E403: Why the Best Investment Firms Stay Small | Sound Point Capital Founder

Most investors believe raising more capital is always a sign of success. Stephen Ketchum has spent nearly two decades proving the opposite. As Founder, CEO, and CIO of Sound Point Capital, Stephen built a $46 billion credit platform by resisting one temptation that destroys investment firms: deploying capital simply because it's available. Instead of maximizing assets under management, Sound Point limits fund sizes, turns away capital when opportunities aren't compelling, and prioritizes long-term trust over short-term fees. Stephen explains why excess capital weakens discipline, why incentives shape every organization, and why culture compounds just as powerfully as investment returns.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Weisburd?

  In today's conversation, we explore why excess capital destroys returns, why incentives drive behavior, and why the best investors often look boring while everyone else is chasing excitement. Joining me is Steve Ketchum, founder and CEO of Soundpoint Capital, a $46 billion investment firm built around discipline, risk management, and long-term thinking. Without further ado, here's my conversation with Steve.

• 0:25David Weisburd?

  Steve, you said one of the biggest dangers in investing is having more capital than ideas. Why do you think that to be the case?

• 0:32Speaker 01

  One of our big mantras is it's better to have more ideas than capital. So why is that? It's just a math problem, right? When you have too much capital and you don't have enough ideas in your pipeline, it's human nature to end up convincing yourself that things that are marginal end up in the portfolio, and that ends up reflecting badly on your performance. And I think the reason it's relevant in this conversation is, if we were sitting here a year ago, your first question would have been, Steve, do you think we're in the golden age of private credit? And as a result, I think in some pockets of private credit, and now private credit is a $1.5 trillion asset class, so it's unfair to generalize too much.

• 1:15Speaker 01

  But I think there was too much capital that flowed into some of those areas, and the manifestation of that was maybe some challenging performance. And in particular, there's a headline every single week about the overexposure to software. Why does that matter? It seems pretty implicit now that AI will have some impact on some sectors of the software industry, and that seems like it may affect returns in private credit.

• 1:42David Weisburd?

  To your point, a year ago, private credit was the hottest asset class on the planet. And ahead of that, you decided to invest differently than everybody else. What made you think that we are maybe out of town?

• 1:56Speaker 01

  It goes back to it's better to have more ideas than capital. And it felt like from an industry standpoint, We were flipping into a paradigm where there'd be more capital than ideas. But let's talk about software, which is, there's a, not a week goes by without a headline about the perils of being overexposed to software in the private credit business. For us, it was less about software being bad than it was about our lack of desire to lend at six or seven or eight turns of leverage. And the reality is, because software companies were being acquired at 15 or 20 turns of EBITDA, in order to have the privilege to lend to those companies, we had to stretch,

• 2:41Speaker 01

  and we weren't willing to do that. Our objective is to have low loan to value, to lend at sort of four plus or minus turns of EBITDA, and by virtue of that discipline, it kept us away from software. I will say, in our performing credit business, our CLO and long only business, we're investing in broadly syndicated loans. I'm very proud of the team because a year and a half ago, fundamentally, we started to see the risks creep in, where we thought that AI could be disruptive to at least some segments of the software industry. So in the broadly syndicated loan market, the average concentration of software is about 14%.

• 3:23Speaker 01

  Our performing credit business is about 7%, so 50% lower than the norm.

• 3:28David Weisburd?

  Does excess capital always lead to worse investment decisions?

• 3:31Speaker 01

  It's a math exercise. So think about, we, like every other asset manager, we're in the funnel business. We want to put as many good ideas at the top of the funnel, go through a rigorous process, and we want these polished diamonds to come out the bottom. And if we need to, I'm making up a number, if we need to deploy investments in five ideas every quarter in a particular specialty, and we put 100 ideas at the top of that Funnel, if you will, and we end up doing 5% of what we start with, that probably ends up with a good outcome. If we need to deploy 50 things every quarter and we put the same 100 at the top

• 4:16Speaker 01

  of the funnel and we end up doing 50% of the things that we initially look at, the math doesn't work. If you have too much capital, does it guarantee bad performance? Certainly not, but it makes it more likely.

• 4:28David Weisburd?

  And to be fair, you guys have $46 billion with a B. How do you know you don't have too much capital?

• 4:33Speaker 01

  We're privileged to have nearly $50 billion of investor capital. What we do differently than others is we try to manage the size of our funds to a modest level. So the largest co-mingled fund that we have is $1.5 billion. We don't have a 10 or 20 or $30 billion flagship fund, if you will. So how do we accomplish that? It creates more complexity. We have separately managed accounts, co-invest vehicles. We have a dozen plus co-mingle funds. And so our view is if we keep the size of the funds and the different strategies reasonable and modest, then we avoid the perils of having too much capital, not enough ideas.

• 5:16Speaker 01

  So yes, in aggregate, we're blessed to have a meaningful amount of capital and trust from investors, but we work very hard to stratify that such that any strategy is modest in size.

• 5:29David Weisburd?

  How do you know when it's time to start a new strategy?

• 5:32Speaker 01

  Part of it is there's a cadence, right? So as opposed to private equity where the investment period tends to be 10 plus years, the investment period for credit type drawdown funds. We have evergreen funds, we have hedge fund strategies, we have separately managed accounts, we have drawdown funds where you raise money, draw the capital down, and then there's a period of two or three years where we can invest that capital and then we pay it back to investors. And so the cadence, the way that we know that it's time to go raise another fund in the same strategy, right, another vintage, is when we're 70 or 80% invested in the current vintage, it's time to go back out to the market and say, look,

• 6:16Speaker 01

  we want to start to raise capital. We expect that we'll have deployed 100% of our capital. In the next four months, so we want to get ready to move on to the next vintage.

• 6:26David Weisburd?

  And do you ever accelerate the timeline or decelerate it based on the market opportunities?

• 6:32Speaker 01

  Absolutely.

• 6:33David Weisburd?

  Give me an example.

