest component whereby part of the principle, we would reserve a proportion of interest up front so that they're less to pay it at the end when they pay back the principal. So there's different structures that be happy to accommodate based on the borrower. We're circling back to this use of funds for

your investments. How positive of a use of fund is that if you were funding a new investment? How would you rank those range of uses? Like what's the best use and what's the worst use? I'm just, I'm using moralistic language, but really like from a risk standpoint, as the creditor, what was your ideal use of funds be and what would be the worst use of funds? How would you rank them? I say more on the business side to make other investments or capital calls because then we know where the liquidity is being driven to from an asset allocation perspective. So if those were to be seen as the collateral that, God forbid, we would need to seize

in a collection perspective, then we know what we can take conviction on. On a personal side, we think a little bit more risky, it really depends on a case-by-case basis. those are needed for personal uses, but then, of course, if we're comfortable with the underlying intellectual that we would use from a, if we were to take a personal recourse, it's hard to rank in too much,

but I'd say, when the business case perspective, it's easier to say, to follow the flow of funds, to understand, like, where funds are going. Because if we've got a little bit of a conviction on the assets they're looking to invest in or the capitals they're looking to make

for those who are underlying funds, and we've got a certain conviction on where those are driven to, that would help us. It's just easier to manage, as opposed to, if the funds go elsewhere, I'll be confident we can receive the principal and interest. How long, on average, not the mean, but the median time that loan takes, and what's 80th percentile? So our average loan is roughly 24 months.

We do loans between one to four years, and we can refinance it based on the need that they have. And loans can take relatively, if we're comfortable with sort of the funds, they can take about two weeks from initiation, and legals to deploying, to more complex cases can take absolutely truthfully about 14 weeks. I'd say lower, but to manage expectations, the longest we've done is like 14 weeks. So it could range between that. But if we're comfortable with underlying,

we can get just an necessary documents in place, there isn't too many different legal structures from a trust perspective. It's a trade will take on the shorter side. Last time we chatted, you said something extremely interesting, which is you're now partnering with funds to be standby nav loan lenders, essentially. you'll partner with the ABC growth equity fund

and if any of their LPs need loans, you're underwritten the fund or you're up to date on the fund and you can underwrite it quickly and provide that kind of standby liquidity. I think this is going to be a big trend in the industry. Talk to me about that and do you have any examples you could talk about

whether named or unnamed? We are in like discretion worth in terms like the actual names, but we have been approached by some private equity funds that have got previous vintages, VC funds. They would just like to have it on hand. So it kind of same,

a certain indication to their investors that it makes a little bit more evergreen. So we've seen a few of those approaches. It's a little bit difficult to do on like emerging managers in the VC space, but definitely a need. We would love to cater for or we see the need arising more and more. To have illiquid funds that have kind of been pre-screened as you go through raising. To a certain extent, we've received data and just the indication from a lot of GPs that it helps to certain extent on the fundraising process because then investors know that the fund

can be leveraged. It's been prescreened, and it can potentially help them raise more. We don't have specific data, so we don't overstate anything. But that is some feedback we've received, and that is a channel that we are growing and helping with. We're active in the GP stakes field. We think it's a really interesting field, and it's one of those situations that's solving its liquidity needs just in time. You have these like 10-year funds that turn into 14-year funds, and now people are doing evergreen funds. And have you looked out that space and what are your views on the space? If you've been considering future tradings, now might be the time to take a closer look.

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So it's great to have just as a customer in life just to have as much optionality as possible is really just important, both from sort of the supply side, like being the GP or the buyer side, just to know you've got all these solutions in place. because it really depends on the person at the end of the day. Sometimes, from a financial standpoint, a loan or a secretary may make more sense, but their preference based on the personal relationship with the fund or the personal conviction on the assets or their personal liquidity needs. So I think it's just really good from like an on the essence position just to have flexibility and options.

