E188: The CAZ Way: Alignment, Access & Asymmetric Upside

Mark Wade leads strategy and investments at CAZ Investments, a Houston-based firm managing approximately $10 billion in assets. In this episode, we unpack the evolution of the alternatives landscape, the rise of evergreen funds, and what it means to lead with alignment—starting with $700 million of insider capital invested alongside clients. Mark gives a candid look at how CAZ sources differentiated deals, manages risk through the “CAZ Case” downside model, and builds trust by investing alongside 7,000+ LPs. We also dig into how the firm leverages NAV-based leverage, the growing appetite for alternatives from RIAs, and why humility is essential when allocating capital. If you're an allocator, an advisor, or simply trying to understand where private markets are headed, this episode is packed with insights from one of the most thoughtful voices in the space.

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

• 0:00David Weisburd?

  Tell me about where CAS is today as a business.

• 0:02Speaker 01

  We have kept to our roots of how we started as an investor of our own capital. So this firm was founded back in 2001 to invest on behalf of Christopher, who's the founder, and a select number of shareholding families, primarily here in the state of Texas. Still with a focus on what we want to do with our personal capital, but also bringing in other investors, investment advisors, institutions and the like. And so today, we're about $10 billion or so in assets under management.

• 0:29David Weisburd?

  So you work with RIA channel. So you have these 500 firms and their underlying investors are investing into CAS instruments.

• 0:37Speaker 01

  We started primarily working with direct investors themselves, high net worth individuals, family offices, institutions. And we still do, we still have a lot of those investors. But but more and more, the focus has shifted for the firm on cultivating strategic partnerships in the investment advisory channel. We feel like we have an advantage there because we are those investors. This is about what we want to do with our personal capital. We are high net worth individuals or acting like them. And so we feel like we understand the challenges that they face. We feel like we understand the opportunities that lie in front of them. And we feel like we're uniquely equipped to bring a differentiated offering to them.

• 1:17David Weisburd?

  What keeps RIAs up at night today?

• 1:20Speaker 01

  I think it's about differentiation. And if you follow that logic through, it's about either growth or survival. And you could look at it either direction where you could say, okay, as an investment advisor, if you're not growing, you're dying. And so I think a lot of those investment advisors are thinking hard about, how do I protect the relationships that I have? How do I get more business from them as those pies expand? And how do I go out and acquire the new client that I've been working on, that I've never been able to get in front of, never been able to differentiate myself for? And so I think it ultimately comes down to differentiation. The reality is for most investment advisors, the way that they differentiate are relationships. Because most firms are investing in a lot of the same things. I mean, everybody owns the mag seven, right?

• 2:05Speaker 01

  In that regard, so you can't differentiate yourself saying, I can help you buy Tesla stock. That's not the way it goes, or Facebook or whatnot. But an area of differentiation would be alternatives in private markets. And so I think a lot of investment advisors, particularly those that are focused on growth, particularly those that are trying to go out and do something different than what they've done in the past. They are, they are very focused on curating interesting opportunities in the private markets for their clients.

• 2:32David Weisburd?

  How much of this is driven by the high net worth, which is typically defined as five million plus, asking for this differentiated product versus kind of advisors pushing this product to high net worth?

• 2:44Speaker 01

  I, I think it's definitely both directions. It's never all one thing or another, so I'd put it on a spectrum. They're very rarely, because this isn't a direct to consumer market, right? I do think eventually we'll probably see like a Blackstone ad on the Super Bowl or something like that, which would be kind of funny, but, but we're not there yet. So most individuals, an entrepreneur who sells their company, but they do come in and they say, what do you got that's different? What's, what, what's something else that I can invest in other than, you know, the traditional markets, which most people, most people are familiar with. They follow public companies, they follow public stocks. And so, so they're familiar there, but they're not familiar in the private markets. And so, so they're not being ultra selective from the investor side of this saying, this is what I want to invest in. They're saying, I'm looking for something that's different. I'm looking for something that's unique.

• 3:29Speaker 01

  What, what can you offer me in that regard? And then, and then again, going to, going to the advisor side of the equation, from a top down perspective, those advisors that are being very thoughtful around what they're curating for their, for their clients, those are the ones who go out and find them, search the market, find those opportunities and bring them proactively to their clients saying, hey, we think this is something that fits in your portfolio for these reasons. That's when the relationship I think is most healthy. The part that would concern me would be if I'm an investment advisor. And I assume because my clients aren't asking me for this, that they're not asking someone else and they don't want it. I don't think that's the case. I think typically speaking, you know, clients are always looking for unique and differentiated investments.

• 4:14Speaker 01

  They just want to understand more about why they should do something different than what they've done before.

• 4:17David Weisburd?

  And if they don't have a point of view, if they're at a cocktail party and another advisor is telling them something and teaching them about a new space. That's a way for them to potentially lose their client.

• 4:27Speaker 01

  Yeah, ultimately, it's about conviction, right? For most clients, the investment advisor is the investment committee. It is the decision maker of what they want to invest in. And so clients are looking for advisors to come to them with conviction. And in order to have conviction, as I mentioned a moment ago, you have to do the work to really understand what the market looks like, what the opportunity set is, why one versus another. But conviction, conviction is the part of all that I think a lot of people are lacking because they just don't know. They don't, they don't.

• 4:58David Weisburd?

  If only that's where all conviction came from.

• 5:02David Weisburd?

  Very different financial ecosystem. Want to talk to you about the trend of the independent advisors versus the wirehouses, JP Morgan, Goldman Sachs. Tell me where that stands. Are independent advisors still growing considerably faster? Or are wirehouses somehow coming up with new products in order to counteract that and potentially even take back market share?

• 5:27Speaker 01

  Look, this isn't a static market and I think both sides of this equation are going to continue to grow. So I think that there's always going to be a place there for private banks because they do a good job in that regard. Otherwise, people wouldn't hire them to do so. That said, when you think about those, the largest, most sophisticated advisors, particularly those that are focused on the next 20 years as opposed to the next maybe five to 10. It's really a one-way path for those people from leaving wirehouses and going into the independent channel and working for themselves or doing a partnership with some of the staking firms out there or some of the platforms that'll help them set up their business. And I don't think that's going to change because they want to have control and they want to have independence. They don't want to be told what to do, where to do and how to do it. They want to serve their clients.

• 6:13David Weisburd?

  Let's say I'm a high net worth individual. Is there a certain use case where it's highly rational for me to be with a wirehouse? And is there something that the wirehouses are providing that independent advisors simply cannot provide?

• 6:25Speaker 01

  I see it a lot where when people are hiring their first financial advisor, they end up going with, you know, one of these larger institutions because they're brand names, they're recognizable. And it's not just your wirehouses, but also, I mean, I think of that, I think of, you know, Merrill and Goldman and Morgan and whatnot. But there's also your Ameriprise's, your Lincoln Financials and of the like. And I'd put all those together where you can have simplicity. I mean, you put yourself in their position. If you've run a shipping company in your hometown for the last 30 years and your family sells it, and all of a sudden you come into money and it's 10 to 20 million dollars, and you have no experience with this whatsoever, but you understand that there's a level of

• 7:06Speaker 01

  complexity around investing the money, borrowing money, getting mortgages, managing trusts, all that sort of stuff. You know, the wirehouses and the private banks, they do a pretty good job of wrapping their arms around that client and giving them a solution to all of those questions. But especially if you're put in a situation where you don't have any experience with this beforehand, I think that's a great mechanism to step into. Now, there's a lot of RIAs that we know that do a great job of that as well. I don't mean to say that they don't. But I think that there's a brand recognition that goes along with these big institutions where when you have that first moment of a liquidity event, you're very protective of it. You're going to go more likely than not with a bigger name. And then

• 7:48Speaker 01

  as you go along, you might start to realize, hey, it might make more sense for us to do some aspect of our business with those banks, some aspect of our business without them.

• 7:58David Weisburd?

  It's kind of like a twist on the you don't get fired for hiring IBM, except it's you're hiring somebody for yourself. So you can only do so poorly hiring a well-known brand. So it's kind of like a safe choice. So when I asked wirehouses or independent IRAs, you said both are growing very fast and the entire space is growing fast. Alternatives is growing extremely fast. What are the confluence of factors? Maybe you could double click on why are alternatives growing so quickly?

• 8:25Speaker 01

  I think it's a general awareness. They've gone from being in the background, associated with frankly, like esoteric ideas into, like I said, we'll probably have a Super Bowl commercial here of some, one of these big publicly traded.

• 8:42David Weisburd?

  Maybe Cas will have one. My Blackstone.