• 6:35Speaker 01

  So we just raised the third vintage of our strategic capital fund, and that is part of our capital solutions business where we provide liquidity to companies that have encountered a bump along the road. They have some liquidity issue. They're not heading into chapter 11, but they just need a bridge to a better time. And we had some success in starting the business eight years ago. We raised our first fund with, call it $450 million of capital. We raised a second fund that was slightly larger and we had great success in deploying it. We deployed it more quickly than we expected. So we went back to our initial investors and

• 7:16Speaker 01

  said, it's time for us to start launching Fund Three. And it was really because of the opportunity set. And so we were pleased that Fund Three was almost triple the size of Fund Two. And going back to the initial point of showing restraint and not having more capital than ideas, we probably could have raised four to $5 billion for that Fund Three. We ended up self imposing a cap of $1.5 billion. And it's interesting, I had LPs and colleagues and friends say, well, didn't it sting to not accept 3X the capital that you ultimately accepted? And we can all do the math about what that might mean

• 7:57Speaker 01

  for management fees and additional performance fees. But for us, being long-term greedy is the best way to build a good business and foster trust with our partners and our investors.

• 8:08David Weisburd?

  I'll double click on that because I've talked to some of your LPs and they do say that you're very long-term thinking. You call long-term greedy.

• 8:17David Weisburd?

  It feels very difficult to do that, given that the management fees are guaranteed income and the promote is hypothetical and hard to quantify. How do you keep yourself disciplined?

• 8:26Speaker 01

  Part of it is, I don't have an agenda in terms of selling the business or monetizing the business. I love what I'm doing and I'll be doing it, hopefully knock on wood for a long, long time. So that's part of what makes it easy. I think the other part is, I've been hanging around this business for 30 plus years and I've seen the movie where you raise Fund One here and Fund Two here and then you become a victim of your own success and you end up raising your third or fourth vintage and making it two or three or four X the prior vintage. And so there are a whole host of reasons that that's not a good idea. Maybe the addressable market isn't big enough. Maybe the team that you've

• 9:09Speaker 01

  built to manage a fund this size isn't big enough to thoughtfully deploy a fund that's this size. And what's the manifestation of that? Maybe the fourth or fifth fund, the next vintage goes back to being this size. Or in the worst case scenario, there isn't a next vintage. So having seen other people make that mistake, it's easy for me to say, that makes no sense. Being short-term greedy is not the way forward. And I do think one of the things that we've done really well is we've fostered trust with our investors. And if we do what we say we'll do, then we'll continue to have that trust. But if we're not long-term greedy and we do go from a, call it a $550 million fund to a $5 billion

• 9:54Speaker 01

  fund, then we'll lose the trust of the people who put us into business in the first place.

• 10:00David Weisburd?

  What are the downstream consequences of being good partners to your LPs? Is that you could... Play offense in very defensive markets. Are there other second order effects?

• 10:11Speaker 01

  Part of it is the psychic benefit of looking in your investor partner's eyes and knowing that they trust you and like you. This is a trust business. And I think the other more practical or financial benefit is if we show restraint, in the example I gave you, our strategic capital fund three, and actually turn people back or reduce commitments that investors have given us, then when we're in a period where we think the opportunity set is massive and we can deploy three or four or five billion dollars in a particular strategy, and we pick up the phone and call our long-term partners and say, this is the time, then the likelihood of them saying, okay, let's back up the truck

• 10:55Speaker 01

  and take advantage of this unique opportunity is much, much higher.

• 10:59David Weisburd?

  Is there an example of when that happened previous?

• 11:01Speaker 01

  COVID was a great example. We launched a fund, a tactical and opportunities fund in right before COVID. And we said to investors, this is a generational type opportunity. Unfortunately, the opportunity, because our government decided to helicopter hundred dollar bills or thousand dollar bills across the entire land, the opportunity set was truncated. But in that window of call it six to eight weeks, the opportunity set was better than any opportunity that we had seen since the great financial crisis.

• 11:36David Weisburd?

  It was a short window and because you had built that relationship, you were able to pick up the phone and make money with your partner.

• 11:42Speaker 01

  Exactly. And I can't tell you when that next opportunity will be or what will cause a next opportunity. I promise you that in the next five years, there'll be an opportunity to pick up the phone and say, this is the time.

• 11:54David Weisburd?

  And that's an example of a trade. Is there also this compounding of trust that develops over many years?

• 12:01Speaker 01

  So there's the trade, which is exciting. And look, again, as I mentioned, the psychic benefit of pick up the phone and saying, we've earned your trust over the past 10 or 15 years, and we're telling you that this is the time. That is beneficial both from a psychic standpoint and from a business standpoint. I do think the evolution, if done correctly, the evolution of. Building vintages and growing a team and building a pipeline and building a business also has long-term benefits. And I expect that our strategic capital fund, six or seven, which we'll deploy in or will

• 12:40Speaker 01

  raise in four, or five, or six years, it will be larger, but it will be larger if and only if we think the opportunity set is better. And if and only if we build a team that can deploy that larger amount of capital in a thoughtful, prudent way.

• 12:58David Weisburd?

  We were talking before we started recording, Warren Buffett was, a couple of years ago, was asked, how had he amassed tens of billions of dollars? It was close to a hundred billion dollars at that point. And he said, I started when I was a teenager and I was in my nineties. And a lot of people discounted that answer and thought he was just being fakely modest. But then when you look at the chat G P T, you could actually see the compounding. What people don't realize, they think that's just financial compounding, but there's also a reputational compounding, which allows Warren Buffett in situations like the global financial crisis to pick up the phone to Goldman Sachs and get this once in a generation type of deal because of that reputation that is compounded.

• 13:37Speaker 01

  Completely agree. And that goes to the point I was making, which is trust is earned not over days or weeks or months. It's earned over years and decades. We've been in the business for seventeen years now, and I think we've always done what we say we'll do. It doesn't mean that we won't make a mistake. It doesn't mean that there won't be a problem credit that finds our way into a portfolio, but we're always proactive and we're always transparent with our investors about what we're doing and whether we're doing something that we're proud of and we're excited to tell our investors about, or whether there's a bump in the road. We always want to be transparent. By the way, just to tie Warren Buffett back to a comment or a question you had at the

• 14:20Speaker 01

  start, the other Warren Buffett has all sorts of interesting adages. One of the things he famously said is, I can make a lot more money, I can make a lot Higher return with less money. And his example was if you gave me a million dollars, I guarantee you that I could generate you 50% return per year. Right. And now he's tasked with deploying hundreds of billions of dollars, which is more of a challenge, which ties back to what we talked about at the outset, which is it's better to have more ideas than capital.

