E241: How Spirits Became a $1 Trillion Alternative Asset Class

How do you turn whiskey barrels into an institutional asset class? In this episode, I sit down with Giuseppe Infusino, Chief Investment Officer and Managing Partner at InvestBev Group, to explore how a real asset like aged whiskey is quietly becoming one of the most uncorrelated and profitable investments in alternative markets. From his early years at RVK advising multi-billion-dollar allocators to managing institutional portfolios in a niche category few understand, Giuseppe shares how InvestBev has built an entirely new asset class from the ground up. We discuss the economics of whiskey aging, how barrel pricing creates asymmetric returns, and why alcohol performs differently across economic cycles. This conversation breaks down incentives, alpha generation, and how to educate LPs on emerging strategies long before they go mainstream.

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

• 0:00David Weisburd?

  So you're the CIO of Investa. We'll get into that in a bit. But you started your career as an OCIO at RVK. Tell me about your experience working at RVK.

• 0:10Speaker 01

  Yeah, that was a great experience. I worked with some really intelligent people who taught me a lot about investing. They always set the foundation for kind of how I thought about things as an investor. And one of the things that I thought RVK and did a really good job of, especially the folks that I worked with, was thinking about things a little bit differently than the broader institutional investment community, especially from the consultant's side, where there was a lot of pressure to invest in big names. Pension plans want to align with what other pension plans have done, simply because it didn't really put their neck out on the line. If you follow people's incentives, you'll see what they do. And the consulting community oftentimes isn't incentivized to really search for the best and brightest.

• 0:53Speaker 01

  It's oftentimes reverted into the mean of the lowest common denominator of what others are going to do. And RVK was very different in that regard. Our team really wanted to differentiate ourselves by finding unique strategies that together created the diversification that maybe a go-anywhere, do-anything allocator fund could do, but with more precision. And typically, what we saw with experts and a specific focus is that you're sourcing better deals, you're adding more value throughout the deal, and you're exiting better. And that was a really important lesson that I thought was unique to the firm and the team that I was working with.

• 1:30David Weisburd?

  And you hear a lot of people saying that consultants or even larger allocators are not incentivized to find these best and brightest. They're incentivized to go after the large brands. Can you double-click, really granularly, why is that incentive there? And maybe walk through that incentive structure from an individual at the consultant or an individual at a large asset allocation?

• 1:50Speaker 01

  For the consultant, you're proposing

• 1:54Speaker 01

  Investment opportunities to typically an investment staff who then has to propose those to a board. And if you as a consultant, which are paid on a flat fee based arrangement, if you propose something new, unique and different, if it performs well, you get no compensation for that. If it performs poorly, you're oftentimes could be considered a scapegoat there to the investment staff. Who the investment staff, if they kind of get in line and believe the story that's being sold from the consultant, then they are responsible ultimately to the board as well. And so if they are recommending something to the board that is kind of out there a bit and it doesn't work out, that's really that's putting their neck on the line and they're oftentimes not compensated.

• 2:36Speaker 01

  And there are structures that some groups have implemented to kind of avoid this a bit, but they're oftentimes not compensated for overperformance. But if you do have something that's a bit of a slip up, then you're going to be judged against that. And all of these institutional groups are judging their performance relative to their peer set, relative to benchmarks. And so as long as you're meeting or exceeding the benchmark, really that you just don't want to be below the benchmark, right? And that's going to put you at risk for your role and for the individual who's making those recommendations. There's not a lot of incentive for either the consultant or the investment staff to take those risks. And you see that bear out in terms of the portfolios that you see a lot of money going to these big allocators that over time are just hard for them to really perform, outperform.

• 3:20David Weisburd?

  If I was debt set to raising from consultants and let's say I was on a fund three or four, I wasn't KKR fund 17, what would I be looking for on as a counterparty from a consultant, maybe individual or firm that would signal to me that they are looking for the best and brightest and that they are willing to take a risk on an emerging manager, maybe a manager that just became an established manager, but still early on their lifecycle? What would be those one or two characteristics?

