E249: How LPs Unlock Liquidity Without Selling

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

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

• 0:00David Weisburd?

  Alex, so you allow LPs to loan against their illiquid positions. Tell me about this and how does one go about loaning against their liquid position?

• 0:08Speaker 01

  Sure. So we essentially provide NAV loans where LPs in private fund interest can, they can use it to serve as collateral. So we assess the underlying portfolio. We model the expected cash flows and structure of credit facility or term loan against that. And this is essentially just a way to unlock liquidity without forcing a sale. And it's just designed to be efficient and discreet for the LPs.

• 0:32David Weisburd?

  An LP needs liquidity to have the option to do a secondary. Because this is a second option of getting a NAV loan. In which case, it's just somebody get a secondary versus a NAV loan.

• 0:44Speaker 01

  So essentially it's at their discretion. I mean, with a secondary, it's permanent. So you're exiting at a discount and losing the future upside. Whereas a loan allows the LPs or potentially the GPs to assess the liquidity while still retaining ownership in that particular fund position. And it's particularly attractive when someone has conviction on the underlying assets, but simply needs the liquidity for personal other business uses while the investment uses.

• 1:07David Weisburd?

  Give me a sense for your scale and how many of these deals have you done? And who have been the early adopters or who have been the counterparties on these loans?

• 1:16Speaker 01

  So I mean, we've structured loans ranging from a few million up to about $50 million. Our platform is designed mainly to scale for the needs of ultra high necros, family offices, small institutions. We haven't really focused on large institutions. So we've tailored more for like high necros. They've got investments in alts and especially as alts are growing. The general need for liquidity has become more prominent, both from the fund side and both from the investor side. So that's kind of like the vertical we're servicing. We're seeing a massive demand through the wealth management channels. That's been a massive need and demand push from us. And these, and yeah, and that's sort of like where the main focus has been focused on.

• 1:56David Weisburd?

  Give me a sense for the rates in the market today.

• 1:59Speaker 01

  From it really depends on the quality of the underlying collateral. So we look at diversification, the maturity of the fund. Rates generally fall on the high single digits to low to mid teens, depending on the quality. So your blue chip type funds will be on the lower side and then the more risky or venture type assets that we'd look at will probably be on the low to mid teens. And the pricing rate just reflects both on the illiquidity of the asset and the flexibility that we're providing. That's sort of how we price it, but it's really depending on the underlying collateral.

• 2:29David Weisburd?

  What are larger institutions doing versus smaller institutions?

• 2:32Speaker 01

  The high net worth investors often, so from a use perspective, they're using it mainly for personal liquidity needs. But institutions such as pension funds, endowments, larger family offices, they're using like these sort of nav loans for the portfolio management, capital calls and rebalancing. So on the one side, we're seeing ultra high net worths are using it more like personal tax, et cetera. And then the large institutions and family offices, it's a lot of restructuring, optimizing the portfolio, potentially finding an arbitrage to retain their existing positions and receive the upside that they intended and to reinvest it elsewhere. That's where we're seeing there's a massive difference in the use of funds.

• 3:11David Weisburd?

  The large wirehouses, JP Morgan's, Goldman Sachs, they interiorly provide these kind of loans. Are you competing against them as a different part of the market? And tell me how you fit into the ecosystem.

• 3:20Speaker 01

  So directly and indirectly, a lot of the larger banks such as JP Morgan, Goldman, they focus a lot on their clients. We've noticed and funds that are like on their platform, whereas we're a little bit more bespoke to a large extent. Also from a timing perspective, client onboarding, our main focus is the lending relationship. We're not trying to get into the wealth management space, et cetera. So we're trying to be as omniscient and flexible as possible. And that's kind of how we differentiate. Whereas when you go to a bank, there's a lot more comprehensive services you can receive as well. And that's sort of how we come in. But we get, yeah, we get a lot of bespoke requests and it's really depending on the client, especially with speed. As we find there's a big differentiation in terms of the bespoke speed needs that they have.