So we're just trying to fill that one gap, the one gap on the lending side. So I think both are critical in the market. Tell me about the origin story. How did you go about founding Liquid LP and how did you get into this business. Sure. So my background has been more than from like VC fund business space. I've started a few companies prior to South Africa, one in Australia, had some success, had a failure. But actually just through kind of an entrepreneur progress, I've always been one that's had an actual loving and building relationships. So had a lot of relationships in the

in the finance space and executive space of a lot of late stage pre-IPO companies and saw similar models providing liquidity against private shares. So we started the business originally supported with, to focus with Citibank, to focus on lending non-recourse loans as employee benefits against executive shares in pre-IPO companies. And as we started to try push and grow their company, we found a lot more product market fits focusing on LPs. And one of our earlier backers, which was a credit fund of Atlanta, they saw our growth and they would be an amazing to work with. And then we kind of like repositioned the business to focus on. on the LP segment based on a lot of internal and external fit for those markets.

So they further backed us and they've been amazing and they've, and it's kind of how we grew more into the LP segment. And we learned that we would rather focus on a diverse, more diverse portfolio of assets as opposed to single fund, single company positions for a range of reasons. And naturally, our network was more in the LP and GP space, both with the fund and ourselves personally. That's how naturally progressed. but it, I'd say it came originally from seeing the opportunity with pre-IPO lending,

which there were a lot of great players in the space. We just wanted to focus them on more on the tech side and a platform approach. And then actually just based on a lot of conversations and product market fits, we shifted to focus on this. And that's kind of how we evolved. What are some unexpected risks in providing nav loans? And what are some kind of tail risks that you encountered and that you've solved around? I'd say the pledging of the assets and disclosure.

is very important. So when underlying, we've had a few cases in the past where we've underwritten a range of assets for a certain borrower that was inquiring. And only after like stronger due diligence, we found out that there was other assets that they didn't disclose, that they've pledged, that they're still paying off or if there's like double pledging, which is of course illegal, but that takes certain due diligence and there's, there is technology, but I think it's like growing in like the blockchain space where you can only pledge things once. But right now, of its contractually based. So that was one challenge we did face in a few cases that we didn't go through,

but we had to uncover. In the private markets, it's very hard to kind of just have conviction on assets, especially based on like no name brands. You really just need to, it really comes down to like the performance, the use of funds, the quality and the trust of the borrower. So these are all like light touch factors that just take experience. We've been fortunate to work with a credit fund behind us to help us an underwriting perspective. they came in with a strong credit view

to look at more venture private equity type assets. That's helped, having a complement of a great team that comes from private equity and venture capital alongside a credit fund and an amazing advisory board, including Mike Roffler, came from First Republic Bank. I think that combination has been quite a blessing to approach the market.

But naturally, different things arise from price of I'd say those were the factors. And you've built out a great advisory board around you. Tell me about that process. what are your lessons learned? What are some mistakes? Where were some key lessons from building your advisory board? From previous ventures, it's always great to have great names on your advisory board. I think it's just important from the founder perspective and to manage expectations from their to kind of have certain milestones or expectations in place. I have found, based on the stage

of the company, certain advisors brought on board too early with big names. They physically can't do much in the beginning because they're at a certain level where their impact is really more effective at that dead level. So I think it's important to kind of not get too excited, like a horse before the carriage, that phrase, to bring on really no-name brands, even if they're very willing to commit and help at an earlier stage. Like, you should try to meet them where they're at as much as possible or just manage expectations to be like, cool. We'd love to have you on board in the beginning. And we kind of did that really well with this company. Like, we had a lot of expectations with our advisory board, but we knew that we had to get to a certain level, and that's

where they became more effective. And we managed it really well on both sides. So I'd say that was like one learning that I learned from my previous businesses that we applied here, quite well. What are the different vectors of value add that advisors could bring in? And do you get them all in one person

and just talk to me about putting together a holistic strategy around your advisory board? So I think definitely introduced them to each other even before they may have signed fully to see if there's like a culture fit to understand like there's a compliment and just a good connection from an energy perspective. that was one thing that I'd suggest based on learnings.

And in terms of, like, giving them always a full strategy of, like, where they see the business and also understanding, like, what are their goals? Aside from a time commitment, dealing with certain advisors, they may have certain entrepreneurial goals that like to pursue in the future. They may have certain personal goals with their family. So just really managing expectations from a timing perspective, a convective perspective, It's super important and just to be real with them. And yeah,

and certain advisors I think are crucial with opening doors. Some advisors are great just to have the names there and to give like sort of an insurance or comforts of credibility associated with the business. It's a subtle, like, quiet touch, but it is important. But really getting them involved in whatever capacity they can bring. So like never to force something, like in general life, you could take horse the water, you can't make it drink.