• 14:54David Weisburd?

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• 15:38David Weisburd?

  You mentioned something there that you always have done what you said you were going to do. I've had multiple people, most recently Ron Biscardi, who runs iConnections, has seen 8,000 GBs and LPs pitching and has seen these kind of simulations play out hundreds, if not thousands of times. And he mentioned that some of the top asset managers that he's ever met have had good to average returns, but have been exceptionally trustworthy, have been exceptionally communicative and have built deep relationships with LPs, more so than some of the top DSO investors that have been terrible at that have never scaled. You know many other managers. Have you seen that with your own eyes?

• 16:17Speaker 01

  The paradigm shifted. I think in the 90s, if you hung out your shingle. The money would come. And now there are so many competitors in not just in the credit business, but asset management broadly, that it is not an option. You must have a robust marketing team and marketing machine. And yes, I've seen asset managers who scale with okay returns, not bad returns, not exceptional returns, but okay returns.

• 16:51Speaker 01

  We'd actually like to get both sides right. What gets us most excited and part of it is because I'm competitive. The partners and people that help me deploy capital are competitive. We get up in the morning because we want to be top decile managers. But we've also built a great marketing team because at the end of the day, investors are much more demanding today than they were 30 years ago. They want responsiveness, they want information, they want dialogue, they want to know what's going on. And the face to the investor universe for us is our marketing and IR team.

• 17:27David Weisburd?

  I love interviewing firm builders like yourself because it's the founder-driven organization. I find them to be fundamentally different than ones that have gone through transition. Do you think that Soundpoint Capital could be as long-term greedy if it wasn't still led by the founder?

• 17:44Speaker 01

  You hit the nail on the head. There is a differentiation. And I'll come back to your question, but I do want to touch on something. I was meeting with an investor a few weeks ago. It was an RFP and we were competing with a handful of other firms, none of which were founder-run at that point. And I, I looked at the CIO of the potential investor and I said, at the end of the day, the star of the show in this meeting is the portfolio manager whose team will deploy your capital. And so that's where we want to lean in. But I will tell you. You're giving us capital for a number of years. In those years, there'll be an event, whether it's exogenous, whether it's idiosyncratic,

• 18:25Speaker 01

  there'll be an event, or there'll be something that you need from us, and maybe a change. You'll have a question, you'll have a comment, you'll have a complaint. And the one person at the organization who can address that and address it immediately is me. And so, here's my phone number, you can reach me 24/7. There is nobody else within our competitors' organization in that particular meeting who could say those words. So I do think it's a competitive advantage, and part of it is there's no professional CEO who has as much pride and ownership of the success of the business and the performance of her funds than somebody who's given birth to a company

• 19:10Speaker 01

  and grow the company. So it's something that I take personally. But in order to have that permeate through the organization, it's not just enough for me to tell everybody to be long-term greedy, we have to attract the right people, right? And so, here's the way I think about it. There's always shades of gray, but in my mind, there are two basic groups of people. There are, and I say mercenary, but I don't say that in a pejorative way. So there are people who are more skewed to have success at pod shops like Millennium, which Millennium has, Izzy Inglis has built a spectacular business. The people who thrive there are people who, they know at the end of the year

• 19:55Speaker 01

  to the penny what they will make based on their own personal performance, right?

• 19:59David Weisburd?

  There's a purity to that.

• 20:01Speaker 01

  There's a purity to that, and it's not a bad thing, it's a good thing. Those people wouldn't thrive at Soundpoint. And so, in our interview process, obviously, we're asking them questions, but we're also making it abundantly clear that for us, it's one team, one dream. And that's why we like to hire people. I love to hire people who were athletes in high school or college, and in some cases, we've got some people who play professional sports on a team. Because there's nothing we do, from raising capital to deploying capital, to building a good track record, that doesn't require the efforts of, in many cases, dozens of people. I love to use... We and us versus I and me.

• 20:44Speaker 01

  And we make that clear at interviews. We make it clear internally when we talk about our successes. There's nothing that we could do without a team. My final point is the first and perhaps most important part is to identify. And then the second order of business is incenting them properly. If we hire people who are skewed to be team players and pay them just on individual performance, then that defeats the purpose. If we hire people who are more individualistic and try to incent them to be team players, that doesn't work. So we need to hire team players and incent them based on the performance of the team and/or the performance of the firm.

• 21:26David Weisburd?

  I think that's also a Warren Buffett quote, which is if you want to look at somebody's behavior, look at their incentives, but that's incomplete. Because to your point, some people are just wired differently. It's another way. You could give as much food to a zebra, it's not going to climb a tree, no matter how much it wants to get that.

• 21:42Speaker 01

  I'm going to use that analogy. That's a good one. But you're absolutely right. Like you cannot, and again, I've been at this for 35 years. You cannot change how a person's wired by.

• 21:54David Weisburd?

  It's frustrating.

• 21:55Speaker 01

  Right. It's frustrating, but I've now learned.

• 21:57David Weisburd?

  You want them to see what could be, but their brain is just not wired that way.

• 22:01Speaker 01

  Yeah. But conversely, you can find the right person. And if you have the wrong approach, then you can turn that person into the person that you don't need. Right? So wrong person, right incentives.

• 22:15David Weisburd?

  You need both correct.

• 22:16Speaker 01

  You need both correct. You need to nail.

• 22:18David Weisburd?

  Is the opposite true as well? If you find a team oriented person, it's going to be very difficult to make them think only of themselves.

• 22:26Speaker 01

  Yeah. And we want that.

• 22:28David Weisburd?

  And that's the beauty of it.

• 22:29Speaker 01

  Yeah.

• 22:30David Weisburd?

  It's not really your coaching. This is a fully formed adult.