• 4:04David Weisburd?

  And how do you balance speed with with doing enough diligence? And what are what exactly are you diligencing on these assets?

• 4:10Speaker 01

  We get in, we get an overview of the underlying portfolio companies. We don't do a deep dive into each single one. We read it so we have a lower LTV to kind of cancel a little bit of the risk. Hence why we're not taking much of a discount on the assets. And but yeah, we've got an amazing team that goes through a deep dock, a deep dive in terms of like the documents that we received through the underwriting process. And then we take a conviction on that based on the giving them an LTV rented terms, as mentioned, like previously.

• 4:38David Weisburd?

  What are the LTV rates today?

• 4:40Speaker 01

  Anything between 20 up to 40% we've done. So depending on the use of funds, depending on the unlikable actual, we've stretched it between also depending on the interest rates that they're looking to get. We've changed it quite a bit. So we've, we've got a whole standardized model, but we've also got very bespoke ones. And that really depends on a client by client phase.

• 4:59David Weisburd?

  So you may have 10 million in assets. You could loan out two to four million, depending on on a various factors and depending on whether you could underwrite underlying assets.

• 5:08Speaker 01

  Correct.

• 5:09David Weisburd?

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

• 5:28Speaker 01

  Correct. And we also have to have a look if they've got existing pledges or other credits liabilities. So we've got to just assess them from a personal perspective, just to make sure that that's all of that is in place to make sure that we can retain the funds, the principal interest over time.

• 5:43David Weisburd?

  You mentioned high single digits, low teens. What are some of the drivers? So what do you need to seek to get them to high single digits? And what de-risks it to you as a as an investor and as essentially a holder of these assets?

• 5:55Speaker 01

  Back regular funds, vintages, a sort of quality. So we've kind of built out our own analysis of a range of different funds in the markets. And we work backwards from there. That's kind of our dictation. But every use case is different. Like we've had clients with one or two fund positions and we have a client with up to 30. So depending on the portfolio. That that's kind of why it becomes like more of a client for bespoke type solution from a cash redemption private equity private credit would be easier to get towards those that price range and we're working towards getting on the other on other asset classes like VC towards that price range over time as well.

• 6:31David Weisburd?

  And because VC is more volatile.

• 6:33Speaker 01

  Yeah, longer term, it's that we found that that's sort of where our range is fitted. But over time, we're looking to bring down the price overall as much as possible for all asset forces.

• 6:42David Weisburd?

  What should larger institutions do today in order to gain liquidity? And how do they solve their liquidity issues?

• 6:49Speaker 01

  From from a large institution side, you've seen a range of different uses like NAV loans are very prominent. This is nothing, it's not really a new concept. There's amazing players out there in the market, larger credit funds and banks that do this to for the institutions. But from like a rebalancing perspective, like NAV loans can be quite a useful tool for them just to rebalance their portfolio, get some cash in, keep the keep retain the positions that they've got, just being aware of if they can pledge their assets going into new investments or what they have on the existing portfolio, that would be quite a useful data point for them to understand. On the secondary funds, it's really on a case. I can't speak on whether they should go through a secondary process, but any sort of given liquidity situation, the premise of just knowing that you can attain liquidity, whether it be through

• 7:32Speaker 01

  the secondary market from a sale or through a loan is quite a positive data point just to understand whether you can or can't. And then from there, it really depends on through the process, like of course, it's at their discretion. Sometimes it's more preferable to get rid of the assets and go through a discount, the tax, et cetera. Then that process is done because if you go through general liquidity process, there's the opportunity cost, there's a time, there's a process. That's why we've seen a lot of reception on the loan front because you don't have to go through and find a buyer or go through, you know, a brokerage firm, et cetera. Whereas if the collateral fits certain criteria and you're happy with the pricing, you can keep that and just get a loan against it. We've seen quite a big speed difference on the on like the NAV loan perspective versus the sale.

