Pod Insights How I Invest with David Weisburd E214: Inside Look into a $14B Multi-Family Office About this episode How can ultra-high-net-worth families invest like endowments—without becoming forced sellers when markets turn?
In this episode, I go deep with Greg Brown, Co-CEO of Caprock, on how a modern multi-family office serves UHNW families. Greg explains why Caprock acts as CFO first and CIO second, forecasting liquidity across complex balance sheets before allocating to private markets. We cover the thresholds for when privates make sense, how to structure portfolios for resilience, the role (and limits) of interval funds, and how Caprock uses pooled scale to negotiate economics and secure access to top deals. We also explore tax-alpha strategies like QSBS, Opportunity Zones, and long/short overlays.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 David Weisburd? You have 14 billion AUA assets under advisement. Talk to me about how pooling your capital, that kind of midway between 10 and 20 billion dollars, positions you in the market to invest into private capital. What way is that an advantage and which way is it a disadvantage?
0:18 Speaker 01 We do pool capital across all asset classes to get access to all kinds of opportunities. In cases, we're using that red capital to negotiate better economics, reduce fees, improved preferred returns, reduce carry, et cetera.
0:36 David Weisburd? Taking a step back, why would a wealthy family invest in private markets? What's the rationale there? Welcome to the High Invest Podcast where we explore how top institutional investors make their very best investment decisions. I'm your host, David Weisburd. Today, I'm speaking with Greg Brown, co-founder and co-CEO at CapRock, which oversees over 14 billion dollars in assets under advisement. We dig into their endowment-style approach for wealthy investors, navigating the practical limitations high net worth families face, and the significant tax alpha available for investors in the private market. Without further ado, here's my conversation with Greg. So Greg, you're the co-CEO of CapRock.
1:22 David Weisburd? What is CapRock and what problem are you solving?
1:25 Speaker 01 CapRock is a multifamily office that we have built to serve ultra-high net worth families with a focus on world-class access to private markets. And we do that tax efficiently. We do it on a completely bespoke basis for each client. And we do it for most of them in a values-aligned way. We think of ourselves really playing two roles. We're the family chief financial officer and chief investment officer. Each of those involves a number of functional activities, but we think of our clients as the CEO. And in most cases, that's multi-generational in scope and scale and duration.
2:05 Speaker 01 We have incredible access on the private investment side, but we are not a product shop. We're a family office for an elite group of clients. Our job is really to help families navigate the complexity that comes along with having a large balance sheet, preserve wealth across generations, and invest in ways that reflect their priorities.
2:27 Speaker 01 We currently serve just over 400 families from 11 offices around the United States and manage a bit over 14 billion of assets.
2:36 David Weisburd? And you say CIO and CFO, so CIO is asset allocation, access, and CFO is kind of K1's planning and almost like one is lagging, one is leading?
2:47 Speaker 01 Yeah, and I would put the CFO hat on first. It's really understanding the entirety of the balance sheet, understanding the things that we don't control first, and that includes privately closely held operating companies, real estate portfolios, personal spending. It's really sort of forecasting future liquidity management in both directions and then understanding the objectives of each of the entities in the estate plan, so that when we eventually put the CIO hat, we're doing it in the full context of all of the things that may need capital in the future. And that includes a lot of things we didn't choose and may not even like some of them, but it's important to wrap our arms in understanding around them.
3:30 Speaker 01 So that's those future obligations, particularly to the things that are not liquid, are done with a margin for error that makes it very sustainable long-term.
3:46 David Weisburd? And is this forecasting cash management? Is that something that you sit down with your clients on a weekly, monthly, quarterly basis? And kind of take me behind the scenes there.
3:55 Speaker 01 We spend a lot of time upfront with families, understanding their liquidity needs, their intent for short and long-term, charitable planning, intra-family gifting, and just really understanding the intent of each entity. And then all of the things on the balance sheet that would potentially consume cash. And many of our clients are entrepreneurs. Many of them have been through exits. Many of them are running their second, third, fourth company. And some of those companies consume capital, some of those companies throw off capital. But really understanding that engine in advance gives us kind of a starting point.