• 3:46Speaker 01

  One of them is that you could look at the track record of what they've already recommended, right? That would be, that would certainly be something that was a kind of telltale sign to the market for us that, hey, we were doing some more unique things. But I think that manager needs to think about how can I be a good partner here? How do I differentiate myself? And if you see a consultant that is open and interested in those things as a way of creating a customized relationship, whether that be fee reductions for first time closings or co-investment rights, like that investor that's trying, that consultant that's trying to find value add pieces above and beyond the contract of the strategy, they're thinking a little bit more about how to add value to their underlying investor.

• 4:28Speaker 01

  Because not only are you, are you trying to be a good partner for this, for this manager, but you're also trying to be a good partner for your underlying constituents, the staff and the board, by lowering the fee load and finding these additional opportunities to do co-investment. So those are just some simple ones, just thinking a little bit differently about, about allocations versus I know that pension plan ABC is in, you, we're already in this fund in a prior vintage, that seems pretty good, nothing has really changed, let's move forward with it with another allocation, which, which, you know, happens quite a bit.

• 4:55David Weisburd?

  What percentage of the funds did, did you and your team source directly out in the market? And how many were referred to you by LPs that were basically sourcing them and, and sending them over to you for diligence?

• 5:07Speaker 01

  Oh, good question. I mean, I would say 90 plus percent were self sourced by us. We really turn over the stones to find the new and interesting differentiated teams. So much in fact, that we would even think about going as far as finding a great group of people who are at a larger firm. And, and we talked about this at times, do we seed a spin out ourselves to create a, you know, we are the seed capital for this new firm, which would really incentivize that manager, obviously, to perform at their first time fund with us as the, as the main LP source. And so we never went that far, but that was, we even, that was something that was bad about.

• 5:44David Weisburd?

  So you went from working at an OCIO to investing in bourbon, quite the career arc. So tell me about that and how did that come about?

• 5:51Speaker 01

  So my partner and the founder of InvestBev, a guy named Brian Rosen, he and I have known each other for a long time. And we were out with our wives, we're, we're good friends, out one night. And he started talking about.

• 6:04Speaker 01

  His industry, which was alcohol, his family had been in the industry for nearly 100 years. It's a really fun story. They were actually the first liquor license in Chicago coming out of prohibition. So his family had been in the space for a really long time. And, and under his stewardship, after running the business for a long time, he had exited the business to private equity with his own personal and friends and family capital. He started investing in the alcohol space again. And he came to me at that dinner and said, look, you know, Giuseppe, I'm seeing deal flow. I'm very ingrained in this space. I think there's some great opportunities to invest. I think, you know, my own capital can only go so far. I'm thinking about raising a fund. And I said, well, Brian, you know, I know this world a little bit. I'm happy to help any way I can and, and kind of in a funny way said, well, why do you think I'm telling you about this? You know, I want to do this together.

• 6:49Speaker 01

  And, and so that's really how it started. And, and so the next step was, okay, alcohol as a category, we all know it as a consumer. Let's, let's talk about what you're actually doing. What's the strategy within the category? And you really, you really leaned into this concept of whiskey aging. And I kept kind of leaning in further and further on this because as I, as I heard about it, this aligns to some of the real assets kind of investing that, that I did in, at RBK, right? About real estate and infrastructure and all those things, timber as well. These barrels are this tangible, real asset that, that really had a lot of the same attributes that some of those other real assets had, but they had a really distinct advantage relative to those, those other things. Where the, the good itself was actually getting better over time, right?

• 7:34Speaker 01

  We all can go to a liquor store and see, you know, 15 year old Macallan is more expensive than 12 year old and so on, right? Those types of things are, are kind of universally known that the maturation of whiskey, you get a better product as time goes on. So, so that really got me thinking that there's some, some attributes about this category that were really compelling.

• 7:54David Weisburd?

  I spent a good half an hour going back and forth with ChatGPT, I even Googled, which is not something I do very often these days. I couldn't find the returns on bourbon. What are the historical returns on bourbon?