• 8:45Speaker 01

  Who knows? So I think it's, I think it's this movement from the background to the foreground. And I think it's because the, the educational process has really improved. First to the financial advisor so that they understand a lot more. And then from the financial advisor to the clients themselves. If somebody doesn't understand something, they're not going to invest in it. Right? And historically speaking, the understanding and the knowledge base was concentrated in institutional investors. You're talking endowments and foundations and pension funds and insurance companies, sovereign wealth funds, and then certain financial institutions, right? I mean, alts have been around for a long time and, and private banks and investment advisory firms, multifamily offices and whatnot have been investing in them for a long time. But we're talking about a proliferation at a scale that hasn't happened before.

• 9:29Speaker 01

  But, but it's really only just begun. I mean, there's a lot of statistics about this out there. So I'm not going to try to claim one specific number, but most of the data that we've seen indicates somewhere between 3% to 5% of global wealth on the wealth channel is in alts. That number is going to go higher simply because it's easier for them to invest in it from a regulatory standpoint, which is something we can talk about today. But more so the structures that are available for investors to be able to access have really improved to solve for some of the questions that investors have. They're not perfect solutions. And then there's that educational process that's more robust. The returns, that's the easy part, right? Relatively speaking, because people look at these returns that they see and they're like,

• 10:10Speaker 01

  man, I can accomplish a much higher rate of return by taking a private illiquid version of largely the same type of an investment by just, you know, going into the private markets.

• 10:21David Weisburd?

  There's the awareness, there's the pipes and rails, the different platforms. There's also the regulatory aspect which you brought up. What exactly from a regulatory aspect is making it easier for high net worth? Not non-accredited, but high net worth specifically to invest into alternatives?

• 10:37Speaker 01

  I think it's a general disposition by the administration. And the current administration here in 2025 has been very active in this. But I want to give credit where credit's due. This was, there was an element of this that was starting before the current administration took over, where there was an effort to start opening up the aperture for more investors here in America to be able to access private markets. But it's really taken off in force, where now it's a regulatory issue of like what constraints and what rules are going to be put upon private fund managers, how to run their business, you know, which are good. We need rules.

• 11:19Speaker 01

  Freedom is not the absence of rules, but it's the presence of the right rules at the right place to allow for all parties to flourish. So we're a big believer in freedom here. So that's our stance. That said, unnecessary burdens around reporting and what you're asking people to do. By nature of investing in a private fund, you're assuming that people are doing additional work in order to invest into it. And so you can't require private fund managers to do the same thing that public companies have to do. Otherwise, you end up with the same type of friction, the same type of administrative burden that public companies have. And the reason why people don't go public is because they don't want to deal with all of those things.

• 12:01David Weisburd?

  One of the things I really like about CAS is that you guys invest your funds and your clients' money the same way. And the way that you frame that is you're trying to solve different types of problems. What are the different types of problems that you're trying to solve today?

• 12:15Speaker 01

  The first I'll say is access. And I don't mean access to some generalized private equity fund. I mean access to the best opportunities that exist out there. The way I describe it to folks is that somewhere in the world, right now, somebody has the best investment idea that's going to generate the best returns over the next three, five, 10 years, whatever timeline you want to think about. Somebody somewhere has it. The objective is to be the first call that that person's going to make to finance that opportunity because that means you're going to generate the returns for yourself. Right? So there's a proverbial list. Now, it's not a real list. It doesn't actually exist. But there's a general list out there

• 12:59Speaker 01

  of somebody says, okay, if I am looking for capital in a given type of an investment opportunity set, well, who am I going to call? Well, generally speaking, you're going to call someone that has the most amount of money, right? Because you need, you might need a lot of money, can move the quickest, is not going to, you know, yank you around and put you on some long diligence process for two years and then not do anything. And then finally, it's going to be a good partner to you along the way. It's those three things. Have a lot of money, move quickly, and be a good partner. And the more of those three things you have, the more attractive a source of capital you are. And as CAS has grown larger and we've become more sophisticated and frankly, learned some things along the way, particularly in the last 10 years, then we've moved up that list. And so our access

• 13:44Speaker 01

  to opportunities is as good as anybody else out there, if not better. And in certain circumstances, like GP stakes and maybe sports and maybe a couple others. We are the first call. We are the, we are the first people that get called with a given idea because they know CAS has a lot of money in those areas, is very sophisticated. We can be a good partner to them because we understand that space. And we can move quickly because we don't need to go through some whole new massive underwriting process around what's a GP stake and why would a GP want to sell a stake in their firm? And, you know, how do we exit and how do we get our money back? All that type of stuff. We've done all that work already. So the first is access, but I don't just mean any access. I mean, access to the things that you really want to get access to, not just the things that come find you.

• 14:27Speaker 01

  That's a, that could be a negative selection bias type of a dynamic there. So the first would be access. The second would be around things like structure. And that, that's an all encompassing word as it relates to diversification, perhaps, liquidity, cash flow. We've pioneered some leverage structures, which are pretty interesting when you think about how can we dial up or dial down exposure in a more capital efficient way. So those, the structure is, is part of it. And then fees, right? And compensation. Nobody likes to pay fees. Nobody wants to pay fees. We all want to try to pay as low as fees as possible. The reality is it's hard to do that in private markets because from a supply, demand dynamic, we talked about this a moment ago, but there's a lot more demand for the best quality investments.

• 15:12Speaker 01

  So there's a lot more capital that's trying to get into them than they're looking to get. And so the supply, demand equation still largely favors the fund manager. But when you can write a billion dollar check, you have a different type of a negotiating ability. And so we, we take all that together and we point that apparatus at individual investment themes that we're most convicted about for ourselves. And then we bring in everybody else with us.

• 15:36David Weisburd?

  You mentioned leverage. You deploy leverage within some of your funds and within your structure. Give me a simple example of how you use leverage in order to improve returns.

• 15:47Speaker 01

  Without getting into like some of the details that are more proprietary and confidential, we've got, we've got a variety of credit providers that allow us to go out and use NAV based loans is the way to think about them. They're quite common in the industry, but we can borrow money at relatively attractive rates, even in a higher rate environment like where we're at now, and invest those dollars on behalf of investors to, to either. Dial up the exposure in a more capital efficient way, or just generate higher returns, higher cash flows, those sorts of things.

• 16:17David Weisburd?

  So let me throw out numbers because I don't actually know these numbers. So they won't be proprietary. Let's say GP stake might be returning 30%. Your cost of capital is 10%. Then if 50% of your money is levered, you're essentially paying 10% and getting 30%. So there's a spread there.

• 16:33Speaker 01

  That's exactly right. That's the math is a really easy thing to understand. There's, there's various considerations that go into levering these investments. You have to be very focused. This is probably a good opportunity to insert what is one of our core maxims here at our firm, which is we have to understand the downside. If we can get comfortable with the downside, then the upside will take care of itself. And so in this situation, anytime you're introducing leverage into play, well, you're increasing commensurately the risk profile of the investment. And so how does that change the downside? We feel like certain assets can accommodate leverage in a much more conservative fashion than other assets can, right? We're not alone in thinking that way. Real estate pushes out 60, 70, 80% LTVs.

• 17:18Speaker 01

  We don't go that high. But if we can find a great asset that generates regular cash flow, that can support a debt service with modest leverage levels, think somewhere between 0 and 50% LTV, then why wouldn't we want to do that? Why, at least, why wouldn't we want to give the option to investors to do that? Again, so much of what we do as a business is putting ourselves in the seat of the investor and say, what would we want to do? How would we want to build our exposure here? One of the frustrating things in private markets is that the structures are fairly rigid. The, the, the fund managers themselves, because it's complex, because it requires a lot of work that they don't want to do. They build a structure. They say, this is the structure. Here's our PPM. Take it or leave it. There's no tweaking it.

• 18:03Speaker 01

  There's no altering it. There's no different way to kind of move around inside of that structure. You're kind of shoehorned in there and that's where you're going to live.

• 18:12David Weisburd?

  Being on the opposite side of this, it could be as simple as they don't want to pay the fund admin or the controller to basically take advantage of leverage. They want to keep their costs low, so they've decided not to implement leverage. People think there's these very sophisticated strategies where sometimes it just comes down to, I don't want to pay for this, or half my LPs don't value this, so I don't want to charge them for it, or they're not going to invest in my fund.

• 18:35Speaker 01

  And our view is, that might be the case. Half of them might not want to, but half of them might. So why not create a structure that allows the half that do, that value it, to do so? And the other half that don't, they don't have to. And you give them the option. That's the controlling idea there, is it's about flexibility. And the reason why advisors like working with us at CAS is we give them more flexibility than they're going to get anywhere else.

• 18:59David Weisburd?

  And private equity style vehicles are famous for these drawdown style commitments where you commit over three years. Are you able to line up the NAV loans with the drawdowns? Or is there significant drag on those?