• 8:15David Weisburd?

  Are these typically recourse loans, non recourse loans? Tell me about that dynamic.

• 8:21Speaker 01

  Certain breach of assets that we're extremely comfortable with, they'll form on the non-recourse side. For certain assets, they may have limited recourse through a full guarantee, full personal guarantee, which a lot of ultra high net worths are very comfortable with in the space based on their background, especially working with facilities and credits. So yeah, it really depends on the underlying collateral. But we've been negotiable with a lot of use cases and a lot of channels that we've built deep relationships with.

• 8:46David Weisburd?

  And it's always been curious to me that these loans that underwriters aren't looking at the purpose of the loan, for example, buying a yacht on one side versus making an investment. In theory, the investment has value, should go up, and oftentimes, these are the best opportunities where people are willing to take out loans. Why do you think that the purpose of the loan doesn't play more into fact and more as a factor? And perhaps I'm missing this point. Is purpose of the loan kind of a big factor?

• 9:09Speaker 01

  It's a massive driving factor. We've seen most of our adoption happens through third parties who manage the wealth of a lot of these LPs or sometimes GPs, whereas either from a tax accounting or wealth management perspective, they see the opportunity to get leverage against illiquid assets. It's a very valuable tool for their clients. And so that's where the purpose is derived, whether it's for rebalancing a portfolio, being the CRO of a family office, whether it's just wealth management and diversity for an individual or a family office to get personal liquidity or to make other investments that are very timely, to find an arbitrage or for tax. We've seen the purpose definitely drives the need.

• 9:49Speaker 01

  We've also seen just some use cases where we've given terms to individuals and families just for them to understand what they can get. They may not need it at the point. They just want to have an indication of what funds would be accessible through us and that they can get liquidity to make them a little bit more comfortable keeping the assets. I definitely think purpose drives the need for liquidity, but also just having this as sort of like an insurance policy to to know that you can get it for certain assets that you have got an investment with. It gives you a little bit of an insurance policy personally to know that these can be leveraged if the need for liquidity comes.

• 10:22David Weisburd?

  Said another way, it increases your risk tolerance, it decreases your fragility, knowing that you could always borrow maybe at a higher rate than you would like, but you could always borrow some standby loans if something happens, if you have a capital call unexpectedly and things like that. It makes investing less fragile.

• 10:37Speaker 01

  Hundred percent.

• 10:38David Weisburd?

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

• 11:12Speaker 01

  Our main focus has been on the LP front, but of course naturally we've received a lot of demand from GPs, especially some GPs that are LPs of funds.

• 11:20Speaker 01

  So we don't focus on carry. That's just not part of our core business model. So we focus on fully funded positions. We've seen a range of different solutions on the GP front. We try not to push just our products. So they've got a range of different solutions. I mean, some funds have got continuation vehicles. They've got existing subscription lines. So depending on the use of the funds, but the main use case is just more on the personal side where GPs have come to us either to get a personal loan for personal reasons or making other investments as a lot of their net worth is tied in their illiquid vehicle that they started or co-founded. And then we've also seen a lot of use cases where there isn't as much DPI as expected, which happens normally in the private markets.

• 12:03Speaker 01

  And a lot of GPs have come to us to kind of get the LP some liquidity in the interim, which LPs can't stand for, what they would like, and they would like to retain their position in the fund. So we've seen a range of uses. So we're just a tool. We're kind of like just an open mannered tool that they can have on hand for their use. But it's really, there's a range of uses that they might get. And there's some that we probably don't know to this day.

• 12:23David Weisburd?

  And I want to stress to us the model a little bit. So you said 20 to 40% LTVs oftentimes for GP commits or it's like the house, house car baby. It's like these small purchases that people need to make at some point in their lifecycle. And take it to the extreme. Let's say you have a portfolio of 500 startups or many different assets. Is there always an amount of money that you would loan against? Could you push that down to like 5, 10%? So for somebody to fund their GP commit? Or is it kind of binary? We like these assets or not? And then it's within this window of 20 to 40%?