• 8:03Speaker 01

  The market by, some would say by design, is a bit opaque. But if you transact as much as we do, we have both our investment equity side and a credit side, which provides a lot of insights, you get a deep understanding of where pricing a barrel should be, finger on the pulse. And in our, in our years of doing this nearly over 10 years now, we've, we've had transactions and you've seen high times in the 40s percent IRR. You've seen some really, really outlandishly good returns. When you think about it as a tangible asset, you compare it to the Timbers of the world, which typically like a single digit type of a return, it's just, it's just no comparison. Now, I'd be remiss if I didn't mention that there are also times, like in recent years, where COVID has, has had an

• 8:48Speaker 01

  impact on the art industry and, and so forth. And so returns have come down, the price of barrels have, have, that appreciation curve has come down slightly. And so returns in some of our vintages are going to be in the, in the 20s, potentially even in the, in the high teens. And, and so, you know, that's really the range that you can, you can think about from, from a realistic outcome.

• 9:07David Weisburd?

  What is the correlation to the market? And how do you look at it? Is it also somehow correlated to equities? Does it have a beta? And how do you go about kind of ascertaining these numbers?

• 9:15Speaker 01

  We actually worked with the Kellogg, Kellogg School of Management here in Chicago. I just had them do a kind of a third party correlation analysis. It, it kind of, it certainly mirrored what we might anecdotally say is that people drink in good times and bad, right? It's a non-correlated category and the data bore that out. There was almost no correlation whatsoever with the S and P 500. There was no correlation with 30 year treasury, the unemployment, housing starts across the board. In addition to that, alcohol sales had a dramatically less, less volatility, right? Standard deviation was, was, was half in many instances and even, even less in others relative to these other categories. And so When you think about a category with an appreciating asset, tangible asset,

• 9:59Speaker 01

  limited volatility and limited correlation relative to the other things in your portfolio, that really became compelling to me and I thought would be compelling to the investment community because that's, that's one of the reasons why you invest in alternatives, right? At the end of the day is you want something that behaves differently and complementary. It doesn't all zig when everything is zigging. You want it to, to at the very least not zig and potentially zag, but the alcohol industry just being so steady is, is a really compelling piece of this to me and to our investors.

• 10:27David Weisburd?

  There's this whole, there's this whole asset allocation of diversifiers. Typically it's hedge funds that are uncorrelated to the market and typically these have lower returns, but add diversification to the portfolio because they are uncorrelated. Is this the bucket that it would fit into, to an endowment or a pension fund? Or where exactly, from first principles, where exactly should investors fit something like bourbon or alcohol in their portfolio?

• 10:49Speaker 01

  The one thing we talk about a lot with investors when we work at the institutional level is those that have really rigid buckets that they need to fill across, across their allocation, struggle with where do I put this? Right? And I would argue that it does fit in a real asset bucket. That's certainly one opportunity or one, one way you can go if you have that. Some folks have just an opportunistic bucket. I, I don't know if the, the risk profile of what we're doing is as high as what was typically in an opportunistic bucket, but we almost have to meet the investor where they are and say, what is your investment profile and portfolio look like? And how can we think about what we're doing and where it might fit? And honestly, it doesn't fit for, for, for a lot of folks, but those that are more nimble

• 11:33Speaker 01

  in their asset allocation and can be a little more open-minded because you don't, you don't start the day with an allocation to whiskey in your portfolio. We have to as a firm convince you that this is a category that, that is interesting and that it does fit as opposed to finding where it was already preordained to fit.

• 11:49David Weisburd?

  You know, there's only a handful, probably half a dozen funds that invest in this entire space. So a big part of your job is educating the market. How do you educate the LPs in a, in a process? And how do you get that second and third meeting? Like what's the art to that?

• 12:05Speaker 01

  You start with, what, what is the, what is the category, right? That we're talking about. If it was real estate, right? They already have an allocation to real estate, but you might have to be more specific and in a particular category. So you need to get into the details of multifamily, right? You need to sell the category in and of itself. What are the underlying? Dynamics and characteristics of the category that make it compelling. And that's where we start with alcohol. We talk about the size of the category, you know, trailing dollar category. You talk about the correlation to other categories. We start with that to say, okay, this is big enough to really think about. This is compelling enough to dive a little bit deeper. And then the next step is kind of what is the strategy, right? With which you're capitalizing on the opportunity. Because first you've got to solve on the opportunity of the category.