• 22:32Speaker 01

  And by the way, not to overcomplicate this, you want a team player. Who knows that he or she needs to contribute? You don't want is somebody who will say, okay, well, we've got a team. So we've got a team that will do all the work. We have to have people rowing on the same work, if you will.

• 22:50David Weisburd?

  An older version of myself thought that most team players were just adversely selected people that couldn't make it on their own. And then as I grew up, I matured a little bit. And I see that as just one factor of a human being. We're in New York City. The Knicks just won the NBA championship and Jalen Brunson is both elite, but also very well known as a team player. And there's other players that are elite and terrible team players. It's just two different parts of a human being.

• 23:18Speaker 01

  It's a great analogy because for years, probably decades, the Knicks had good players, but they didn't have a Jalen Brunson, who was great in the locker room, great as a leader, but also was a phenomenal contributor. We're looking for, if there are any Jalen Brunsons out there, we want you at Soundpoint.

• 23:39David Weisburd?

  Jalen Brunson aside, there's other players on teams, whether sports teams or teams in finance that function as the glue, the culture bearers. Is there room for these culture bears even when they're not the most elite?

• 23:55Speaker 01

  A hundred percent.

• 23:56David Weisburd?

  Could you give me an example?

• 23:58Speaker 01

  I'm going to give you a little bit of an anecdote. And by the way, to your point, if the Knicks had five Jalen Brunsons on the court, that could be a problem. There are other teams where they're-

• 24:12David Weisburd?

  The super teams that never make it to the finals.

• 24:15Speaker 01

  Exactly right. So there are teams that I can think of that have two or three superstars, potentially Hall of Famers, and there are not enough basketballs on the court to be able to make those two or three superstars happy. This is a good anecdote of what we're trying to create at Soundpoint as a culture. There's a book that I love called Culture Code. And in the book, the author profiles a bunch of different high performing organizations, like the Navy SEALs, for example. And one of the people he profiles is Danny Meyer, who's arguably the most successful restaurateur in the world. And has a lot of great restaurants, but also has other things like-

• 24:55David Weisburd?

  Unreasonable hospitality.

• 24:56Speaker 01

  Exactly. And so he's, years and years ago, he's interviewing Danny Meyer for this book. And I don't know, maybe he's the grammar sheet haver. And he's got his notebook out and he's asking Danny questions about how he built this spectacular empire. And all of a sudden, there's this loud clattering. And a young woman who has been busting a table, has a tray of glasses and plates. And we've all been at restaurants and watched somebody drop a tray of plates. And it's loud and it's disruptive and it interrupts the mood. And the author continues to ask Danny questions. And Danny says, hold on a second. The next 30 seconds will determine whether this is a great night at this restaurant

• 25:40Speaker 01

  or whether it's a bad night. And the author says, well, why is that? And Danny Meyer says, well, if this young woman has left her own devices and has to clean up this big mess by herself, it will deflate the room. People will feel badly about her and it will create this awkwardness and heaviness. But if other coworkers come to help her, then it will lift up the room and people feel, they won't feel as badly about her, she won't be as embarrassed. And low and behold, five or six coworkers came to help her clean up the shards of glass and the broken plates. And all of a sudden, there was this palpable buzz in the room. So what does that have to do with Soundpoint or Asset Management? And it goes to your point about, do you need people other than Jalen Brunson?

• 26:23Speaker 01

  Well, at the end of the day, the culture that we've tried to create at Soundpoint is that people have each other's back. It's a team oriented atmosphere. And- Not everybody does everything right. We make mistakes every day and I can promise you that the person who makes more mistakes than anybody else at Soundpoint is me because I have in some cases dozens of decisions a day to make. But if we foster that environment where people are not afraid to make mistakes, you have to learn from your mistakes. You can't make the same mistake over and over again. If you're carrying too many plates and dishes on a tray, maybe next time try to have fewer plates and dishes. But that's what we're trying to do. We're trying to allow people to make mistakes, learn from

• 27:06Speaker 01

  their mistakes, and have their back when there's a problem that needs to be fixed. So that's why that anecdote defines what we're trying to create it.

• 27:15David Weisburd?

  It's the butterfly effect or culture, or maybe the broken windows theory of culture. How you do one thing is how you do everything. And the culture is determined by these hundreds of small things, not the things that are on the wall.

• 27:28Speaker 01

  I want to come back. I do love sports analogies. Sorry, I love your Jalen Brunson analogy. Not everybody can take the last shot of the game when the team's down two and they need a three-pointer. But in order for the Knicks to win, everybody has to have their role.

• 27:43David Weisburd?

  You've been scaling Soundpoint over 17 years to 46 billion. One of the challenges that founders of private asset firms or any firms in that regard is scaling culture. What have you learned about scaling culture as your organization gets bigger?

• 27:58Speaker 01

  It's a great question because when we first started and we were in a...

• 28:03David Weisburd?

  How many people did you start with?

• 28:05Speaker 01

  Well, we started with, we started with one. We started with me. And then I brought on our CFO and he was working at another firm, another credit firm that he was winding down. I don't think I paid him a salary for a year. So he was working, but I don't know if he was officially an employee. But let's say when we really got going, we started with four or five. And so when we had five people or seven people or 10 people, we were all in a tiny little hedge fund hotel. And it was, we were all audacious. We knew we were taking risks. It was exciting and it was scary. And we didn't have to define our culture because everybody knew that they had to change the paper and the printer and

• 28:46Speaker 01

  order supplies from Amazon. And we were entrepreneurs and it was great. And then we had some level of success. Then all of a sudden, we woke up one day. I mean, today we have 210 employees. But we woke up one day and there were 50 employees. And I think in any organization... When you get to a certain size, you can't just assume that everybody knows what the culture is supposed to be. So we tried to articulate what the culture was, and we've talked a little bit about it. Team oriented, everybody has else's back, no stabbing people in the back, being transparent and communicative. I mean, we want to disagree, but we want to disagree in an agreeable way. If we certainly don't want a situation where people sit around a room and everybody yeses each other to death.