• 19:13Speaker 01

  This is where art and science come together, right? Because managing a portfolio of private investments, there's a simple way to do it, and then there's the right way to do it. The simple way to do it is to say, I'm going to commit to the next fund when I get a dollar back from the fund that I'm already in. That's how some people do it, when they just want to check a box and kind of take the easy way out. At the portfolio level, that's their idea of reinvestment. Well, anybody who's actually modeled this stuff out will know that you're going to have a significant cash drag if that's the case. You have to pace these commitments out, and you have to do some modeling in order to understand timing and magnitude of cash flows from the distribution side and the reinvestment side.

• 19:56Speaker 01

  And so that's really the service that we do for a lot of our investors in the form of some of our evergreen funds, is we do all that modeling. And it is extensive, and it takes a lot of people, and it takes a lot of time, and it takes a lot of focus in order to manage those models. But done done properly, you allow your capital to truly compound in a compounded annual growth rate and not just an IRR. An IRR and a CAGR, they're not the same thing. They're not at all the same thing. Not just us, but other firms are understanding this and saying, okay, if we can package this thing in a vehicle together, that instead of generating a 20 IRR, generates a 16 CAGR, but you get the money deployed today, five years later, if you compound at 16% for five years versus having an IRR that's 20%, but your weighted

• 20:40Speaker 01

  average time deployed is might be three years, well, one might be better than the other.

• 20:45David Weisburd?

  Oftentimes, the IRR could be a vanity metric, which you could actually eat the CAGR. You actually get that return versus IRR could be gamed.

• 20:54Speaker 01

  Yeah. And our view here is, again, it's about flexibility. When we invest, some of many of the investments we make, we give investors an option to do so via an evergreen structure, but also a traditional drawdown structure, because some people value the attributes of the evergreen fund. But some people prefer a closed-end drawdown vehicle. And we're not here to tell you how to manage your client's money. What we're here to do is give you options that you don't have otherwise to access these opportunities in a way for your clients that's most suitable for them individually, not just what's the most convenient thing for CAS.

• 21:28David Weisburd?

  Let's say somebody wants to get into your evergreen fund. They basically commit and then they could get liquidity over 20 quarters or how does that work?

• 21:38Speaker 01

  There's been a lot of press about evergreen funds and tender funds and interval funds and the notable issues that have happened with some of the other vehicles out there. I think the first thing I'll say here is investors have to really understand how these liquidity structures work. They're not there to be a perfect liquidity mechanism. That doesn't exist. If it were, you would immediately start to lose some of that illiquidity premium that we think that we're getting. Okay. So that's a really important concept to start with. From there, understanding how much of the fund can come out on which period and planning for that. And in the case of our vehicles, We're not trying to overpromise anything. We're trying to give investors an off-ramp

• 22:20Speaker 01

  in a normalized market environment that allows them to have liquidity. And we're not trying to say, hey, you call me anytime you want and you get your money out. It doesn't work that way, unfortunately, at least not yet. What we're trying to do is help investors solve for the normalized environment. Because it's important to note, that doesn't exist otherwise. If you invest in a traditional drawdown fund in a normalized environment, you don't get to call the GP and say, send me my money. They'd say, no, thank you, but that's not how this works, right? We're going to sell the assets and maximize value because we're not going to jeopardize everybody else because you need your money out. So these innovations are just that, they're innovations, they're improvements, but they're not, they're not meant to be an all encompassing, you know, resolution of the liquidity question.

• 23:06David Weisburd?

  One of the crazy things about evergreen funds is a lot of people think it's just a high net worth product. But in some cases, you have pension funds investing into evergreen funds because they don't want their cash to have drag. So typically, private equity calls about two thirds of their capital, which means a third of it is basically just sitting in cash. So significantly it could draw down your returns even at high interest rate environments where with an evergreen structure, you get to deploy your money from day one.

• 23:34Speaker 01

  I think that's a really interesting observation, David, because in taking it even a step further than that, pension funds and institutional investors have been investing in evergreen funds for decades, decades and decades and decades. They've just been doing it in the public markets, not in the private markets. Because, because in large part, these evergreen solutions were not there in the private markets. But some of our largest and most convicted investors in our, in some of our evergreen vehicles, convicted in the sense of they have conviction and why they own it and how they own it, are institutions in our evergreen funds. Because they recognize the difference between a CAGR and an IRR, right? And they want to see that grow. And especially when you think about some of the other widgets, as we call them,

• 24:19Speaker 01

  or structural advantages that we bring to play. With some of the things we've talked.

• 24:22David Weisburd?

  So why would somebody ever invest in a drawdown fund if these advantages exist in a evergreen fund?

• 24:29Speaker 01

  Let's start with a defined pool of capital. When you invest in a drawdown fund, you are investing at a given point in time, in a given asset class, with a given manager, that's going to own a given set of assets. And that's not going to change, right? Barring some type of big GP removal clause or some anomalous event. In large part, you have a very defined pool of capital where you know who your partners are, you know who the manager is, you know who the team is that's selecting those investments. And sometimes you can even get a good look at the portfolio before you invest, where you know what those are going to be on the front end. But more importantly, you don't have to worry about what's this GP going to go buy five, six, seven, eight years from now, like you might have to underwrite as part of an evergreen model. Now, the trade-off there is if you don't like an investment that a GP makes in an evergreen fund,

• 25:14Speaker 01

  you just pull your money out, right? So you can solve for that. But that's why people like drawdown funds, is you have a defined pool of capital that you've underwritten that risk at that point in time, and then you can set it aside. You don't have, you have to come back to it from a monitoring standpoint, but there's not an ongoing management of, okay, what is the GP buying? How are they buying it? Are the returns being good? At that point, it's done. So it's, it's simple. It really is simple in that regard. I don't mean to say it's easy, but it's, it's a simpler sort of underwrite. There's also the dynamic around with some drawdown funds. You know, you might, as I mentioned, you can, you have visibility to the portfolio. Maybe it's performing well, and maybe you can still come in at cost down the road before a fund final closes and get a little bit of an arbitrage. But that's, it's largely about specificity of strategy.

• 25:59Speaker 01

  They, they're not, they're looking for a more targeted bet as opposed to give me an allocation. That's why you see a lot of evergreen funds, historically speaking, have been in public markets. They're like, look, you're going to be my large cap value manager. You're going to be my large cap growth manager. I'm going to let you tell, decide how you want to build the portfolio. I'm not going to, I'm not saying I like 20% Fang and 80% everything else. You know, it's a more specific bet on the drawdown funds.

• 26:27David Weisburd?

  With the Evergreen Fund, I think one of the things that people need to really wrap their heads around is that it's marked by the fund every quarter. So there's basically a new mark. Is there ever incentive for the fund manager to undervalue the assets? In other words, if I'm cashing out in year five, is there a chance that I'm cashing out in a deflated price?

• 26:51Speaker 01

  Well, you're talking to a skeptic here. And so especially when it comes to the financial services world. So I, I think that this is something you have to really understand with an Evergreen Fund is the, really is the valuation policy. That's what we're talking about here. How is the fund going to be valued? What are the inputs? How do you go into the fund? How do you come out of the fund? Are they similar? Are they different? Et cetera, et cetera. I personally think that if someone's going to be a bad actor in this regard and undermark the portfolio and, and somehow, or, or overmarket for that matter, right? Because there's incentives that could be in place for, for a GP to overmark their portfolio.

• 27:30David Weisburd?

  To get their carry quicker.

• 27:31Speaker 01

  To get their carry, or typically the fees, right, will go up as, as the value of the fund changes on an Evergreen vehicle. So the, the better the performance on paper of the fund, the higher the management fees might be. So there's, there's, there's always conflicts of interest. And it's not about does one have a conflict of interest and the other one doesn't? It's understanding what those conflicts of interest are and figuring out which ones are you more comfortable with, right? Again, that's why people invest in drawdown funds or tradition, or, or Evergreen structures is because they might be more comfortable with the conflicts of interest in one versus the other. The conflict of interest on the, on the traditional drawdown side is, well, a GP gets to control when the fund exits, right? And when they sell the assets. And so they might have an adverse, you know, interest in extending a fund and keeping it

• 28:14Speaker 01

  going because A, it gives them more time maybe to rescue assets and generate carry for themselves. And the LPs want to be done. B, they get to extend, you know, the management fee income off of it. The conflicts of interest are frankly, they're everywhere, right? It's about understanding what they are in each bucket and figuring out which one are you most comfortable with? Which are you not and choosing accordingly.

• 28:37David Weisburd?

  Why would a GP want to undermark? If they had some, let's say they had some wiggle room in their valuation policy, why would you want to under?

• 28:44Speaker 01

  Generally speaking, GPs are pretty conservative when it comes to marking their assets. And they're conservative because the one thing they don't want to do is they don't want to mark something up and then sell it below that mark after the fact. That's just a, that's a bad look to LPs. That, that, and, and look, I, we've seen it happen, right? We've seen it and, and the way it kind of comes up is a GP is they raise their first fund, they deploy it. It's successful. They raise their second fund, they deploy it. And you're not really sure how it's going. And you see marks on paper, but maybe there's not a lot of cash coming out of it for various reasons. And they go back to market with their third fund and they're marketing their third fund.