• 12:50Speaker 01

  And then you have to sell, how do you capitalize on it? And so that's when we get into the whiskey barrel, specific characteristics, et cetera. And then from there, once they get a good grasp of this whiskey aging component, then you have to talk about why us, why are we the ones to do it? Right? So it's a three-part journey in my mind. And to be honest, the first of those is honestly typically the most difficult. Once you get to now you've bought into this, I've been open to the concept. The strategy on the bourbon barrels is really compelling. And then you talk about us as a firm. To your point, there's very few people who do this aside from us. But our whole team, aside from me, comes from the beverage industry, right? Aside from my partner who I mentioned, we have folks from Bacardi, Molson Coors, et cetera.

• 13:29Speaker 01

  And that really differentiates us from a relationship basis to buy and sell barrels differently. And to the point I made earlier about sourcing better, adding value, and then exiting better. If you have deep industry relationships in our category, which we do, that really sets us apart from, no offense from anybody who lives in New York, you know, flying in from New York and just doing this as part of a larger hedge fund strategy, or whatever the case may be, it's very different. And that's how we think about it.

• 13:56David Weisburd?

  A lot of people, for whatever reason, don't think of asset managers as traditional businesses. I like to think of them as businesses. And the way I kind of think about it is you have to pick your hard. So it's very hard to be in a hyper competitive market. And it's also very hard to educate a market to go through all that. But there are these huge rewards for people that start markets.

• 14:15David Weisburd?

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• 14:58David Weisburd?

  It's two funds that come to mind. Arcto started the first sports fund in 2020. I believe they're today at about 9.9 billion as of January 2025. Blue Owl, which was named dial at the time, started GP stakes for the first few years. It was incredibly difficult for them today. Today, they're a part of Blue Owl, which is roughly 284 billion. So it's the, some of these businesses, it's the education, the first mover advantage. Although it's very difficult, that's what leads to these like unique asset classes. Same could be said in venture. Andreessen Horowitz had to popularize this idea of founder friendly. We're going to give feedback to founders. We're not going to treat founders poorly. And it took a while to kind of scale up for them. I think their first fund, if I'm not mistaken, was roughly 200 to 300 million dollars.

• 15:42David Weisburd?

  So I think you pick your heart and there's different dynamics. But there is no free lunch. Same to your execution sourcing, like that is your alpha. The reason that's sustainable alpha over several vintages is because you can't just come in. It's not just financial trade. Everybody wants that financial trade, but they don't want to capture a beta. They, they want to capture alphas. So I think you have to think about alpha, not only as today, but how do you sustain that alpha over several vintages?

• 16:04Speaker 01

  It's an incredible way of thinking about it, right? Pick your heart there. And, and I certainly, we've experienced that over time. There's certain people that, that immediately get it. And there's certain that just need a lot of convincing and some you'll never convince, right? To do something different until they see, you know, decades of experience and then, and then I say it'll be too late, but you'll, you'll certainly be behind the curve of getting exposure to categories that, that really could generate, you know, returns that you're not getting in other places with managers that you want to be aligned with, right? Andreessen Horowitz, for, for instance, right? If you passed on that years, years ago, and you said, okay, now I've, now I'm bought in, I'd love to have an allocation there. Well, good luck, right? It's, it's one of those things that, that they're only working with existing investors typically. And so, um, you know, you don't want to say books are going to miss the boat, but, but there's, you will certainly from a return perspective, and you may just, you know, not be able to get access to that manager.

• 16:49Speaker 01

  You see that with others in venture, Sequoia and so forth. Like it's just becomes, becomes difficult and very sought after one, once everyone's bought in. Going back to that point we talked about earlier, right? Once there's, there's comfort in the masses. From from others investing, you start getting a snowball of commitments.

• 17:05David Weisburd?

  Do you find that the early adopters, the Clay Christensen Innovator's Dilemma, the the early adopters and going back to the laggards and the conservative investor, do you find that that's on organizational level when it comes to LPs or on an individual level, or is it some combination of both? And if both, then how would you allocate kind of 100 points across the individual versus organization?