• 29:31Speaker 01

  And I want everybody at the firm to be able to look at me and say, Steve, I think you're making a mistake. But we actually had to sit. When we got to a certain scale, the leadership had to sit down and say, okay, what is our culture? We need to make sure we communicate that to others. So that's what we did. Every month or two, I have breakfast with all the new joiners at some point. And in every one of those breakfasts, I use that culture code anecdote about Danny Meyer and how he thinks about the culture.

• 30:02David Weisburd?

  He's part of folklore.

• 30:04Speaker 01

  Exactly.

• 30:05David Weisburd?

  If I gave you 100 points and I made you assign it to stated culture versus actual culture behavior, what actually defines culture?

• 30:16Speaker 01

  What defines culture is you can tell people what you want your culture to be, but if you don't back that up, if we don't create the atmosphere that we just described, that Danny Meyer anecdote, then people will leave. So we have to define the culture and then deliver that culture, which means we have to hire the right people. We have to make sure that people get rewarded for embodying that culture. And so I think what defines it is that you hire the right people, you have low attrition because people Enjoy the culture and feel like they're part of something.

• 30:56David Weisburd?

  But would you give like 10% on the definition of the culture, 90% on the delivery of the culture? Or slightly different?

• 31:05Speaker 01

  I think it's sort of 50 50.

• 31:07David Weisburd?

  50 50?

• 31:08Speaker 01

  Yeah, I think because-

• 31:09David Weisburd?

  So actually going around and saying what culture you want is important.

• 31:13Speaker 01

  For sure. A hundred percent.

• 31:14David Weisburd?

  It's not just incentives.

• 31:15Speaker 01

  A hundred percent because if you don't, and by the way, we, this happens with almost every growing company. There's no rulebook that says, okay, now that you have a certain number of employees or you're managing a certain amount of assets, now you have to tell people what your culture is. You sort of wake up one day and say, maybe not everybody, maybe it's not intuitive to everybody.

• 31:38David Weisburd?

  That's surprising to me. I would think 80% is how you manage, how you deliver incentives. And 20% is basically what you talk about. But this makes me rethink the model in terms of how important it is to constantly communicate the culture.

• 31:52Speaker 01

  Yeah. And, and look, part of it is we have the great good fortune of growing. And one of the reasons I weight the defining and the communication of culture more than you might've thought was intuitive is because if every month there are new people coming on board, we need to make sure that we articulate it directly to them. And then we need to make sure that we remind the managers to define it and to embody that.

• 32:22David Weisburd?

  Culture, if left to its own perils, has this half-life as you grow as an organization.

• 32:27Speaker 01

  And by the way, if we don't constantly communicate, and one of the things I've learned is whether it's culture, whether it's whatever it is that's important, one of the things we do at the end of the year, we ask people to do a 360 degree review, or we ask people to do a self-evaluation. As part of our 360 degree review, we also ask them what we can do better as a firm. And without fail, a significant percentage of the comments are, we'd love to have more communication about what's going on, not just about what our culture is about, but what are we doing? How are we growing? What's our next thing?

• 33:05Speaker 01

  What can we do better? And so you can never, ever, ever, as a leader of a firm, whether it's an asset management firm or you're making widgets in the Midwest, you can never communicate enough to your employees. That's the one, I mean, I've learned many lessons over the last few decades, but that's one of the most profound lessons that I've heard. I, I might feel like I am communicating crisply to everybody I come in contact with at Soundpoint, and it's never quite enough. So that's something.

• 33:37David Weisburd?

  You have an organization of 500 people and you've said the same thing seven times. And on average, five people have been there. You've only communicated to

• 33:44Speaker 01

  Exactly.

• 33:44David Weisburd?

  a small percentage of the organization. You feel like you've said it over and over again, but less than 10% have actually heard it.

• 33:49Speaker 01

  Yeah, and we had, and look, as you know, as a result of that feedback, we have town halls on a regular basis. We try to make sure that we articulate to everybody what's going on. So nobody feels siloed, nobody feels orphaned. And again, that's part of feeling like you're part of a cohesive culture and family and team.

• 34:09David Weisburd?

  You've grown from a one-person shop to four to five people, now to 210 employees today. Today, June 2026, what is your role as founder and CEO? What are your responsibilities?

• 34:20Speaker 01

  I put out fires every day.

• 34:23David Weisburd?

  The Elon Musk, which is you deal with the hairiest problems, the problems that invariably come up and that no one else can solve.

• 34:30Speaker 01

  The reality is you become a little bit, as a founder, CEO, you become a little bit of a victim of your own success as a firm. Because when you get bigger, you have more employees, the fires that you need to put out, they expand exponentially. And so when I

• 34:47David Weisburd?

  More complex.

• 34:48Speaker 01

  Make it, you create

• 34:50David Weisburd?

  Now there's multiple layers of people that can't handle it.

• 34:52Speaker 01

  That's exactly right. I'm obsessive about having a to-do list. But things get added every single day. So if I think about the three most important things, and look, I'm the CIO, and so I have veto rights over every trade that we do, and I sit on our investment committees, but we've done, one of the things I'm most proud of is we've brought in people to run our different businesses better than me at what they do, right? That's an important part.

• 35:18David Weisburd?

  That humbling to you to do that?

• 35:20Speaker 01

  No, it was.

• 35:22David Weisburd?

  Not even a little bit?

• 35:23Speaker 01

  Not even a little bit. Over the past 10 years, and it wasn't the case 10 years ago, but when I find somebody to either build, or take over, or run a business line, and I know they're better and smarter and more knowledgeable than me, it makes me excited because it gives me leverage.

• 35:42David Weisburd?

  You're a far greater man than I, because every time that happens to me, I both feel extremely excited and also like a little piece of me has died.

• 35:50Speaker 01

  I'm not saying it's not humbling, but in the long run, it's a good thing. And so I want to get back to your question. So if I think about the handful of things that are most important for me to do to continue the success of Soundpoint, one is just coming in and putting out fires and dealing with things every day. And I'll get back to the office after this podcast, there'll be a fire to put out, and I can't tell you what it will be. I think the other, another really important thing, because we want to continue to do great things, is to be the keeper or the driver of the reality distortion field. If you think about people like Elon Musk and Steve Jobs, they pushed their employees

• 36:33Speaker 01

  in a way that people didn't even expect they could be pushed, right? So growing from $35 million, and that's million with an M, to $46 billion and doing it in a thoughtful way is audacious when you think about it. And I'm proud of what we've done, but.