4:39 Speaker 01 And then we refine that over time as new information comes to us. I think for most families, when we try to uncover things like burn rate, initial estimates that clients have in mind for what that is tend to be off by a wide margin. And part of this process of refining what actual spending is helps all of us do that with much more precision.
5:04 David Weisburd? Having to look at their kids' credit cards and their spending.
5:09 Speaker 01 Yeah, exactly.
5:10 David Weisburd? And from a practical standpoint, charitable giving, spending money, shopping, spending on capital calls, private equity, these are all just liabilities on the balance sheet. And they all basically are one number or summed into one number at the end of the day.
5:28 Speaker 01 Yeah, that's right. And on a, I mean, we have the benefit as a family office of looking at the entirety of the balance sheet. We're looking at all of those cash flows and expected cash flows on a blended basis. That gives us much more comfort over time to take on some illiquidity. Whereas firms that I think approach investing from more of an asset management perspective, where they are kind of doing a cookie cutter model, they're at a disadvantage because they don't have as much visibility into what else is going on on the balance sheet. And because we do so much of that upfront discovery work, we are able to invest more like an endowment and we have great comfort taking on long-term illiquidity.
6:14 Speaker 01 Elsewhere on the balance sheet, when we already understand all of the things that are going to need liquidity near and long term that we've solved for with a margin for error.
6:25 David Weisburd? One of the biggest trends in finance, perhaps the biggest trend is this shift towards privates for high net worth, ultra-high net worth, family offices, essentially sub-billion dollar pools of capital. Today, 2025, at which net worth is it practical for a high net worth investor start having alternatives or significant alternatives exposure in their portfolio?
6:51 Speaker 01 Yeah, great question. Generally, once a family exceeds at least 10 million of investable assets, they can begin to access some of the benefits of endowment style investing. And that potentially includes meaningful allocations to private equity, venture capital, private credit, private real estate. Our average client is much larger than 10 million. But doing what we do is possible at that scale. Because of legal requirements and practical limitations, it gets much more difficult when you get smaller than that because of some of the work we do to make opportunities more accessible. We can still do a good job
7:35 Speaker 01 at that level.
7:38 David Weisburd? I previously had the CEO of the Walton family, the CEO of Cascade, Bill Gates Family Offices. He said one of the things family offices should focus on is making sure that they manage their money and their money doesn't manage them, or basically that their money serves them and that they don't serve their money. Are there certain light versions of capital allocation or operational complexity that somebody with $10 million might want to pursue versus somebody that has a whole staff to do the work for them? And just talk me through that.
8:12 Speaker 01 Yeah, maybe doing private investing, number one, is very hard to do it well. It's easy to deploy capital in private markets. It's hard to do it well with top quartile managers for many reasons. Having access to great funds is difficult because most great funds that have sort of longstanding, high-quality, risk-adjusted returns have a lot of other investors who also appreciate that and have been at the table, recurring investors throughout many vintages. And so...
8:54 Speaker 01 Many of the great platforms that have been around for decades just are very difficult to get into. And then for smaller investors, it can be really difficult to meet the minimums and build out a diversified portfolio when the check sizes and commitments are substantially larger than what would make for a comfortable commitment at that level. And then to your point on the administrative overhead and having sort of the administrative complexity, tail wag the dog of the client, their overall objectives.
9:33 Speaker 01 There is a lot of complexity in handling when you have dozens of fund commitments or co-investments, handling all of the tax documents, making capital calls, managing liquidity to forecast those things on a blended basis over time. There's a lot of complexity there, and I think all of our clients appreciate what we do as a family office to make that look less difficult than it is.
10:03 David Weisburd? So where does the service that you do for your family offices start and stop on behalf of your clients in terms of this complexity, cash flow management? And talk to me about how much you go about obfuscating this operational complexity.