• 17:26Speaker 01

  Ultimately find at the end of the day that the individuals who think that way gravitate to the organizations that think that way, right? Because if you were if you were that have that entrepreneurial mindset and want to do things that are new and different, you're going to get stifled over time at an organization that doesn't doesn't think that way. And you're going to either go start your own thing, or you're going to find an organization that that does accept that mentality. So it's certainly driven by the individual at the end of the day. But I think the the individual drives the organization and they have to ultimately be aligned for for anything to get done.

• 17:58David Weisburd?

  Tell me about the economics of alcohol production. How does what does that look like?

• 18:02Speaker 01

  We'll we'll use spirits here, right? Because it's different across different categories in alcohol. When you think about beer and wine and so forth. But and I'm going to use rough numbers here, just in terms of these costs, and they vary. But if you think about whiskey, right, a barrel, the wood itself is going to cost roughly 250 bucks. And then you think about the grain and the labor and all those things, another 200 $200. So then you you have a roughly 450 cost basis as a distillery. If we as a firm buy that barrel for 750 bucks, and we bought barrels for more expensive or less expensive than that, less expensive today, which is great. But that's roughly a 40% margin, right? So now we're talking about a margin of 40%. We hold it for four years, let's just say on average, and we sell it to a brand for $2,000. And again, we've sold

• 18:45Speaker 01

  four year old barrels for more than that, and at times even less than that. But if you think about those numbers, if you bought it for 750 and sell it for 2,000 in a few years, it's a 27% return, which is kind of in line with with what our fund is projecting. So now you have a $2,000 barrel of whiskey, and you're going to get

• 19:03Speaker 01

  Anywhere from 250 to 300 bottles out of that barrel. And so now you're talking about $7 a bottle. So then you take $7 a bottle and you add that into, uh, you add in the, the bottle itself, the label and all those things. Call it $10 for cost of goods to the, to the brand. That, that brand is going to sell it to the distributor for, let's call it $25. So they're getting, they're getting their margin. Then that distributor is going to have to sell it to the retailer and they're getting their margin. And then that retailer has to sell it to you as the consumer and they're getting their margin. And so all in that, that liquid that costs $7 a bottle is probably ending up on the shelf for $50. All in, when you, when you, when you layer in all of those, those pieces of the ecosystem in the alcohol industry.

• 19:49David Weisburd?

  So that's a lot of, a lot of middlemen.

• 19:51Speaker 01

  Lot of middlemen and, and the, the whole three tiered system. And we can, we could have a whole conversation around that. It came out of prohibition, but there's pros and cons for that. But for those who can navigate it well, it creates advantages to, for scale. And for those that can't, it creates hindrances and, and really blocks the ability to grow brand. And so the fact that we have a team that knows that space very, very well. And, and you know, decades of experience there, um, is, is incredibly helpful for us as a, as a group.

• 20:14David Weisburd?

  You started your first fund in 2015. You're on your fifth fund. What have been some of the lessons that you've learned over the last decade on how to start and scale a fund manager?

• 20:23Speaker 01

  People are important in every business and having the right people on our team has, or, or early, in the early days, just not having as many people or, or the, you know, as really my partner in the early days. I think that can limit your ability to, to execute and to scale. And so if you, if we had a crystal ball and kind of knew where the world would go and knew, um, how investors would, how this would resonate with investors, I think we would have, we would have invested even more upfront. We would have built a bigger team, we would have built bigger, more resources and we would raise more money earlier. Would, would probably be, uh, one of the lessons that, that, um, that I see because.

• 21:03Speaker 01

  One thing that we really found ourselves thinking about is our first institutional fund was our Fund 2. The first fund was really friends and family capital that predated that. When we came in the market in the middle of COVID in 2020, we didn't know how the market would react to a alcohol-specific fund, etc. And so we came up with a pretty small fund, and we ended up being oversubscribed, which was great, right, for the fund. But then you find yourself in that dilemma of now I have to go sell my second fund. And I think about my consulting hat, bringing that back on. You don't want to see a fund make too big a jump between Fund 1 and Fund 2, Fund 2 and Fund 3. So now we're sort of anchored to this smaller fund size that we've been building on over the years. And now we're to our Fund 5, which is still relatively

• 21:48Speaker 01

  small comparatively to some of the names we've talked about. But now we're big enough to really be on the radar of some of the larger.