• 29:27Speaker 01

  Well, what they don't want to do is mark down a bunch of stuff in the second fund. If, if that's going to impact their ability to raise their third fund. So that would be the conflict of interest there and it exists, right? And so, and then, and then low and behold, they have their close of their third fund. And a quarter or two after that close, what happens? The assets in fund two get marked down and everyone's like, well, wait a minute, what happened here, right? So that would be like an incentive that a GP would have to over market, to under market. My thought would be is if they, particularly if it's an evergreen fund. If you, if you're trying to go out and raise new money into that vehicle and bring in new capital and attract that capital.

• 30:10Speaker 01

  If you are able to show them how like, hey, there's unlocked, I mean, there's value here that hasn't been unlocked yet. And we're holding it at this value and we'll hold it there. And then after you come in, we think a year from now it's going to go up. That, that feels like that would be the conflict of interest there. I don't really worry as much about that one. And I don't really worry as much about either of these, frankly, when it comes to evergreen funds. It's not to say that we don't worry about them, but from a conflict of interest standpoint. Ultimately, if a GP chooses to play these games, that's going to come out in the long run. And that's, that's kind of a golden goose killer, as we call it here, right? That's a reputational compliance issue.

• 30:47David Weisburd?

  That's what I wanted to actually double click on, which is essentially, these are, I would frame it not necessarily as a conflict of interest. I would say it's short term versus long term conflicts.

• 30:57Speaker 01

  Yes.

• 30:57David Weisburd?

  So something that may make you look a little bit worse in the short term and, you know, oh, neutral or good in the long term. It's kind of like a legal agreement. There's an infinite amount of ways to screw someone in a legal agreement. It's theoretically infinite. So you can't, you can't legalese over an untrusted party, or it's extremely difficult. People try to do this all the time. To bring that analogy to conflicts of interest is you need to look at the best predictor of whether someone's likely to act in the short term versus long term is how they have acted in their career. The behavior would likely be consistent, all things being equal.

• 31:37Speaker 01

  That's also where reference checking can be really helpful of talking to other LPs in the fund and understanding like, what's your experience been? How have they handled issues that come up? Because issues always come up. I mean, this is not a static business that we're in. It's a challenging business. Things, things change, things go differently. You know, a set of assumptions you had about the way a situation would emerge and be handled have to change because the circumstances that caused it to emerge were different, right? And the key there is transparency, integrity, acting in the interest of your LPs. Somebody asked me one time, how do you develop trust with someone? And my initial response was time and experience, right? The more time you spend with someone and the experience you have with them will help develop trust. I think that's true.

• 32:22Speaker 01

  This person's response back to me was, yes, alignment of interests, though. If you align your interests with somebody else and you're truly aligned, then trust is very easy because you're not really trusting them to do anything other than act in their best interest. And they will carry you with them, right? So it's understanding, are you truly aligned? And in that regard, for us, I mean, we are, as a firm, the largest investor in our vehicles. We've got more money invested in our funds than anybody else does, right? Any other individual investor. I think it's about $700 million of our total capital is internal money, shareholder money, partners, team members. I mean, and that's not just like the people at the firm

• 33:06Speaker 01

  who make a lot of money or who are the higher wage earners. I'm talking about analysts and associates who want to put a few thousand dollars into an idea. We love it. We welcome them into it. We want them to do it because it helps create that alignment all the way through the organization. It's very different when an investment person who has money invested in that fund, a junior level person, not just a carried interest, but actual risk capital in the fund who's invested, when they come to you with an idea, it's their skin in the game. And that's very important for everybody to know about our firm is that we lead with alignment of interest. What we're doing with these funds is about our personal capital and people can know and rest assured that when we make a decision, we're making a decision

• 33:50Speaker 01

  on behalf of everybody, not just what's in the best interest for the GP, because we are investors in our funds as LPs. Like, that's our investment mechanism for us individually is as LP investors in the funds.

• 34:01David Weisburd?

  I've always been a big believer in letting junior people invest. And a lot of firms, I don't know why, or I have an idea, but they try to gate this as some kind of like thing that you get when you become a partner. But that alignment that you get from having real skin in the game, to your point, we are evolutionarily wired to be much more sensitive about losing money than about the potential to make money. So having people have actual dollars at play is extremely powerful.

• 34:27Speaker 01

  Yeah, I had a conversation with one of our associates about a year ago. He was about a year into the firm and he was looking at buying a house. And he's like, Mark, well, they bought the house and they were going to do an improvement to the house, right? Put some money in, redo the kitchens or something like that. And he said, Mark, I can put this money into my house, or I can put it into a particular fund. He's like, which one should I do? I'm like, I love this conversation. This is great, right? Guy's 26 years old and he wants to have this conversation. And it wasn't a huge sum of money, but it was huge to him, right? I mean, when I joined CAS 10 years ago as an associate out of business school, I can remember signing that sub-doc for the first time and committing to that

• 35:09Speaker 01

  first GP stake vehicle that we ever did and thinking to myself, man, I hope this goes well, because this is a new idea.

• 35:17David Weisburd?

  It almost enforces a greater standard. It's the equivalent, when I invest my own money, I don't think about it as much when I invest in my parents' money or my friends, because money is money. But if you, you don't want to lose a friendship, or you don't want to hurt your parents. So junior people, somewhere in the middle, maybe not, not like your parents or your close friends, but you certainly, you seem to, if you're not a terrible person, you seem to value it more than your own money.

• 35:42Speaker 01

  We, we really look at it as a, as a collective group, right? I mean, we, we, it, it, it's just, what we're trying to accomplish here is bring people together to accomplish what they couldn't otherwise do on their own. That's the premise of CAS, ultimately, is that it's each of us individually. Some people have extensive resources, financial resources, extensive relationships, extensive access, extensive knowledge, all that, right? They have it in spades, but they don't have all of it, right? And they certainly don't have as much as, and, and what could be accomplished if they team together with another person similarly. Well, how much more so is that true when you can bring together? I think we have over 7,000 investors in all 50 states and 36 countries around the world, maybe more now at this point.

• 36:27Speaker 01

  And so when you can harness that ecosystem, I mean, we're talking about institutionalized, like cat herding is largely what I feel like we do here sometimes. But when you can do it and you can harness that ecosystem, that's a very powerful ecosystem, because it's not, it's not an ecosystem that is not operating with a focused manner. It's very focused, it's very organized.

• 36:47David Weisburd?

  What are some practical benefits that you get from having 7,000 stakeholders in CAS?

• 36:52Speaker 01

  There's a few, right? For the sake of the business, we have a very diversified LP base, right? So we're not contingent upon any one investor backing us to do any one thing, because, you know, nobody makes up any kind of a large percentage basis. Now, we have some corporate relationships that are bigger than others, where we certainly value those, and, and we would be very sad to see them go. Thankfully, I think they're pretty happy at this point. But a diversified LP base is very helpful. Nobody does everything that we do, but somebody does something, and that's valuable.

• 37:25Speaker 01

  Inside of that ecosystem, though, are some very, very smart investors and business people that we can lean on. So we have some partners, many partners, who are some of the most successful investors that exist out there, right? And having them in our ecosystem, having them as investors in our funds, gives us access to information, access to resources that we might not otherwise have, because they have a vested interest in what we're doing here. And it's very powerful in that regard. So when we're looking at an energy investment, we can pick up the phone and call the founders of the most, one of the most, if not the most successful, energy private equity firm that's ever existed, right here in Houston. Well, that's a very nice phone call to be able to make, in addition to investing with them. But maybe we're looking at something outside of our relationship

• 38:09Speaker 01

  with them, and they're happy to help us with that. Same thing in technology, same thing in healthcare, same thing in real estate. So that resource base is quite large, and it's growing. It's also helpful to touch that many parts of the market, because you get feedback from them and understanding what are they focused on, what are their, primarily, what are their challenges, what are they trying to solve for, both with your own business and your relationship with them, but outside of it. That's helped us, and really us inform a lot of the new vehicles that we've launched, and the new structures that we've put together, has come from direct feedback from those investors around, how do you do this, how do you do that, help me with this issue, help me with that issue.

• 38:47David Weisburd?

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• 39:31David Weisburd?

  appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square Checking. They also have built-in tools like loyalty and marketing so your best customers keep coming back. And right now, you could get up to $200 off Square hardware when you sign up at square.com/go/HowIInvest. That's S-Q-U-A-R-E.com/go/HowIInvest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today. It's funny, because I wanted to ask you about how do you actually get real references? It seems like calling references is such a conflicted process.

• 40:12David Weisburd?

  Obviously, you do off-list references, but even there, it seems like people are so reluctant to give good feedback. Is that your hack on getting good references, calling your partners? And absent of that, if somebody's not a partner, how do you get to the essence of a real, honest reference?