But if you could just bring it close and then let it, do its thing in any way or form. I think that's naturally quite beautiful, any way of form. So I think not four structures, but just highlights in the strategy of the company, where are we looking to go, how we see the future, seeing if they align, gain their contribution is great. And not forcing anything. I think just that's one thing.

You're kind of meeting them where they are, seeing their natural strengths, their natural weaknesses playing around their strengths, and not forcing a donkey to run in a Kentucky Derby, meeting them exactly where they are. Yeah, like there may be certain advisors, especially those more mature that reach a level of self-actualization where they just want to impact the world and they're not too focused on like money and commercial whereas as far as you're more focused on like profitability and just generating revenue so you need to understand where they are and even though they may like you personally and they may like the business like their incentive is not to make money it's great

they can make advisory fees and they could be maybe worse something but if you can just personally meet them where they're at even if it's helping on their on their on their philanthropy side and then and come in and bring in just their perspective very likely but just affording them the time that they need to focus on what's important to them like that was quite important because when you get their when you do get their hour hour or eight hours a month whatever it's very impactful because they just feel personally you just make them where they are so I think that just it's more like a life this is speaking of meeting them where they are do you find that the best advisors are kind of driven by impact and they use the money and the advisory shares as a way to to be shown respect

or are the best ones the ones are coin operated that'll go to bat for you and kind of do the most amount of work and how do you balance the mercenary versus a missionary yeah so it's yeah it really depends on like

the environment there is that mercenary transactional focus which is great and sometimes it's like it's like a second wind that they get after the pair that they can like

dive into an entrepreneurial journey back the energy of like the founding suites and just enjoy the ride and like I think that's a whole certain channel is certain ones that want to do well commercially and impact or there's certain people that were found that will have like a sentiment towards the founders such as myself or others

and they feel just that this founder in the future will do great things that are aligned with the impact that I'd like to do now. So if I can empower him or her at this stage to do well but kind of guide them also on like a personal and spiritual perspective on how they run their business from an ethical and value perspective essentially you kind of creating

an impact on their question that they can be make better in the future in maybe non-business activity. So I've seen that subtlety, and sometimes they're very open with it, and you can just feel it by the way that they advise you and archaicry people or employees or direct a business and from an ethics perspective. And that's quite a, it's a great perspective that I've noticed. Through the podcast and through my expanding network, I've gone to meet these really transformational entrepreneurs, people like Blake Scholl, who started Super Sonic.

Yesterday, I spent the entire day with the founder and CEO of Republic who's trying to digitized assets. They all have these drives to make these big changes and evolve society. And sometimes I struggle to translate that to the finance world. And how do you bring that kind of vision and how do you get people excited about something like making money or putting in loans? How are you able to frame that in a way that gets people excited to wake up every day morning? Truthfully, it's also been a personal challenge to me because realistically sometimes the narrative of, okay, we're lending money to wealthy people or privileged people, Like, what is the impact there?

So, like, there is a question that comes back and forth from a personal perspective. In a that, there's a need we solving. So as long as it's driven towards solving a genuine need or, like, like, helping people, especially in a personal financial position or just altering or growing a certain market, like opening up the ultra market to become more investable, just being, you know, another liquidity option that adds value. Those are great. If you can, I think engaging with people, like one of the fortunate things you've had the opportunity

is meets definitely of a thing. thousand types of investors that invests in the private markets and to learn through them and kind of like just exchange dialogue exchange energy um that's been quite special just to like transfer a certain sentiment to people even if 80% of the people that we've engaged with we don't actually do a deal with or work with we can just send a good vibe a good vibration to them or work with them or connect them to other people they could do business anything like that we've seen a lot of motivation from that side from a culture perspective having a lot of banter and like just laugh is like very important culturally are from South Africa so we used to tease each other and