• 12:56Speaker 01

  It's a mixture. So we do have a more standardized approach where it does fit within that 2040, but we are flexible. Our loan ranges have been roughly between one up to 75 million dollars we can take in.

• 13:09Speaker 01

  But for certain cases, we can lower the LTV, like you mentioned, to lower the risk. So if we're comfortable with the individual or the borrower and sort of the asset class from an underwriting perspective, we can be a little bit more flexible on a bespoke basis.

• 13:22David Weisburd?

  I know you're very asset driven, but behaviorally, it must matter to you, the borrower, their credit score, their track record of paying off their loans. How much does that factor into the process?

• 13:32Speaker 01

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

• 14:12Speaker 01

  or whether it's to for personal uses, God forbid a divorce, or if they need like a family emergency. It's important for us to know the use of funds, just understand that will this principal amount be used at the given time all upfront? Or will it be used over a period? And do they have other methods to bring in income? Either to pay the interest, or we could do sort of like a reserve interest component whereby part of the principal, we would reserve a proportion of interest upfront. So they're less risk to pay at the end when they pay back the principal. So there's different structures that we're happy to accommodate based on the borrower.

• 14:44David Weisburd?

  Circling back to this use of funds for your investments, how positive of a use of fund is that? If you were funding a new investment, how would you rank those range of uses? Like what's the best use and what's the worst use? I'm just, I'm using moralistic language, but really like from a risk standpoint as the creditor. What was your ideal use of funds be and what would be? The worst use of funds. How would you rank them?

• 15:07Speaker 01

  I say more on the business side to make other investments or capital calls because then we know where the liquidity is being driven to from an asset allocation perspective. So if those were to be seen as the collateral that, God forbid, we would need to seize in a collection perspective, then we know what we can take conviction on. On a personal side, those we think a little bit more risky, but it really depends on a case by case basis.

• 15:32Speaker 01

  Those are needed for personal uses, but then of course, if we're comfortable with the underlying collateral that we would use from a, if we were to take a personal recourse, it's hard to rank in too much, but I'd say when the business case perspective, it's easier to say to follow the flow of funds, to understand like where funds are going because if we've got a little bit of a conviction on the assets they're looking to invest in or the capital calls they're looking to make for those sort of underlying funds and we've got a certain conviction on where those are driven to, that would help us just easier to manage as opposed to if the funds go elsewhere, I'll be confident we can receive the principal and interest.

• 16:06David Weisburd?

  How long on, on average, not the mean, but the median time that a loan takes and what's eightieth percentile?

• 16:11Speaker 01

  So our average loan is roughly 24 months. We do loans between one to four years and we can refinance it based on the need that they have. And loans can take relatively, if we're comfortable with sort of the funds, they can take about two weeks to the, from initiation legals to deploying, to more complex cases can take absolutely truthfully about 14 weeks. I'd say lower, but to manage expectations, the longest we've done is like 14 weeks. So it could range between that, but if we're comfortable with underlying, we can get just the necessary documents in place. There isn't too many different legal structures from a trust perspective, it's a trade or take on the shorter side.

• 16:47David Weisburd?

  Last time we chatted, you said something extremely interesting, which is you're now partnering with funds to be standby NAV loan lenders, essentially. You'll partner with ABC Growth Equity Fund and if any of their LPs need loans, you've underwritten the fund or you're, you're up to date on the fund and you could underwrite it quickly and provide that kind of standby liquidity. I think this is going to be a big trend in the industry. Talk to me about that and do you have any examples you could talk about whether named or unnamed?