• 21:54David Weisburd?

  Let's assume that a Fund 1 is 100 million. What's an acceptable Fund 2, Fund 3? And what's taller role, for lack of a better word, by institutional investors? And what do they like to see in terms of fund size over time? And how much is that impacted by the strategy itself?

• 22:10Speaker 01

  We've been doubling that. That's palatable to folks, even though it's a bit of a, not a bit of a, not a stretch, but I mean, it's like a slight stretch. You don't want to see this dramatic increase. But a doubling has been what we've done from Fund 2 each time. So we're at about a 250 million target here for our Fund 5. So still on the really small end of the spectrum. But now you think about from the institutional perspective, there's a couple of things that have historically been limiting factors for the very large institutions to look at us and really have, we've gotten past now, which is great, is that if you're writing a very large check, now we're to the point where in the most recent fund, we have an anchor that's a $100 million check, which is great. And we have a couple of others that are 15, 20 million dollar checks. And so that that snowball is starting to really roll, which is great.

• 22:54David Weisburd?

  Going back and putting on your RVK hat, I've heard of this kind of doubling as an acceptable kind of speed limit. But you do see some people that triple or even quadruple. What are some leading indicators of a fund that's allowed by their institutional investors to grow faster? What's necessary?

• 23:11Speaker 01

  If you can prove. That you're not having scope creep in terms of what you're doing and doing it differently. And to say that maybe there were deals before that you had to syndicate and now you can take more of that deal. I think that that's really compelling as a story to say, well, just we're just going to take more, more of any individual deal, which gives us more pricing power as being the, the sole capital or more of the capital. If you add to the team and you have more capabilities, right? I think that's also something that can be pretty compelling from a, from a investment community perspective. And then if you, then if you just have great returns, right? If you have great returns doing what you're doing and you say, look, we've had to turn down a lot of deals. And this is what we're, this is what we've done historically, which we've turned down tons of deals. But we're going to keep doing exactly what we're doing, we're just going to do more of it. That's believable versus I was buying, investing in oranges before, and now I'm investing in Cadillacs.

• 23:56Speaker 01

  It's a hard time for me as the investor to look at you with a, with a straight face. And I say, I believe you can execute on this totally kind of diverse strategy for what you've been doing.

• 24:03David Weisburd?

  Even better than that would be having co-invest. So let's say you had a hundred million dollar fund, 200 million dollar co-invest. How do you know that you could have a 300 million dollar fund? Well, if I had done the co-invest in the fund, then I'd have 300 million. I know this sounds kind of oversimplified, but that, that is a way to almost empirically prove the investable universe.

• 24:21Speaker 01

  Yeah, we definitely.

• 24:22David Weisburd?

  A lot of GPs, as they grow, private equity funds want to at some point start a private credit franchise. When does institutional investor market allow that? When do they want it? And what's your right to start a credit fund? How do you know that you might be approaching that?

• 24:37Speaker 01

  I think credit is very different, right? Than traditional, maybe like it's in private equity or venture or something like that. I mean, private equity specifically, right? It's just very different than, than private credit. So in my mind, you need to port it over a whole team from someplace to lead that strategy. I don't think you could say this, this group can necessarily do something different. Now, in, in the example of InvestBav, the thing that, that is a little bit unique is that what we do on the barrel side is, is essentially inventory financing, right? Because a brand who doesn't want to buy the barrel today. Is waiting until it's aged and buying it from us. And the reason they don't want to do that is because they don't want this inventory being on their balance sheet for four or five years. So they're waiting to buy it from us when it's older. We're essentially doing inventory financing.

• 25:20Speaker 01

  So for us, we are working with the same parties. We're solving the same problem and we're just doing it in a slightly different way. If we bring our private credit solution to the market, which we have and we've put a decent amount of money to work on that side of what we do. Because a brand could either wait until the barrel, then the liquid inside the barrel is fully aged and just buy it at that point. Or they might want to take some chips off the table, have some risk appetite to have the barrels slightly earlier in the aging process. And if they do that, instead of doing it with 100% equity, they can do that with 40% equity and 60% debt. And why we are very well positioned to do that is because if we were to take those barrels back, we have a whole side of the business that does that on a day to day basis. So we know what to do with the inventory. So we know how to underwrite that collateral.