all came from love so like just in tension behind doing things we all here to like make money do well you know have a good name um but i think just of course like a lot of a lot of my personal mentors always said to me like alex extremely hard on yourself like you know you still young etc you need to enjoy the journey but the one thing i've learned as i'm trying to enjoy the journey which i'm not always very very present on is the company you keep on the journey so like working with your friends or new friends is quite important especially like if you can isolate where your strengths are whether it's on like the business development side or the operation side or like investment side that's been quite important and i think that energy

transfers into like external conversations um yeah that's probably the best answer i can say i just i can't lie and say that lending directly impacts you know like good causes that hopefully i could do bigger things in the future but that's how we're trying to um how how we stay motivated and as long as possible in the interim. There's an Alex Hermosey quote. In my 20s, I thought it was about this destination. My 30s, I realized it was about the journey. In my 40s, now I realize it's about the company.

So there is something about that who you're on the journey with that's oftentimes underplay kind of in your 20s. You're just trying to get to that milestone. The way that I kind of look at it a high level, and the way that I look at it is from a leverage standpoint. So if you're an employee at a company, you have your thing that you work on. So, and you go in, you work on,

you have your little piece, and that's great. If you're the CEO of the company, you might have hundreds of people that you're leveraging. Your impact is across the entire organization, and you have each individual person that works. In theory, if you're a great CEO, you empower them to do a better job. You allocate resources.

Then you have on the GP level, you have maybe 15 to 30 CEOs. So now you're basically managing the CEOs that manage employees. and then like we do GP staking so we're partnering with these GP stakers and you you provide loans to the people that are maybe investing into these GPs why does that matter is it just finance we live in a world where there's different polar views on different things so I believe there's like the state basically totalitarianism communism communism and then there's capitalism and free markets

these are kind of two polarities that fight against each other and the absence of a strong equitable, like efficient, capitalistic market, you start to get this kind of totalitarianism. We're seeing that a lot today from both sides of the totalitarianism. And I like to think that by bringing more capitalistic and

free markets into the world, we're playing a small part in thousands of companies, perhaps not a large part in any one company, but to drive this kind of positive force into the world. It's making people happier, healthier, more unified versus this kind of dark, dark

totalitarian and polarity. That's kind of how I view it. And that's become a good organizing principle for me. I agree with you. And I think just in principle, essentially, you are, if you sort of underwriting lending or buying GP positions or lending against LP positions with certain funds, you're probably going to be lending against certain assets.

So you're lending against good investors. We're probably going to be promoting good companies. That's sort of the thesis. So you're kind of creating jobs and you're intents of thousand people to work with good companies that would hope you do well. that have probably got a good mission and are solving a good part of good solution. So, yeah, I think the peripheralation

of like growing the economy in different ways that is a motivating factor. So I think from what you said, that really shines a lot. There's a cathedral parable. A foreman asks three workers, what are you doing? And this is at a cathedral.

And the first replies, I'm laying bricks. The second says, I'm building a wall. The third says, I'm building a cathedral. So I think unifying principles and understanding the concepts behind what you're doing, again, most people in finance will say that's not the spreadsheets, that's woo-woo's stuff, that doesn't matter. And yet, it adds a sixth gear to people's motivation. It aligns people. It makes them work the extra hour, extra two hours every day.

It puts more focus and intensity into that work. It helps them recruit. It helps them build narratives, all these things that are downstream of purpose. Along with behavioral finance, one of the most underrated aspects of finance to. I agree. No, I agree. I mean, I could get very deep with you. Like, I love, um, generic talk to me. If it's, the intention in mind, anything is super important, even if it's a simple question, like, how are you? In every, yeah, in every situation where it's internal conversations, external conversations, just having just like an undertone of love, um, as we were that may sound. It's just super important because, like, we are on this earth for like a short time. Life is short. So, yeah, I definitely agree with you on that. Well, on that note, Alex, many people might not know. We were friends for a while before I even knew what you did. You've always been a good friend to me, and we had a great trip to Charlie Munger's last Berkshire meeting and spent some good time there.

And you've been a great friend. I appreciate you. And I look forward to continuous conversation. Likewise, I appreciate it. Thank you. That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. share with one person in your network who'd find a valuable or leave a short review wherever you listen.

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