• 17:12Speaker 01

  We aren't like discretion with in terms of like the actual names, but we have been approached by some private equity funds that have got previous vintages. VC funds, they would just like to have it on hand. So it kind of sends a certain indication to the investors that it makes a little bit more evergreen. So we've seen a few of those approaches. It's a little bit difficult to do on, on like emerging managers in the VC space, but definitely a need we would love to cater for, or we see the need arising more and more to have illiquid funds that have kind of been pre-screened. As you go through raising a cut, to a certain extent, we've received data and just the indication from a lot of GPs that it helps to a certain extent on the fundraising process because then investors know that the fund can be leveraged, it's been pre-screened, and it can potentially help them raise more. We don't have

• 17:57Speaker 01

  specific data, so we don't want to overstate anything. But that is some feedback we've received, and that is a channel that we are growing and helping with.

• 18:07David Weisburd?

  We're active in the GP stakes field. We think it's a really interesting field and it's one of those situations that's solving its liquidity needs just in time. You have these like 10 year funds that turn into 14 year funds and now people are doing evergreen funds. And have you looked at that space and what are your views on the space? One thing that I've learned from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets. It's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need, concerned about how much it may cost, think life insurance is too complicated?

• 18:50David Weisburd?

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• 19:06Speaker 01

  There's a lot of these, of small to larger funds, these great funds, like kinds of point capital. And I think it really, it really depends on just the need that they have. Sometimes, as mentioned, there is the opportunity to buy out

• 19:18Speaker 01

  a position and it's more preferable than a loan. So it's great to have just as a customer in life, just to have as much optionality as possible is really just important, both from Sort of the supply side, like being the GP or the buyer side. Um, just to know you've got all these solutions in place. Cause it really depends on, on, on the person at the end of the day. Sometimes from a financial standpoint, a loan or a secondary may make more sense. But their preference based on the personal relationship with the fund or the personal conviction on the assets. Um, all their personal liquidity needs. So it's, I think it's just really good from like an omniscient space, like position just to have flexibility and options. So we're just trying to fill that one gap, the one gap on the lending side. So I think both are critical in the market.

• 20:00David Weisburd?

  Tell me about the origin story. How did you go about founding Liquid LP and how did you get into this business?

• 20:06Speaker 01

  Sure. So my background's been more than from like VC fund business space. I've started a few companies prior in South Africa, one in Australia. Um, had some success, had a failure, but naturally just through kind of my entrepreneurial. Um, progress, I've always been one that's had an actual loving and building relationship. So had a lot of relationships in the, um, in the founder space and executive space of a lot of late stage pre-IPO companies. And saw similar models providing liquidity against private shares. So we started the business originally supported with, um, to focus with Citibank to focus on lending non-recourse loans as employee benefits. Um, against executive shares in pre-IPO companies. And as we started to try to push and grow their company, we found a lot more product market fits focusing on LPs.

• 20:52Speaker 01

  And one of our earlier backers, which was a credit fund of Atlanta. Um, they saw our growth and they've been amazing to work with. And then we kind of like repositioned the business to focus on the LP segment based on a lot of internal and external fit for those markets. Um, so they further backed us and they've been amazing and they've, um, and that's kind of how we grew more into the LP segment. And we learned that we would rather focus on a diverse, more diverse portfolio of assets. Um, as opposed to single fund, single company positions for a range of reasons. And actually our network was more in the LP and GP space, both with the fund and ourselves personally. As I naturally progressed, but it, I'd say it came originally from seeing the opportunity with pre-IPO lending, which there were a lot of great players in the space.

• 21:36Speaker 01

  We just wanted to focus on more on the tech side and a platform approach. And then naturally just based on a lot of conversations and product market fits, we shifted and to focus on this. And that's kind of how we evolved.

• 21:48David Weisburd?

  What are some unexpected risks in providing NAV loans? And what are some kind of tail risks that you encountered and that you've solved around?

• 21:56Speaker 01

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

• 22:36Speaker 01

  In the private markets, it's, it's, it's very hard to, um, to kind of just have conviction on assets, especially based on like no name brands. You really just need to, it really comes down to like the performance, the use of funds, um, the quality and the trust of the borrower. So these are all like light touch factors that just take experience. We've been fortunate to work with a credit fund behind us to help us in underwriting perspectives. They came in with a strong credit view, um, to look at, you know, more venture private equity type assets. That's helped having a complement of a great team that comes from private equity and venture capital alongside a credit fund. And an amazing advisory board, including Mike Roffler, who came from First Republic Bank. I think that combination has been quite a blessing to approach the market.