• 36:52Speaker 01

  There are times where I had to push people and have them exceed their own expectations. And then I think the third aspect that I spend a lot of time with is investors. And I think we're in a world today.

• 37:05David Weisburd?

  Customers.

• 37:06Speaker 01

  Customers.

• 37:06David Weisburd?

  Ultimately, who pays all your bills?

• 37:08Speaker 01

  At the end of the day, we serve at the pleasure of our LPs and our partners and our investors.

• 37:12David Weisburd?

  Do you think a lot of your peers and other GPs understand that they are ultimately service providers for the LPs?

• 37:19Speaker 01

  Not everybody. We're serving at the pleasure of our LPs. The most important thing that we do, the most important thing that we produce is trust. They're trusting us. And by the way, these LPs, they do. But at the end of the day, it's a leap of faith, right? Because they are giving us capital that we will deploy in the future. So they have to believe that we will do the right thing. And at the end of the day, unless we remember it's their money we're managing, then if I were an allocator, I wouldn't be happy with somebody referring to their capital.

• 37:52David Weisburd?

  A lot of people would say, well, my capital, LP capital, semantics. No, not semantics. This is extremely revealing on deep level of how GPs think about the situation.

• 38:02Speaker 01

  100% agree.

• 38:02David Weisburd?

  After this podcast, you're going to go back to your office and you're going to have some fires, some unforeseen fires. How do you divide your time between working on these fires versus working on the business?

• 38:13Speaker 01

  Some are little brush fires and some are fires that could get out of control. So at the end of the day, it's my job to react to things. If they're potentially existential, then I need to react. But other than that, I, again, as I said, I'm obsessive about to-do lists and I try to prioritize the things. There are, I think, one of the important things, and it's very difficult for people in my position to do, is to say, okay, well, if we're fighting fires and just dealing with things that are relevant today, if we don't allocate time to figuring out what we need to do to get to where we want to be in five years, whatever that is, right? It doesn't matter.

• 38:56Speaker 01

  If you don't step back and invest the time. To help us become what we want to be, then we'll wake up in five years and say, where's the time gone? It's a timely question because we had a meeting recently with senior management where the conversation was primarily about what do we need to do today? But if we want to be here in five years, what are the pieces we need to put in place? And those things are long tail items, right? Those are things where you might need to spend months and months and months

• 39:33Speaker 01

  building something new or changing a paradigm. And that's hugely important.

• 39:39David Weisburd?

  I would label these other projects as skunkworks, almost like R and D, which should have really different criteria for success. And it's almost like a baby, a newborn baby is being born. How do you structure that so that it survives within an organization?

• 39:55Speaker 01

  It's like everything. It has to be top down. And if I don't invest time and energy on developing the babies and focusing on the skunkworks and making sure that whomever is responsible for that is held accountable, then those things don't get done. And so part of it is having a cadence where we don't just talk about it and forget about it. We talk about it and then we get back together three months later and say, okay, we prioritize these three things. They might not manifest themselves for five years, but where are we in that process? So that's on me to make sure that it is a priority and stays a priority.

• 40:37David Weisburd?

  Thought a lot about this doing versus thinking. And the problem with these fires is that they compete for the exact same brain real estate as thinking long term. And I discovered this because on the weekends I would go biking and I always had great new ideas. And I started to isolate the variables. Maybe I'm biking. Maybe it's that I'm outside. Like, why is it that every weekend I come up with a great idea or every other weekend? And then I ultimately realized that it's just the mind space, that I could create the same space during the week if I was extremely conscious about it. And then lo and behold, I would get great ideas during the week. But on the level of a brain, the thinking and the doing kind of competes for the same reasons.

• 41:19Speaker 01

  Well, for me, I like to play golf and I like to play squash. Those are sports or activities where you don't have as much time to think as you might if you're going on a long run, or you're swimming, or biking. So my quiet time where I can actually step back and think, I probably could do a better job of carving out three hours of time on a Thursday and saying, okay, my door's closed. This is the time where I'm going to really sort of come up with creative ideas that will maybe help shape or mold the future of the business. My quiet time tends to be on airplanes where I'm sitting on an airplane, nobody can come into my office.

• 41:58David Weisburd?

  Oftentimes, no Wi-Fi.

• 41:59Speaker 01

  Exactly. And I'm happier when there's no Wi-Fi. So, and either fortunately or unfortunately, I'm on planes a lot. So I find that that's when I really get to do my reading, I get to do my thinking, and that's where I'm away from real-time firefighting mode and I'm into existential, futuristic, how do I continue this reality distortion field and continue to try to do audacious things and build a firm and make sure that we're not locked into short-termism that we're focused on long-term ideas and the execution of those ideas.

• 42:36David Weisburd?

  Clearly, some of these fires must come to your desk. You're the founder, CEO, and also CIO. Outside of these large fires, have you found ways to gain leverage on your time otherwise?

• 42:47Speaker 01

  The bigger fires find their way to my office. But I will tell you, and this goes hand in hand with the comment I made about finding people that are smarter than I am to run or investing businesses. Over the past few years, I've helped create leverage for myself by making sure that there are people that are really good at putting out those fires, such that they don't get to my desk or get to my office. And in some cases, I don't know about them. And there are many cases where a few months after the fire is put out by not me, by somebody else, and I learn about the fact that the fire has been put out, which makes me happy.

• 43:27Speaker 01

  And so, and one of the things that is really important in an organization, especially as it grows, is I've done a better job in the last five or six years of making sure I have leverage and have people that are good firefighters. And now, one of the things I'm focused on in the organization is to make sure that they have firefighters underneath them, people that can put out, and it's not, look, it's not just putting out fires. Part of it is executing on the plan, right? And everybody who is senior and valuable at any organization needs to look for people who can provide them leverage because it will allow them to do their job better.

• 44:07David Weisburd?