• 40:30Speaker 01

  Are you asking in the context of us looking at investing in something? Or you're talking about somebody investing with CAS?

• 40:35David Weisburd?

  Oh, actually, because it's essentially the same thing from different angles.

• 40:38Speaker 01

  Yeah, so when we're looking at making an investment, this is something that we have really ratcheted up in the last probably six to 12 months at CAS, is institutionalizing this partner base and understanding where to go for additional information.

• 40:56Speaker 01

  The world's a small place. It's far smaller than any of us probably realize. You're never really more than one to two phone calls away in the private markets world from getting pretty good information. We use it for hiring decisions. We use it for investing decisions. Let me give you an example. So we'll talk about energy for a moment. We invest a lot in energy. We have a number of different relationships that we deploy capital with in the energy sector.

• 41:23Speaker 01

  We brought an idea to an investment committee. And this happens to be one of my primary areas of focus. So I'm sort of the lead analyst in that regard. And we're talking about the deal, and we're talking about the specifics of it. And Christopher, who's the founder of the firm, looked at me and he said, Mark, Have you called such and such out in Midland about this? And, and, and I thought to myself, no, I actually hadn't done that. And he said, well, why wouldn't you like Midland is the center of the oil and gas universe. Right. That is like, if, if you think you have a great oil and gas deal and, and it's in, it's in the Permian Basin, it doesn't get out of the petroleum club of Midland. I can promise you that Wolfcamp Grill, right? I go out there once a month. We have a lot of great relationships in Midland.

• 42:08Speaker 01

  And because of that, I can pick up the phone and call one of the most successful family office entrepreneurs in all of the oil and gas business and say, hey, guys, we're looking at this. Do you want to invest with us? But help me with the diligence here. What you're, you guys, they, they've forgotten more about energy investing than we ever will. Now, the people who are bringing us that deal, they don't know that we have that relationship. They don't know that we know those people. They don't know that we can make those phone calls. But that's a big part of this whole ecosystem and the power of the ecosystem as we describe it. It's having these resources that are one phone call away, who are investors with CAS, who have an interested party affiliation with our business, who are going to help us make the best decision possible. It's very, very powerful.

• 42:53David Weisburd?

  We'll get right back to interview, but first we're looking for the next great guest. If you or someone you know is a capital allocator and would make for a great guest, please reach out to me directly at [email protected]. Just to double click on that, there's two aspects to that. One is they're already aligned with you, so they have a high incentive to tell you the truth and to give you real reference, real information. The second one is you're essentially forcing them to align with you in a nice way with a carrot, saying you can invest potentially, you know, without fees or some favorable economics. And if they're not investing, that itself is the feedback. The lack of investment is the feedback, is the reference.

• 43:30Speaker 01

  Yeah, it's an interesting dynamic, but.

• 43:34Speaker 01

  In this family office in particular,

• 43:38Speaker 01

  they have invested in our energy vehicle. So I am calling them as the, not as the, the, the person who manages the relationship, who has them invest in CAS funds, but as the analyst, the lead analyst on the investment that they're an investor in. And I tell them that, I say such and such, I'm calling because I have this opportunity. We're looking at it. I want your feedback. I don't need to remind them that they're an investor in that fund. They know that, right? They have not forgotten that. And so immediately they're, they're thinking about this from the standpoint of, okay, if CAS makes this investment, we are making this investment, right? By default. And so they're, they're, and so the trick is you want to bring people into your ecosystem.

• 44:22Speaker 01

  You have to attract them in a way so that they, they actually have a vested interest. And there's a number of ways that you can do that. But then, once they have that, you have to engage with them and you have to talk to them. And, and that's what I love about our business model is that it's never a one-way street. Some of our very best ideas that we have invested in, period, have come from our partners, our, our, our limited partners in that regard, the investors in our funds. And we love that, right? Nobody has a monopoly on great ideas. We're happy to hear that feedback. Now, a lot of times we get shown something and it's just not a fit. And so we have to say no quickly. But sometimes, sometimes it's a great idea. And we ended up deploying as we have, sports is a perfect example of that. Investing in professional sports franchises.

• 45:05Speaker 01

  That came about from another family office in another market who alerted us to it. And this was six years ago. You know, we'll, we'll put to work a billion dollars by the end of this year, in those last six years in professional sports franchises. That was a pretty good phone call to get in hindsight.

• 45:21David Weisburd?

  You guys have matured roughly 10 billion in assets and.

• 45:26David Weisburd?

  What makes you successful going from zero to a billion or one to 10 billion evolves in that once you're already 10 billion, once you mentioned you're the first call on interesting opportunities, your job almost evolves from finding the next best opportunity to knowing which ones to say no to, so by default you could find the next best opportunity. In other words, it's more about shot selection because all the insight kind of comes to you in some form.

• 45:51Speaker 01

  I understand the question. One of my great fears is complacency, is that organizational complacency sets in and because we are an attractive source of capital and because so many opportunities come to us, that you just sit back and you let them as opposed to pursuing them and running them down. I really enjoy our business model where we can make investments as small as $3 to $5 million and we do that with a high degree of regularity and as large as a billion. There are very, very few number of institutions on this planet that will operate across that entire spectrum. There's just not a lot. Those who can put a billion dollars to work typically are not writing a check for less than 50 to 100 million. Those that are writing a $5 million check, very few of them can

• 46:33Speaker 01

  scale to a billion dollars. So that flexibility is very important to us. But inherently, it creates a challenge, which is if somebody shows you a really awesome $5 million investment, my insides, like, I would cringe if I said, "Oh, that's too small for us." Well, if it's a great investment, let's make it. Let's do it, right? Why wouldn't we? And so the trick is, okay, how do we build a machine that can process the deal flow, as you mentioned, to understand what do we need to say no to quickly so we can spend more time on it? I think we've built that machine pretty well. We look at somewhere between 1,500 and 2,000 different investments in a given year and very few of those actually make it through to deep dive diligence, as we call it.

• 47:19Speaker 01

  And then from there, it's how do we still maintain bandwidth, mental headspace, to go after the things that are not coming to us, but that we're still thinking about because of things we receive, because of this information. Sometimes it's not the thing that's shown to you, but it's something similar to it in a tangential space that you need to go run after. We do quite a bit of that as well, but it's attention, right? It's very much attention and it's something that we have to manage and be thoughtful about on a daily basis.

• 47:49David Weisburd?

  One institutional investor, roughly a hundred billion, off the record, told me that the way that they look at the sizing of investments is by relationship size. So if you could get a $5 million investment and you know that the next deal might be 50 and the next one is 100, that's much more scalable than doing a $20 million investment once and it's a one-off and it's not within their circle of competence, so it's unlikely to scale anymore.

• 48:17Speaker 01

  Once we have a track record going with an investor, I'll give you a live example. One of the energy private equity firms that we talked about, you know, we've invested hundreds of millions of dollars with, we've got a 20-year history with them, we've done a number of things together, we are, we're very close with them in kind of every way that you could think about being close, you know, personally and professionally. They had a really unique asset that was coming up in a fund that was at its end of life, that was a great asset that they didn't want to sell, and they basically had to figure out a solution. We had a very limited amount of time to do the work, to understand it and to invest, and we ended up writing a $25 million check into that relatively quickly.

• 49:02Speaker 01

  Why? Because of that relationship, as you talked about. If somebody else that we didn't have that relationship would have brought us the same thing under the same timeline, we probably wouldn't have gotten there, right? Just because of that relationship's not there. The fun part about it all is as you build that trust through time and experience with alignment of interest, you can build a really interesting partnership. And that's really how we focus as a firm, is we think about having strategic partners in given sectors of the investing landscape, that when we're doing something, we're probably going to do it with them because we think they're the best at it and because we think that we have the most scalable, you know, path forward into something more than just a one-off type of a deal.

• 49:46David Weisburd?

  I would actually argue that you did much more diligence than the average person in that case, and I'll explain why. I think investing, especially in a domain that you may not be an expert in. So let's say the best oil and gas investor comes to me on the planet. My own diligence in that asset class will basically have zero value, especially if you consider game theory and people pitching me like generalist knowledge that most people would agree with, but that would be different oil and gas. What I'm looking for is what we've been talking about, which is how much money, how much alignment, and what's their track record? If they have done 100 oil and gas deals, they're top, and they're putting in a large GP commit, I would argue, at least with my own money, I don't need to do a lot

• 50:29David Weisburd?

  of my own diligence. If anything, my own diligence in a space that I don't know about might actually be detractive from the process. They may actually come to the wrong realization in both directions. I may become excited about something that's terrible, and I might think that's something that's really good is actually not good.