• 23:17Speaker 01

  But naturally, different things arise from the process. I'd say those were the factors.

• 23:22David Weisburd?

  And you've built out a great advisory board around you. Tell me about that process. What are your lessons learned? What were some mistakes? What were some key lessons from building your advisory board?

• 23:31Speaker 01

  From previous ventures, it's always great to have great names on your advisory board. I think it's just important from the founder perspective and to manage expectations from the advisor, to kind of have certain milestones or expectations in place. I have found based on the stage of the company, certain advisors brought on board too early with big names. They physically can't do much in the beginning because they're at a certain level where their their impact is really more effective at their level. So I think it's important to kind of not get too excited, um like a horse before the carriage, that phrase. Um to bring on really no name brands, even if they're very willing to commit and help um at an earlier stage. Like you should try and meet them where they're at as much as possible, or just manage expectations to be like, cool, we'd love to have you on on board in the beginning.

• 24:15Speaker 01

  Um and we we kind of did that really well with this company, like we had a lot of expectations with advisory board, but we knew that we had to get to a certain level and that's where they became more effective. Um and we managed that really well on both sides. So I'd say that was like one learning that I learned from my previous businesses that we applied here quite well.

• 24:32David Weisburd?

  What are the different vectors of value add that advisors could bring in? And do you get them all in one person? And just talk to me about putting together a holistic strategy around your advisory board.

• 24:43Speaker 01

  So I think definitely definitely introduce them to each other even before they may have like signed fully to see if there's like a culture fit to understand like there's a compliment. And just a good connection from an energy perspective. That was one thing that's um that that suggests based on learnings.

• 24:59Speaker 01

  And in terms of like giving them always a full strategy of like where they see the business and also understanding like what is what are their goals aside from a time commitment? Um dealing with certain advisors, they may have certain entrepreneurial goals they'd like to pursue in the future. They may have certain um they may have certain personal goals with their families. So just really managing expectations from a timing perspective, a connection perspective. Um it's super important and just to be real with them.

• 25:27Speaker 01

  And yeah, and certain advisors, I think, are crucial with opening doors. Some advisors are great just to have the names there and and to give like sort of an insurance or comfort or credibility associated with the business. That's it's a subtle like quiet touch, but it is important. Um but really getting them involved in whatever capacity they can bring. So like never to force something like in general life, you could take a horse to water, you can't make um a drink, but if you could just. Bring it close and then let it do its thing in any way or form. I think that's naturally quite beautiful, any way or form. So I think not four structures, but just highlights in the strategy of the company. Where are we looking to go? How we see the future, seeing if they align, getting their contribution.

• 26:06Speaker 01

  It's great and not forcing anything. I think just that's one thing.

• 26:08David Weisburd?

  Essentially, you're kind of meeting them where they are, seeing their natural strengths, their natural weaknesses, playing around their strengths. And not forcing a donkey to run in the Kentucky Derby, meeting them exactly where they are.

• 26:20Speaker 01

  Yeah, like there may be certain advisors, especially those more mature that have reached a level of self-actualization where they just want to impact the world. And they're not too focused on like money and commercial. Whereas as founders, you're more focused on like profitability and just generating revenue. So you need to understand where they are. Even though they may like you personally and they may like the business, like their incentive is not to make money. It's great, they can make advisory fees and they could be maybe worth something. But if you can just personally meet them where they are, even if it's helping on their, on their, on their, on their, their philanthropy side. And then come in and bring in just their perspective very lightly, but just affording them the time that they need to focus on what's important to them. But that was quite important because when you get there, when you do get there, hour, hour, eight hours a month, whatever.