  Said another way, the perfect organization would have firefighters all the way down to the summer intern. Is the best summer intern firefighter, the analyst is the best firefighter, and everybody gets leverage on the staff.

• 44:18Speaker 01

  And by the way, maybe this is a different analogy than firefighting because, look, it's not growing an organization and creating excellence isn't just about putting out the fires quickly, although that's important. Part of it is about doing things with intent, right? And so, it's a coincidence that we have 10 or 12 interns every summer. And I had lunch with our intern class and going back to your point about humbling, I look at their resumes, it's like, oh my God, they're, you know, I couldn't, Steve Ketchum couldn't get hired as an intern at, you know, at Soundpoint, whatever, 35 years ago. But one of the things I said to all the interns is, I said, look, I am obsessively focused

• 45:01Speaker 01

  on AI and how it can help us generate alpha for our investors, how it can streamline our business, increase our margins, do a better job of, you know, than human beings, of parsing through data and providing information to our investors and making them happy. And I said, even though I'm obsessed about it and use it. In every aspect of my life and my career that I can, it's not intuitive to me because I'm of a certain age. And the interns are 19, 20, 21. And I said, look, you'll be here for a couple of months. But one of the most important things that you can do,

• 45:42Speaker 01

  you're just learning about our business and you're figuring out what your tasks are. But everyone in this, we're sitting in our conference room. Everybody in this conference room is more intuitive about AI than virtually anybody else at Soundpoint. So make your mark in the next two months and look at what we're doing and not doing with AI. So that's a great example.

• 46:07David Weisburd?

  In this case, it's interns, but analysts, associates, VPs. How do you create the incentives for people lower in the organization to take risks and to develop these kind of competencies for the firm?

• 46:20Speaker 01

  Yep. So part of it is making sure they know, and it's not just telling them the Danny Meyer story. Part of it is, and look, everybody-

• 46:30David Weisburd?

  Goes back to this, the 50% of telling them that they have the power to do it.

• 46:34Speaker 01

  Right. I don't know. I may have to go back and calibrate my percentages. But again, it feels to me like it's more than 20% in terms of the communication. So part of it is the communication. And then there will be in every or younger employee's career, it will happen sooner rather than later. They will make that mistake. They'll drop that tray of plates and glasses. And if they get chastised for it, and if nobody helps them pick up those shards of glass, then they'll say, well, gosh, I heard Steve Ketchum at our new employee breakfast, tell me about all this great culture and everybody at Soundpoint has each other's back. Well, my manager, my peers don't have my back.

• 47:19Speaker 01

  So part of it is that first time they make a mistake, feeling that there is support, right? So that's hugely important. And I think in terms of incentives, there are financial incentives. But one of the things I tell our managers is that very few people in our business or any business- Leave their firm to get a five or 10% bump somewhere else. Some people are job hoppers. But at the end of the day, the reason people leave is because they feel that they don't have a career trajectory. Like, we're human beings, we're aspirational. Yes, people who are attracted to asset management or Wall Street are not in the business for altruistic reasons.

• 48:04Speaker 01

  They want to create wealth and they want to be able to pay for the kids' education and put a roof over their heads and enjoy.

• 48:10David Weisburd?

  In some ways, that's the purity of finance is a lot of times in Silicon Valley, they'll go around and say, I want to change the world. And in finance, there's a purity to it.

• 48:18Speaker 01

  Yeah, by the way, that's okay. But in my experience, the people who leave, leave because they don't see career growth. They don't feel that their manager is thoughtfully managing their career. And we're human beings, we're all aspirational.

• 48:36David Weisburd?

  They want to essentially use their career to self-actualize, to constantly get better.

• 48:40Speaker 01

  A hundred percent.

• 48:41David Weisburd?

  Been in finance now for 35 years. What's compounded the most in your career?

• 48:44Speaker 01

  What's compounded the most? We talked about the Warren Buffett financial compounding, but I think that the relationships that I've developed have been really the compounding effect. And that could mean a lot of different things. I have investors and there were people that supported me when I had this audacious idea of starting a business in the depths of the great financial crisis with no track record. And so there were people that I had built trust with who made a bet on me. So that's an example. There are people who, and you really do know who your friends are. You learn who your friends are when you start a business. Another compounding effect was the relationships that I had formed and the advice I got from people who had perhaps already done something like what I did.

• 49:29Speaker 01

  So I think it's being able to go back. And I think about a prior life, I was an investment banker and your first handful of years as an investment banker, you're working 120 hours a week and sleeping under your desk. And. Pulling all-nighters and eating bad Chinese food. And you form these bonds with the people that you've, that you work with. And to this day, if I need to advice or ask for favors, six months ago, we got a great new deal for our core middle market lending business from somebody I had worked with 30 years ago, who'd built a successful middle market private equity firm. So for me, overwhelmingly, the compounding effect is the relationships that I had built.

• 50:14David Weisburd?

  Think about investment banking almost as a tour of duty, almost like military. And the paradox there is that oftentimes you build these deep bonds with the people that you went to battle with, even though they may be completely different. And it's not just differently from a cultural or religious standpoint, but just differently even socially. They may have not been people you would be friends in high school or college in, but because you go through this formative experience, they sometimes end up being some of the most valuable relationships.

• 50:42Speaker 01

  You're in the foxhole and you're, and again, even though, as you said, there could be, in a different situation, there could be no commonality whatsoever, that shared experience, which is profound, when you're sleep deprived and when you're working hard and getting beat up by-

• 50:59David Weisburd?

  You're almost in this existential crisis where you don't know if you can make it.

• 51:03Speaker 01

  And you're constantly in a fight or flight mode. And that shared experience is indelible.

• 51:12David Weisburd?

  One of my working theories is that great organizations are not built on these huge leaps, but really on this daily operational improvement, every day, just 1%. And it just compounds in such a dramatic way over several decades. Is that something that you found at Soundpoint?

• 51:27Speaker 01

  Especially when you're starting out a business like this, if you don't want to be the proverbial person who's watching that pot of water boil, right? And staring at it. And the important thing, I think, in building a good organization, whether it's an asset manager or a widget company, is knowing that there is a process doing all the right things. And in asset management, one of the most important processes is raising capital.