• 50:45Speaker 01

  You're touching on a subject that I think is an interesting philosophical question, which is, how much humility are you going to bring into the investing world? Most people don't bring a lot. Most people think they're the smartest person. They think they know better than everybody else. And I don't think that way, personally. I don't think I'm stupid, but I think if you're not going to bring a measure of humility to a conversation about investing, you're going to end up in some very deep water very quickly. And unless you get very lucky, you're going to get your face ripped off. And a lot of this comes back to what are you more worried about in the investing landscape? And for us, it's, as I mentioned, the downside. But in that scenario, if this trusted partner, to you

• 51:29Speaker 01

  said, is bringing us this opportunity, if they're investing substantially in it personally...

• 51:37Speaker 01

  Well, then, what would I have to see? A lot of this goes back to touch on another topic of like the whole co-investing model, right? And how do people think about co-investments? Well, we do, we do a lot of co-investing. I mean, a lot of co-investing. We, we tell every strategic partner, as I mentioned, if we're going to get into a relationship with a fund manager, we're going to say, we're going to invest in your fund. We're going to be a material investor in your fund. Maybe we'll even be your biggest LP in the fund. But we, but, but we really won't do that unless you are going to bring us consistent co-investment opportunity set. And they'll, and, and a lot of LPs talk about wanting to co-invest and they don't ever really do it in a big way. We do it in a very big way. And sometimes, especially when we're going through

• 52:18Speaker 01

  a diligence process with a prospective investor with CAS, they'll say like, how do you guys think about the co-investments? Do you do every one that that sponsor shows you? And my answer is, well, we don't have to. We're not obligated to do so. However, if I've underwritten this fund manager, if I'm, if I approach that relationship with a measure of humility, as we've just talked about, which is that person actually knows better than I do, unless we see something in the underwriting of an individual transaction that is a massive red flag to us from a compliance standpoint, a regulatory standpoint, just whatever. Well, what do we know? If they're putting that asset in the fund where they have an incentive and they have a carried interest, which is that alignment of interest we talked about,

• 53:02Speaker 01

  what am I going to know to say that I'm better at underwriting that asset than they are? If I can buy the same thing at no fee, no carry, well, why wouldn't I do that? Right? Help me understand that. They're like, well, you increase risk. Do I? Am I actually increasing risk by making the investment? Or I'm actually increasing risk by not doing it? Because now I'm saying that like, all of a sudden, I don't trust that fund manager anymore. That's the, that's actually a bit of the disposition that you're taking in that regard. So I think you're right. Like, I think it's about... From a diligence process, I think a lot of allocators of capital get ahead of themselves because they don't have the humility to say, hey, I'm really, I'm really actually trying to outsource this. My job is to, I'm reminded of that, the movie, The Biopic about Steve Jobs.

• 53:47Speaker 01

  I think it was Michael Fassbender who played Steve Jobs, that one. Where he was, he was talking to Woz before the launch of one of the products. I can't remember which one it was. And Woz is kind of complaining to him about why, why isn't Woz more featured? Why doesn't he have a bigger position in the company? And Jobs looks at him and he points down at the chair right in front of him. He goes, he says, that's your chair. That's the chair of the first violinist. You are the best violinist in the world. You're the best at what you do. He's like, but I play the orchestra. Well, being an allocator of capital, capital, you are playing the orchestra. If you think you're going to step into that first chair violinist role and be a better violinist, then go be a violinist, but you're not a conductor at that point. Right? And, and our model is as a conductor. We want to, we want to play the orchestra.

• 54:32Speaker 01

  We're not trying to put ourselves in the seat of anybody in particular.

• 54:36David Weisburd?

  And one of the interesting things that I've found across asset classes is that the top decile investors are not just doing the same things better than the median or the top quartile. A lot of times they're operating under a different paradigm. A lot of times they're seeing trends early and they're truly thinking from first principles. So you have basically industry standard, best practices on one side, which is like just being diligent, checking all the boxes. And then you have first principles, which is oftentimes is just a different paradigm. There are no top decile investors across many different domains. The same individuals do not understand multiple domains to top decile. Part of that top decile is that 10,000 hour rule. It's spending the 10,000 hour in your asset class, maybe 20, 30,000 hours, whatever it is,

• 55:20David Weisburd?

  and going deep in order to understand the paradigm and the new paradigm. So for a generalist investor to be interested in investing, that alpha is almost not there because that's just a kind of existing paradigm. And many would argue this is only a venture paradigm, but it's also anything where there's a new way of investing that's better. That's where you get a lot of the returns. So I would argue that is the definition of alpha, which is what do the top managers see that the average or even top quartile do not see? And backing behind those managers makes a lot of sense, even if it's not intuitive to you.

• 55:54Speaker 01

  Yeah, I think that's an interesting way to think about seeing, operating under a different paradigm where you're, you're just, you're playing a different game, right? You're, you're really playing a different game. We all, my, my background is largely athletics. That's what I spent a lot of my youth doing. And I'm reminded of this when I go play golf. I took one of our younger guys out who is a plus golfer, meaning he, he's, he's a very, very good golfer. And we went and played a round together in a charity function here in town. And I'm, I'm probably a 15 or a 16 index, right? So I'm, I can get around, but I'm not very good. We're playing golf together. He is playing a completely different game. I get up to the tee and I'm saying, please God, let it go straight. Right? That's it. Don't slice it.

• 56:36Speaker 01

  And, and he's thinking about, well, this one has a slight dog leg left. And so I want to land on the right side of the fairway because that gives me a better shot into the green. And I'm like, I just, just go straight. Right? They're, they're playing a different game. So finding those people who are, who are truly playing a different game. I think, I think you're right. That, that, that's, that's critical to generating alpha.

• 56:56David Weisburd?

  A lot of times people think people are just like working harder or just smarter, but oftentimes it is just a different paradigm. It's a different way of looking at things. It's a different data set. It's something fundamentally nonlinear. It's a new insight or new way of doing things that's leading to their success. Not that they're working 16 hours and you're working 12 hours. It's not going to really lead to 10x returns.

• 57:18Speaker 01

  I agree with that.

• 57:19David Weisburd?

  Tell me about the CAS case and why is that so central to how you guys invest?

• 57:23Speaker 01

  Because this is our money, because this is my money, Christopher's money, Matt's money, Clark's money, our partners, our team, whole team shareholders, because it's our money. Goal number one is don't lose it, right? Don't lose it. Like, so avoid cases where you're losing capital. We're not, we're not afraid of taking risk and we've made investments that, that, that have the risk to go to zero. But if we're going to do that, we need to see an upside that is highly asymmetric. But the CAS case, as it's become known, is it's really focused around mostly in our GP staking business and what we do there. You ask a GP to show you a downside scenario and somehow in their downside scenario, a business still grows. You know, they're still generating some revenue

• 58:08Speaker 01

  growth and some EBITDA growth and that to me is not a downside scenario. A downside scenario is thinking about all of the variables that could go wrong and then they all go wrong to a very large degree. And in that scenario, what happens, right? And it doesn't mean that if it's the business is zero, that we don't make the investment. It just means that's really the downside because no GP, most GPs out there don't actually put forth a real diligenceable model on the downside because they don't want people to think about that. But that's what we think about. That's very important to us. And so there are people who are going to watch this, who have been put

• 58:49Speaker 01

  through the CAS downside case and they know exactly what I'm talking about. It's largely what we assume there is that businesses that have 10, 20, 30 year track records of making money, of doing well, never do that again after we invest in them. And in that scenario, what happens? And so that's really the CAS downside case and understanding those dynamics as it relates to, well, if things go well, then what happens?

• 59:15David Weisburd?

  When I interview a lot of asset managers, oftentimes their biggest gripe, especially in venture but other asset classes, they don't price in the upside. So they thought this might be a 20x, it ended up being a 200x and that they were overly conservative. But if you took a step back, the reason they were able to compound their businesses succeed for 20, 30 years is because they were conservative. And that conservative nature of certain asset managers and protecting the downside gives you the right, gives you the shots on goal in order to make that 100x or whatever that outperformance in your asset class, it gives you the right to survive, compound, improve as an organization, get more LPs. Said another way, if you do have a blow up,

• 59:59David Weisburd?

  Well, it's great that theoretically, you know, you got unlucky or the next year you would have done well. It doesn't really matter if LPs have lost interest in you, if you've hurt your reputation. So sometimes actually protecting against the downside leads to the upside. Maybe not on the same deal, but very soon after. If I invest into Nvidia with some thesis and then they pivot and then they become a four trillion. I didn't cause that to happen as investor, but the reason that did happen is because I had that shot on goal. And if I had enough shots on goal, something crazy will happen to the upside. So that downside is very closely related to the upside in a way that I think a lot of people underappreciate.

• 1:00:39Speaker 01

  That's a, that's a very good insight, David. I, I'm going to steal that from you and use it, use it in the future. The, the, if you don't go backwards, it's very easy to keep going forwards. It's like the simple idea of that, right?