• 27:04Speaker 01

  It's very impactful because they just feel personally, you just make them where they are. So I think that's just more like a life.

• 27:09David Weisburd?

  Speaking of meeting them where they are, do you find that the best advisors are kind of driven by impact? And they use the money and advisory shares as a way to be shown respect? Or are the best ones, the ones that are coin operated that'll go to bat for you and kind of do the most amount of work? And how do you balance the mercenary versus a missionary?

• 27:28Speaker 01

  Yeah, so it's, yeah, it really depends on like the, the environment. There is that mercenary transactional focus, which is great. And sometimes it's like, um, it's like a second wind that they get after the period that they can like dive into an entrepreneurial journey. Back the energy of like the founding suite and just enjoy the ride. And like, I think that's, that's a whole certain channel. There's certain ones that want to do well commercially and impact, or there's certain people that were found that will have like a sentiment towards the founders, such as myself or others. And they feel just that this founder in the future will do great things that are aligned with the impact that I like to do now. So if I can empower him or her at this stage to do well, but kind of guide them. Also on like a personal spiritual perspective on how they run their business from

• 28:11Speaker 01

  an ethical and daddy perspective. Essentially you kind of creating an impact on their question that they can be better in the future in maybe non-business activities. So I've seen that subtlety and sometimes they're very open with it and you can just feel it by the way that they advise you or not. Kai should treat people or employees or direct the business and from an ethics perspective. And that's quite a, it's a great perspective that I've noticed.

• 28:36David Weisburd?

  Through the podcasts and through my expanding network, I've gone to meet these really transformational entrepreneurs, people like Blake Shaw, who started Supersonic. Yesterday I spent the entire day with the founder and CEO of Republic, who's trying to digitize assets. They all have these drives to make these big changes and evolve society. Sometimes I struggle to translate that to the finance world. And how do you bring that kind of vision? And how do you get people excited about something like making money or putting in loans? How are you able to frame that in a way that gets people excited to wake up every day morning?

• 29:08Speaker 01

  Truthfully, it's also been a personal challenge to me because realistically, sometimes the narrative of, okay, we lending money to wealthy people or privileged people, but what is the impact there? So like, there is that question that comes back and forth from a personal perspective. And in a day, there's a need we solving. So as long as it's driven towards solving a genuine need or like helping people, especially in a personal financial position, or just altering or growing a certain market, like opening up the alt market to become more investable, just being, you know, another liquidity option that adds value. Those are great. If you can, I think engaging with people, like one of the fortunate things you've had the opportunity is meet definitely over a thousand types of investors that invest in the private markets and to learn through them and kind of like just exchange dialogue,

• 29:53Speaker 01

  exchange energy. That's been quite special, just to like transfer a certain sentiment to people, even if 80% of the people that we've engaged with, we don't actually do a deal with or work with. We can. Just send a good vibration to them or work with them or connect them to other people. They could do business, anything like that. We've seen a lot of motivation from that side. From a culture perspective, having a lot of banter and like just laugh is like very important. Cops, we are from South Africa, so we we used to tease each other and all came from love. So like just the intention behind doing things, we all had to like make money, do well, you know, have a good name. Um, but I think just of course, like a lot of, a lot of my personal mentors always said to me like, Alex, you're extremely hard on yourself. Like, you know, you're still young, etc. You need to enjoy the journey.

• 30:37Speaker 01

  The one thing I've learnt as I'm trying to enjoy the journey, which I'm not always very, very present on, is the company you keep on the journey. So like working with your friends or new friends is quite important, especially like if you can isolate where your strengths are, whether it's on like the business development side or the operation side or and and like investment side. That's been quite important and I think that energy transfers into like external conversations. Um, yeah, that's probably the best answer I can say. I just, I can't lie and say that lending directly impacts, you know, like good causes that I hopefully I could do bigger things in the future. But that's how we're trying to, um, how we stay motivated as long as possible in the interim.