• 51:54Speaker 01

  I can promise you that for a capital raising process, whether it's at Soundpoint or any other firm, for the person who runs a particular business, for the portfolio manager, that process always takes longer than expected. We might say, okay, we're going to go raise our third or fourth vintage fund. And our objective is to have our first close in September 1st. Well, guess what? It ends up happening November 30th. So the most important thing is that putting one foot in front of the other and trusting the process and doing all the right things and measuring yourself, not every day, on the end result, because the end result, as I said, ends up getting pushed off. But knowing that you're doing all the right things from a process standpoint.

• 52:39Speaker 01

  So yeah, it is putting all the mundane work in, doing the stuff that is behind the scenes and doing it well. And then you look back and say, okay, this was a great success. And it also ties into the comment about the success is driven by the team, not any individual. So everybody has to do their tasks. And some of the tasks are more unsung than others. Right? And so I think one of the things that we really do try to do, we try to share successes. Everyone, and this goes back to my point about communicating or over-communicating. We have a good accomplishment, whether it's a great deal or a good fundraise. We want to make sure that we send a blast email out to everybody and celebrate that.

• 53:23Speaker 01

  And one of the things that we spend an inordinate amount of time on is making sure that every person who has contributed to that success is included in that email. That's a little thing, but that's an important thing in terms of building the culture.

• 53:40David Weisburd?

  You've now built this organization over 17 years. What are some of those learnings over 17 years in terms of how you would have accelerated the growth of your business?

• 53:48Speaker 01

  Certainly, our timing was good. We started at a time where credit was cheap and really interesting, and there were great things to do. We started at a time where investors were disappointed in their incumbents. And so we tried to do things different and better, tried to be more flexible. I think that we are very deliberate now about who we hire and to make sure that they are a cultural fit. And look, there are other criteria that obviously cultural fit is important, but being smart and good and having a good track record at whatever your skill set is. I think one of the things that I've learned in the 17 or 18 years that

• 54:32Speaker 01

  we've been at it is if you make a hiring mistake, especially at a senior level, it can impact the entire ecosystem. So we take great pain, great care in making sure that we don't make hiring mistakes. And it means that the process is deliberate and thoughtful.

• 54:52David Weisburd?

  How have you decreased the error rate when it comes to hiring?

• 54:55Speaker 01

  We spent a lot of time. One of the things I've learned is when you're interviewing somebody and you get towards the end of a process and you ask for recommendations, people that you can call to check up on a person. No one in the history of interviewing has ever given a potential employer people that might say negative things about them. And so we have to be our own little private detective agency. And we don't ever want to put somebody in jeopardy in terms of having their employer know that they're looking for another job. But we dig really, really, really hard to make sure that we've hired the right person. And again, it's skill set, it's performance. If they're, for example,

• 55:40Speaker 01

  if they're a prospective investment team member, but at the end of the day overwhelmingly, it's about cultural fit. And like I said, if you hire somebody that is a square peg in a round hole, it permeates and it affects everybody around them, everybody in the organization. And so that's when I look back and think about mistakes. And again, we're in the risk business. So of course, we're making investments. We try to minimize our mistakes, but mistakes will happen. But mistakes around hires are things that have huge impact.

• 56:17David Weisburd?

  I've interviewed hundreds and hundreds and hundreds of LPs to say now over $10 trillion. And the number one thing that differentiates the top LPs from even the second and third quartile is the number of references that they do. Specifically off-list references, which is what you're talking about, which has references that are not given. But oftentimes, the top LPs will do 10, 15, 20 references per candidate because they realize that downstream of that decision, it's very annoying. Nobody wants to jump on 20 calls. AI and tools like that are making it slightly easier, but still it's extremely annoying. But the downstream consequences of a bad hire is if you think about it for 10 years, that's 3,650 days of.

• 56:56Speaker 01

  You're 100% right. And look, it can be cumbersome and making 20 calls instead of five calls. Again, not accepting the, you know, the reference list that the person gives you. It does take time, but as you said, the manifestation of making the wrong hire can cost dozens and dozens of cumulative hours of HR and legal. And then sometimes there are costs associated with a termination, especially if it's bumpy. And so the return on that investment in time, and by the way, it's not just reference checks. I think it's, we try to be creative about approaching the interview process. One of the things we try to do is to say, okay, well, you know,

• 57:41Speaker 01

  this person will focus on whether the person has a good cultural fit. This other person will focus on whether they're a good intellectual fit. Everybody has their.

• 57:52David Weisburd?

  Allows them to be more precise in their interviews.

• 57:54Speaker 01

  Exactly right. And look, the other thing that we try to do, and it's, the airplane test is important, right? Like, we want to hire people who you'd want to be on a transatlantic flight with, sitting next to, and you wouldn't be unhappy to be spending five hours stuck sitting next to on a plane with. And so that means it's not just the reference calls. It's investing the time to have lunches and dinners and breakfasts and drinks and making sure that they meet a bunch of people. Because at some point, if there's something just a little bit off, oftentimes you see that in a social setting. So investing that time is important, especially because we care about culture as much as we do.

• 58:35David Weisburd?

  If you go back 35 years ago and give yourself one timeless piece of advice, what would that be?

• 58:41Speaker 01

  The advice I would give to young Steve Ketchum is if you're feeling, and I always think even from a young age, I felt entrepreneurial that I wanted to sort of take some risk and create my own culture and build something. And so I think the advice I would give to my younger self is if that's who you are and that's what you want to do, then do it and do it earlier. And I have a lot of friends who have built businesses, many in the asset management business, but also other businesses as well. There's not one person who I know who did what I've done, built a business, who hasn't

• 59:21Speaker 01

  said, if I knew how much fun this would be or this has been and how challenging and exciting and intellectually challenging it would be, I would have done it earlier. So that's, that's the advice I give to my young self.

• 59:35David Weisburd?

  Steve, this has been absolute masterclass. I really enjoyed this. Thanks so much for taking time.

• 59:39Speaker 01

  Thanks so much for having me, Dave.