• 1:00:56Speaker 01

  And I think about examples in our own investing, you know, right now where, where things didn't go the way that we thought that they would. And you end up with a mediocre outcome, right? In a variety of, of, of, you know, variables. I was talking to one of our LPs about it and I was kind of telling them, I'm like, look, this isn't, this isn't a good outcome. It's fine. He said, Mark, he's like, this is, he's like, this is good. He's like, this is like, we'll take this. He's like, this is like, this is what we're, this is not a bad outcome for us. Like we have other investments that we make where we're, in that case, we're losing money. He's like, you guys got all of our money back and then some like, you know, like you survived to live in like, to your point, like you get another shot on goal, right? You get to, you get to play the game again, right?

• 1:01:40Speaker 01

  If you don't lose money for people, you get to play the game again, for the most part, unless you really mismanage the situation. And then you might, you might get your, find yourself fired. But if you, if you don't lose money for people, then they're, then they'll probably, you know, they'll, they'll, they'll take your call the next time you call them with another idea. If you lose money for somebody, well, like it puts yourself in their situation. Would you listen, right? Probably not. It takes a disciplined investor to understand circumstances and they're out there, right? We have some folks who are like, look, this wasn't your fault. This went against you guys and we understand that. So we're not holding it against you, you know, call us with the next idea type of thing. But that takes a pretty disciplined investor.

• 1:02:18David Weisburd?

  I think a lot about game selection, not that I play video games or sports. I'm a workaholic, but. There's these trades that inherently call options, which is you lose a bunch of money many times and then you make a lot of money.

• 1:02:31Speaker 01

  Yep.

• 1:02:32David Weisburd?

  And then there's put options where you make a little money or you make some money for many years, then you lose everything.

• 1:02:38Speaker 01

  Yeah, call it bonds. We call it investment-grade bonds.

• 1:02:42David Weisburd?

  It's always clear in retrospect, but it's not always clear at the time what managers are playing what games until there's really a blow up.

• 1:02:50Speaker 01

  Yeah, yeah. We see, obviously you want to target the call option side of that, right? That's what you're looking for. You're looking for asymmetry to the upside. But it's quantifying that. That's what's hard to do prospectively, right? In retrospect, you're like, well, yeah, of course, now we see that that was possible. It's one of the reasons why we love GP stakes, just to speak directly to that specific asset class. We feel like it is a, in a scenario where things go wrong, they don't go that wrong. They really don't. From a return standpoint, you still, you still get back most, if not all, of your money in what we call that CAS case, that CAS downside case. We really like

• 1:03:31Speaker 01

  that attribute to it. And if you get it right, you get it really right. I mean, it's an incredible business. I mean, there's some GPs that we've invested in that have gone from $4 billion under management to $2 billion or $1 billion under management. That's, that's not great. But, but you don't lose all your money in that regard. You still actually get back a decent chunk of it. But that same firm that managed four, well, 10 to 15 years later, they might have 40, right? Like, the way the asset management business works and the way alts and private market managers work, when they kind of catch fire, they are, they are the in-demand fund. Everybody wants to be with them. Your right tail risk, I mean, if you look at the statistical dispersion of our returns, just to kind of nerd out on

• 1:04:15Speaker 01

  it, and my, my college, my graduate school data science professor would be very surprised that I can use these terms because I was struggling that first semester. The dispersion of returns and like of GP stakes, it's very concentrated, right? It looks very much like a bell curve around very attractive returns, but there's really interesting positive skew. There's that right tail that goes out is, is, has, has some really interesting data points in it and there's not a lot to the left, right? Like there's, there's nothing that's a zero, at least for our, for our portfolio. And, and so that, that, that bell curve with positive skew, that means if you can see a data set like that of an investable opportunity set,

• 1:04:59Speaker 01

  if somebody looks at that data and says, that's a game I don't want to play, I would ask them in return, what game are you playing that looks better than this one, right? On paper, from it, from a return standpoint, it's, it's really attractive.

• 1:05:14David Weisburd?

  You have a vantage point, seeing all these managers, also being aligned with them because you become a shareholder in these managers and both on the smaller side and on the large side, most notably with firms like Blue Owl. If you had to choose in five to 10 years, do we see mass consolidation behind a few large manager, call it 100 large managers, or do we continue to see fragmentation of private assets?

• 1:05:41Speaker 01

  Yeah, I, this is a, this is a very long arc of consolidation that's happening in the industry, but it, but it has accelerated in the last three or four years compared to the 10 years behind that. And so I think two things can be true at once. I think the first thing is that you're going to see consolidation in private markets because this is the natural evolution of every market, right? Mark, as markets grow, as they mature, they move towards consolidation. But what makes Alts different is that there's enough niches of the market for somebody to play in that it's very hard for a Carlyle or a

• 1:06:23Speaker 01

  KKR to be very good and have it be meaningful to their business to run a biotech venture fund. What do they care, right? Like, they raise more in B REIT in one quarter than that fund has raised in their entire 20-year track record, right? So like, from a materiality standpoint, they're just not going to be interested in it. So you're going to continue to see a very large number of niche managers in niche strategies of private markets. The consolidation is going to happen in the bigger areas, right? The kind of $5 billion to $10 billion plus, the things that are frankly easily distributable. That's why you see

• 1:07:04Speaker 01

  a lot of secondaries that are being acquired, real estate firms are being acquired. Niche private equity buyout, not so much, right? It's not, it's not really a, you know, you're not going to want to scale that business up from a billion-dollar fund to a $20 billion fund very quickly because LPs are probably not going to want to support that. So I think two things are going to be true at once there. You'll see consolidation, but there's still going to be room in there for those that have a very specific sector focus.

• 1:07:32David Weisburd?

  And some of those buyouts are also equivalent to majority stakes where the existing team sometimes stays on, or there's, there's a generation transfer and the next generation stays on and continues to manage that strategy for the parent company. So it's not like they're continuously, they're not taking them over and disbanding the team and bringing in their own team. They're oftentimes integrating them into the organization.

• 1:07:56Speaker 01

  Yeah, yeah, that's happened a number of times in the last year or two. And I think it's healthy. You have to think about it from a customer standpoint, right? Who's the customer of a, of a private equity firm or private credit firm? Well, it's their LPs, right? There's certain LPs in the world that are looking to have larger scaled relationships. They're allocating large dollars across a very wide range of investments. It's become very hard to manage a, a private book with 200 or 300 managers inside of it. They're looking to streamline that. Well, in order to do that, you need to have firms that have all those different strategies. And so, large allocators trend towards larger firms that

• 1:08:39Speaker 01

  have more different products underneath the one roof that they can say, okay, we've got Blackstone, we're going to do this Blackstone fund or whatever. That's the trend there. But the opposite is true as well, right? Where you have a lot of smaller allocators or more nuanced allocators that understand, look, we're not trying to put Two billion dollars to work every year into private markets. We're trying to do 200 million. We want to do it with those that are that are more sector specific and we don't mind having, having, you know, more relationships because, you know, we, we, we value that, that diversification.

• 1:09:15David Weisburd?

  I've been watching closely the CAS podcast and I watched the one that you did with Michael Reese and Tony Robbins and seen Tony Robbins with Robert Smith and Christopher, tell me about your relationship with Tony Robbins and the firm's relationship with Tony Robbins? And how's that been strategic for you?

• 1:09:33Speaker 01

  That was an interesting one. So, so Christopher, our founder, has been, has, has been very vocal about the impact that Tony has made on his life personally. I mean, our firm actually exists because back in the 90s, Christopher went to a Tony Robbins event and he was listening to the tapes back then about goal setting and that sort of thing. And he wrote out a goal that says, I want to start a firm in 10 years. This is back in 1991, called CAS Investments. And so it's, it's, it's an interesting dynamic because it's sort of a full circle thing. Tony became an investor first with CAS a few, a number of years ago, just as a, what we would call

• 1:10:16Speaker 01

  a partner or a client and, and focused around a few key areas that we were active in. And, and once he and his team kind of got to know our business, Tony's a very active financial services professional, right? He's a very good investor. He's, he's owned and been an investor in a number of financial services companies. He looked at what we were doing and how we were doing it and said, this is a really unique business model and I think I can help you guys, our team, I think our team can help you guys. And so we were not looking to take on a GP stake, but the firm that was very well known for GP stakes ends up selling a stake in GP stakes, right? So it's kind of an interesting kind of. Ball of yarn there. Very meta.

• 1:10:58Speaker 01

  And so, obviously, provided some growth capital to the business to help us grow the people and to grow our footprint and whatnot. That was very helpful. More so than that, it's understanding how to think about positioning ourselves in the RIA community, in the wealth manager community. They have a lot of experience there. There's a gentleman named A.J. Gupta that's been Tony's partner for a long time, who himself was in the wealth management business, very successful entrepreneur there. Recently was the chief investment strategist for a very big RIA. And so, having their perspective on how to retool our business and think about the challenges that we were going to face as we made the pivot to focus on the investment advisory community, they've been invaluable. They're on our board, they sit in our quarterly

• 1:11:42Speaker 01

  planning meetings, they're great friends, they're great partners. We love it, we really do. It's been, it's been a lot of fun. I personally was a little bit of a skeptic because I didn't really understand what was under the hood there on their side of things, because I just didn't know, and my ignorance was quickly proven wrong. They're very good at what they do, and they're even better people to be involved in business with.