• 26:02Speaker 01

  We know how to sell that collateral if we actually had to liquidate and again, solving the same problem. So, so our story, we think is a little, much more kind of the, the jump feels less of a jump and more of a step, right? For us, but I think in the broader community, you really have to have a compelling story as to why you have a right to win on the credit side. We obviously we do, but you know, it is a hard story to sell.

• 26:27David Weisburd?

  I want to double click on something that you said was very interesting, which if you had known the demand for the asset and for your fund, you would have invested more money upfront. What are those some low hanging fruits that are, that you could have invested money in that would have helped you accelerate your franchise?

• 26:44Speaker 01

  We would have put more on the operations side on our team, just buying and selling actual assets is, there is some operational intensity there. That if you, if you have those resources internally, you just remove a lot of the friction of, of those processes, just kind of explaining it in kind of mundane detail, right? But like, if you are buying a barrel from me, I have to. Get a sample sent to you. You have to agree that you like the sample. Then we have to send you sale agreements, invoices, all these different things. Then we work with the, the storage facility and it transfer over from my account to your account. Change, there, there's a lot of steps in the process that can just really slow things down. If you don't have dedicated resources focused on that, um, that just kind of gets you stuck in the muck a little bit.

• 27:29Speaker 01

  And, and we saw a lot of great buying opportunities. So if we had more capital, um, and, and the team to kind of uh, execute operationally in the early years, we could have bought barrels at prices that were, that were attractive in the, in the 2020 timeframe. And that would have set us up or even earlier, um, that would have set us up to have larger funds that had more, more barrels at better cost basis in those funds.

• 27:49David Weisburd?

  What are some hires, investments in technologies or things that you wish you would have done Fund One or Fund Two that now are painfully obvious and just accelerated your franchise?

• 27:58Speaker 01

  So behind the scenes, a lot of what we do from a valuation perspective and where we see the intrinsic value of a barrel today and where, where that barrel is going to be valued in the future is based on other factors that are going on around just the barrel itself, the inventory that exists at that time, demand at that time, all these different things. And had we brought the rigor in the, in the very, very early days to

• 28:23Speaker 01

  to identify how all those factors interact, get more precise on pricing. I think we could have been even more aggressive than we ultimately, uh, were. So I think that would have been great. I think if we, then you build this model that, that tells, gives you, gives you insights, but all models, right? Across AI to, to, to bourbon, it's all about the input, right? What goes into the model? And so if we had spent more time working with some of our peers in the industry, gathering data too, that would have fed the model and to be even more precise in the earlier, earlier days, uh, that would have been, that would have been really interesting. Uh, we have gobs of data now, right? Over, you know, 10 years of operating, but I think there could have been some interesting collaboration efforts with, with, you know, there are tons of other players out there, but other players, um, and

• 29:06Speaker 01

  that, that both of those things would have been something that if you had to do it over again, I would have spent more time focusing on in those days.

• 29:11David Weisburd?

  What's the single best piece of advice or feedback that LP has ever given you?

• 29:15Speaker 01

  No one, no, no investor is ever upset about returning, you returning their capital.

• 29:21Speaker 01

  That was one of our investors because we I had a conversation with a family office that I've known for a really long time, all the way back to my RBK days. And I said, look, you know, we bought some of these barrels.

• 29:33Speaker 01

  A year ago and we're getting offers to sell them and we get a nice IRR. But, you know, I'm, I'm thinking about this from a multiple perspective and want to deliver on that side of it. And the response was just, I understand what you're saying. I think investors really do want multiples, right? They want real dollars, but if you see a good trade and you can return money to investors. No one is going to look at you cross-eyed for that. No one is going to be upset about getting, getting money back. Now, I will say in the institutional world. That it does become a problem sometimes, right? Because you make an allocation, you go through a whole.

• 30:07Speaker 01

  You know, process to get approvals, et cetera. And then all of a sudden, money comes back quicker than you anticipated in a pacing study or what have you, then you have to go through and make a new allocation. So it does need to be a little bit balanced. I think there's like an asterisk on that point.