• 31:17David Weisburd?

  There's an Alex Hermosy quote, in my twenties, I thought it was about this destination. My thirties, I realized it was about the journey. In my forties, now I realize it's about the company. So there is something about that who you're on the journey with that's oftentimes underplayed kind of in your twenties. You're just trying to get, get to that milestone. The way that I kind of, I kind of look at it at a high level and the way that I look at it is from a leverage standpoint. So if you're an employee at a company, you have your thing that you work on. So and you go in, you work on, you have your little piece and that's great. If you're the CEO of the company, you might have hundreds of people that you're leveraging. Your impact is across the entire organization and you have each individual person that works. In theory, if you're a great CEO, you empower them to do a better job, you allocate resources.

• 32:02David Weisburd?

  Then you have on the GP level, you have maybe fifteen to thirty CEOs. So now you're, you're, you're basically managing the CEOs that manage employees. And then like we do GP staking, so we're partnering with these GP stakers. And you, you provide loans to the people that are maybe investing into these GPs. Why does that matter? Is it just finance? We live in a world where there's different polar views on different things. So I believe there's like the stake, basically totalitarianism, communism, fascism. And then there's capitalism and free markets. These are kind of two polarities that fight against each other. And the absence of a strong, equitable, like efficient capitalistic market, you start to get this kind of totalitarianism.

• 32:47David Weisburd?

  We're seeing that a lot today from both sides of the totalitarianism. And I like to think that by bringing more capitalism and free markets into the world, we're playing a small part in thousands of companies. Perhaps not a large part in any one company, but to drive this kind of positive force into the world. It's making people happier, healthier, more unified versus this kind of dark, dark totalitarian polarity. That, that's kind of how I, how I view it and, and that's become a good organizing principle for me.

• 33:19Speaker 01

  I agree with you, and I think just in principle, essentially you are, if you sort of underwriting lending or buying GP positions or lending against LP positions, with certain funds, you're probably going to be lending against certain assets. So you're investing, you're lending against good investors. We're probably going to be promoting good companies. That's sort of the thesis. So you're kind of creating jobs and you're incentivizing people to work with good companies that would hopefully do well. They're probably got good, a good mission and are solving a good, a good solution. So, yeah, I think, I think the peripheration of like growing the economy in different ways, that is a motivating factor. So I think from what you said, that really shines a lot.

• 33:56David Weisburd?

  There's a cathedral parable. A, a foreman asks three workers, what are you doing? And this is at a cathedral. And the first replies, I'm laying bricks. The second says, I'm building a wall. The third says, I'm building a cathedral. So I think unifying principles and understanding the concepts behind what you're doing. Again, most people in finance will say, that's not on the spreadsheets. That's woo woo stuff. That doesn't matter. And yet. It adds a sixth gear to people's motivation. It aligns people. It makes them work the extra hour, extra two hours every day. It puts more focus and intensity into that work. It helps them recruit. It helps them build narratives, all these things that are downstream of purpose. And it's long with behavioral finance, one of the most underrated aspects of finance.

• 34:40Speaker 01

  I agree. No, I agree. I mean, I could get very deep with you. Like, I love, um, generic talk to me. If it's the intention behind anything is super important, even if it's a simple question like, how are you? In every, yeah, in every situation, whether it's internal conversations, external conversations, just having, just like an undertone of love, um, as we was at Maison is just super important because like, we are on this earth for like a short time. Life is short, so yeah, I definitely agree with you on that.

• 35:09David Weisburd?

  Well, not note, Alex, many people may not know, we were friends for a while before we even, before I even knew what you did. You've always been a good friend, friend to me and we had, we had a great trip to Charlie Monger's last Berkshire meeting and spent some good time there. And you've been a great friend. I appreciate you and I look forward to continue this conversation.

• 35:28Speaker 01

  Likewise, appreciate it. Thank you.

• 35:30David Weisburd?

  That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person in your network who'd find it valuable or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your continued support.