• 1:12:05David Weisburd?

  If you could go back over a decade ago when you started at CAS and give yourself a principle or a lesson that you learned the hard way, what would you tell yourself?

• 1:12:14Speaker 01

  It's not necessarily something I've learned the hard way, but I read a book called the Go Giver series. Maybe you've heard of it. It's a book of fables. It's a series of fables, like teaching lessons. It really made an impact on me that if you, if you're trying to be in the business world, business is ultimately about providing value to the community around you, right? Nobody is forced to buy your product or service, okay? They have to perceive value in what you're doing. But beyond the value that your product or service is delivering to whatever market you're operating in, it's about helping people. It's about helping people accomplish things that they cannot accomplish on their own. And so, when I went

• 1:12:59Speaker 01

  through a perspective change around how can I move into my community and help the people around me in a way that is far above and beyond, frankly, than they would ever be able to repay back to me, you completely change your paradigm of how you're thinking about every day. You go from a scarcity mindset, saying I need to get as much as I can for me, I need to take as much as I can out of every situation, and thinking, David, okay, How can I help you? How is Mark Wade uniquely positioned in the world? Not saying I know everybody, not saying I have all the resources in the world, but I have the resources that I have and I have the relationships that I have and I have the knowledge that I have. Well, how can I use those for your benefit and do something for you? With nothing expected in return? Not a thing.

• 1:13:44Speaker 01

  Say, hey, I'm here to help you. When you have that perspective with people, the world completely changes. Frankly, the world opens to you and the world comes to you, right? In a very beautiful way. At least that's what I've observed. And so I wish I would have told 28-year-old Mark Wade that when I started here 10 years ago, that, hey, don't think about things from a scarcity standpoint. There's actually abundance out there. But you have to be willing to step into that uncomfortable moment where you enter into a relationship not thinking about what's in this for me, but what's in it for them.

• 1:14:17David Weisburd?

  Listeners of the podcast will appreciate, this is a very David question.

• 1:14:23David Weisburd?

  Is that a capitalist way, irrational capitalist way to look at it? Which is, if you don't think transactionally, you will end up more successful? Or is it just a philosophy in a feel-good way that makes you more grateful, more present and just live a happier life?

• 1:14:41Speaker 01

  Well, I think, as I said before, I think two things can be true at once, right? I think, going back to your comment before around short-termism versus long-termism, I think that's the perspective that I just articulated is playing the long game, right? There are relationships that I've built that I had, and I did them in a way that was self-interested and was about me. And I think that's come back to haunt me, right? In certain situations, and it still does to this day in large part, right? Things that happened 10 years ago, 20 years ago, where somebody has a view of an interaction that I had with them and they're like, I, you know, I don't like that, right? They don't like, they didn't like the way that that went. Maybe it was too one-sided.

• 1:15:23Speaker 01

  That that's that's that's not good in the long run. As opposed to, you know, I remember I was at a high school reunion of mine and some guy came up to me that I hadn't seen literally since we left high school. And that's that's 20 years ago. And he says, you know, the way you treated me and you interacted with me, like, it really changed my perspective on people like you. And I was like, well, I don't know what people like me are. We'll save that for another day, right? But it was but it was positive, right? It was a good and and so and because of that, it unlocked a conversation that we had about something that he was doing that was an interesting idea, interesting business idea. And we didn't end up pursuing it, but maybe we would have, right? And so to your point around, is this a philosophy or is this capitalism?

• 1:16:06Speaker 01

  It doesn't have you don't have to choose between these two things, right? Ultimately, I think that, you know, getting a bit to my personal beliefs here. I I I think that there's a system that we operate within in this world where if you if if you play by those rules, good things, generally speaking, are going to happen. That doesn't mean bad things won't happen. But in business in particular, if you operate by those rules and you operate under the under that paradigm where you where you think about other people first and not about yourself. I think ultimately, you're going to have a lot of success in the long run as as we all define success, which is more relationships, you know, better better investment outcomes, better business success, better better home life, at least for me, that's how I define it.

• 1:16:45David Weisburd?

  I I've evolved a lot in the subject. I I've always one thing, maybe I came out of the womb with this idea, maybe I probably learned it from my parents. I never actually engage in relationships where I can't bring value myself.

• 1:16:56Speaker 01

  Yeah.

• 1:16:56David Weisburd?

  Not I'm not trying to virtue signal or say I'm a good person. It just doesn't feel good to me and I I just don't enjoy it. It drains my energy as much as an other one sided. What I have done, though, I have evolved where I am very giving after I decide to bring somebody into my life. And I do, you know, used to V I V I P rule. I I do have kind of a bouncer to get into my V I P. And then, once you're in that V I P, I give as much and as often without really calculating. But I have evolved because before I would just get make everybody a V I P and that could be extremely draining and very difficult and not scalable.

• 1:17:34Speaker 01

  I like that idea of a bouncer. I'd be curious. We don't have to talk about it here, but I'd be curious to know what that criteria is. Right? Where do you, how do you, how do you draw, where's your velvet rope? You know what I mean?

• 1:17:46David Weisburd?

  Yeah, I'm happy to answer that. There's different criteria. One is I have an energy journal and I, I write one to 10. Every, every conversation I have, like, how does that, does that bring me energy or not? Because I actually believe in energy management, not time management. I think there's a reason people come home every day at 6:00 PM and they don't work four hours on their business. It's not because they don't have those four hours, it's because they're emotionally drained. And so one is an energy aspect. The other one is this is truly a compounding relationship. To double click on that, is this somebody that I want 15, 20 years of my life? That's the main criteria. That's actually, that's the razor. Then after that, then there's almost no, you know, there's almost nothing inefficient you could do.

• 1:18:29David Weisburd?

  The way that I distill this is you can't spend too much time on a billionaire. Whether that's with money or billionaire that has, that's very giving, that's a great friend. It's very scalable to spend time with somebody that's really good at something.

• 1:18:44Speaker 01

  Yeah, yeah, I had, I actually had lunch today. He's one of our investors, but he's a very close, personal friend of our family. And he is a, a leading nanotechnologist. And, and we're like-minded in our beliefs and, and, and we, and our families know each other. And so it's this like, I seek out the time with him and I go out of my way, I drive, I drive down to the university here in, in Houston. And I, I, I take a lot of time out of my day to sit with them during my workday, not because he's invested a lot of money with us. And he, self admittedly, he hasn't, but because I can sit with him and he, he is so knowledgeable about things that I'm interested in.

• 1:19:27Speaker 01

  And I told him, I said, look, like, I'm here, not because like, like I'm here to serve you. I, I look at him as an example of. What makes my life so full and why I love what I do is because it's not just like the investing, it's not just the financial upside. It's the ability to build very deep, multifaceted relationships with other people. That's awesome. Like, that's so life-giving to me because otherwise it's just transactional. And that's fine. It's like, there's a lot of investors who give us money who I will never meet and they will never meet me and I love you, right? I wish I could meet them and I'm very grateful for it. But how much more so when you can share life with people, all aspects of life? And I know some people, when it comes to business and personal, they don't mix it. But for me, those are always the most rewarding relationships.

• 1:20:12David Weisburd?

  It goes back to game selection. It's if you are truly a long-term thinker, relationship person, you have to find the right market for that skill to flourish.

• 1:20:21Speaker 01

  Yeah.

• 1:20:22David Weisburd?

  And if you don't, which there's been times when I haven't, you end up getting really bitter because it's a short-term nature and you're being handicapped because long-termism is a form of handicap in the short-term market. So you could become very bitter very quickly. But if you now realign yourself and find those compounding markets. First of all, they're much more lucrative. There's almost no short-term markets that are lucrative, you know, at least that I'm aware of. And secondly, you're able to have that founder-product-employee fit where you're naturally able to be yourself and succeed.

• 1:20:56Speaker 01

  Yeah, yeah, that's well said. Should be writing notes down right now.

• 1:21:00David Weisburd?

  Well, Mark, I wish I could say that I was surprised by this conversation, but I knew it was going to be a good one. Your new relationship, but I'm looking very much to this friendship, certainly 15 to 20 years at a minimum, and I appreciate you jumping on the podcast.

• 1:21:16Speaker 01

  Hey, it's my pleasure. Thanks, David. Appreciate the opportunity to visit more and I'm sure I will see you soon.

• 1:21:22David Weisburd?

  Thanks, Mark. Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend. This helps us grow. Also provides the very best feedback when reviewing the episode's analytics. Thank you for your support.