• 30:17David Weisburd?

  I would even put it to the extreme. I invested in a company seven, eight years ago. It's not doing well, to be nice. And I, I found a way, a secondary to get my investors back their money. And I was very apologetic. And I had multiple, especially the, the most. The most institutional and most experienced LPs were like really patting me on the back. They're like, look, you don't have, you don't get any economics here. I really appreciate all the work that you did here. So even when you return 1X over seven, eight years, especially in venture, and certainly that's not what, what you underwrite the investment to, even that itself could be a positive to your LPs.

• 30:49Speaker 01

  Yeah, a hundred percent. And I was just at a conference earlier this week. And this has been a theme in many of the conferences over the last, and just in the broader kind of investment community about. The tie-up of capital. Across investors in private equity and venture and so forth, and that being a. A linchpin in the, in the, in the, in the ecosystem here of we need that capital to free up. To make new investments, to kind of keep them, keep the kind of machine running and it's, and it's tied up. So, you know, just getting that capital back. Can really be. A good thing, even if you're not maximizing returns to your point, there's there's something to be said for for money back in your pocket.

• 31:25David Weisburd?

  I went to karaoke last night with 20 LPs and without outing the LP, one of LPs made a rap about DPIs. So I think that's a good sign of where where the LP market is today.

• 31:35Speaker 01

  That's a that's a that's a hidden talent right there.

• 31:37David Weisburd?

  It was it was a great, I'll keep them anonymous. Those is is a great is a great is a great rap. How are you using AI today?

• 31:44Speaker 01

  One thing we're using it for is just broadening our reach in terms of research on who our potential customers are on the barrel side, who our potential counterparties are. You can you can do, you know, each barrel has what's called a mash bill, which is just essentially the recipe of proportions of grains, corn, wheat, rye, malted barley. And you can, we've used, you know, AI to say which invest, which brands are using this type of of of liquid, right, of this type of bourbon. So you, we know many of these brands, we have relationships with lots of them, but just there's there's thousands of brands in the whiskey space alone in the United States, things like 4,500 brands. And we don't have that reach, right? And you use those tools to to find that information and broaden broaden that kind of outreach,

• 32:27Speaker 01

  looking at it from a trend perspective, to think about kind of how can we be thinking about what's coming next from a from in the alcohol industry, right? If if we would have been able to been thinking about this 10 years ago, or maybe a little longer, somehow predicting hard seltzers, right? Now we have hard teas, all these different things. We continue to spend time talking about and and and toying with AI to try to help us unearth some of those trends.

• 32:54David Weisburd?

  Yeah, we're still trying to figure out how to best incorporate AI. One one thought experiment that we look at it as kind of a third person in the room. You literally could turn on ChatGPT while you're having a conversation, have ChatGPT chime in at the appropriate time, almost as a third partner, as somebody that could provide more context. So it's still evolving every day. And and as the AI gets better, I think that's going to evolve as well.

• 33:17Speaker 01

  So taking that step further, using it as a as a contrarian kind of counterpoint. So kind of to the third person point that you're mentioning, but really, you know, when we, we haven't talked much about the other side of our business on the the brand side. But, you know, if we're making a A business case that is worth making an investment in a particular brand, you can use AI to poke holes. What aren't we thinking about? Contradict or contest some of the points that we're making in our assumptions here or in our business case.

• 33:41David Weisburd?

  So take it a little bit less personally when it's AI versus individuals.

• 33:44Speaker 01

  Yeah, exactly. Yes, that's true, right? You do get some groupthink sometimes as a team and people don't want to necessarily always fight against someone who's super passionate about something. And so you get an inanimate being, kind of being the one that says, you guys are missing something pretty glaring here. That can be really useful.

• 33:58David Weisburd?

  Goes full circle to the incentives we talked about in the beginning of the interview. Well, just looking forward to continue this conversation live and thanks for doing a full breakdown on the alcohol space and how you're going about investing.

• 34:10Speaker 01

  Yeah, no, really enjoyed the time, Dave. Appreciate it.

• 34:12David Weisburd?

  Thank you.

• 34:12David Weisburd?

  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 it valuable or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your continued support.