10:16 Speaker 01 For every client, we track every cash flow across every entity and serve it to them every month. So we're tracking every capital call, every distribution, characterizing it from a tax perspective and a return perspective so that we have ongoing returns across the portfolio and have very tight control and reporting on cash flow movements in both directions. So there's a lot that goes on from a reporting perspective.
10:56 Speaker 01 From, I described some of the activities that we perform as CFO. A lot of those are kind of building blocks to help us understand and give us context around what each entity on the balance sheet is trying to accomplish. But as a CIO, it's really about Sort of starting with a macroeconomic view of the world, the opportunity set, the risks of that environment, which clearly is a changing, it's a moving goalpost, if you will. But once we have that view and are prepared to deploy capital, we spend a lot of time
11:36 Speaker 01 putting opportunities in the toolbox across all asset classes and then let our advisory teams who have the best understanding of what each client is trying to accomplish, make those tools available to those teams and then the teams make recommendations to clients for sort of the right pieces of the puzzle to accomplish the needs of each of those entities. So it's really, you know, those two roles, there's a lot behind those and within our firm, there are many sort of functional teams that are playing a role there. But it's really about, you know, kind of managing the balance sheet, managing those
12:17 Speaker 01 future obligations and then building an elite group of opportunities to fit our macroeconomic view. What we don't do is a lot of the more concierge services. So we're not walking our clients' pets, we're not fueling the jets, but we might help them, you know, buy the homes or buy the plane or the boat or finances. So things that have sort of an impact on the balance sheet, we're involved in. Things that have more of a personal impact on a day-to-day basis, we're probably less involved in.
12:58 Speaker 01 But as a family office, we're not trying to do what we do for everyone. We're trying to do a lot for a small number of families versus the inverse, which I think is more akin to what most of our peers in the industry do.
13:11 David Weisburd? At the time of this recording, you have 14 billion AUA assets under advisement. Talk to me about how pooling your capital and that kind of, you know, midway between 10 and 20 billion dollars positions you in the market to invest into private capital. What way is that an advantage and which way is it a disadvantage?
13:35 Speaker 01 Yes, we do pool capital across all asset classes to get access to all kinds of opportunities. In some cases, we're using that breadth of capital to negotiate better economics, reduced fees, improved preferred returns, reduced carry, et cetera. Many of the co-investments that we do are direct to balance sheets, particularly for companies where we can be helpful to those portfolio companies of GPs that we know well. But there are many scenarios where having pooled capital in pooled vehicles also makes sense, and we do a fair amount of that.
14:18 Speaker 01 We... There are opportunities where there are limited slots in funds or limited slots in co-investments. We have pooled vehicles. We've done seven vintages of pooled vehicles in private markets that are all fee-free and carry-free to our clients, and that alone is exceedingly rare for firms in our industry. In those vehicles, we do LP commitments to things that are very difficult to get into. And then we also do co-investments in many, many great companies over the years. We've been in SpaceX multiple times, going back over a decade.
15:02 Speaker 01 We're in companies like Andorol and Sironic, and we were in Palantir when it was private, Adipar, Anthropic, and many others. But all of those, for our clients, are as direct as you can get and with no economics to us. So they're special opportunities, and these days, private markets are...
15:26 Speaker 01 A pretty important place to be.
15:28 David Weisburd? I was speaking to the CIO of Fordham University earlier today. We were discussing interval funds. And one of the things that she mentioned was that they kind of are a poor fit for liquidity because just the time that you need the liquidity, you know, everyone's rushing for the gates and they can't get that much liquidity. And then they're also poor for the illiquid bucket because there's some cash drag there as well because you basically have to invest in some liquid parts of the portfolio in order to to. What are your views on interval funds specifically for taxable investors?
16:04 Speaker 01 Interval funds are a sensible part of the broader democratization of private markets.
16:15 Speaker 01 And particularly for firms, advisory firms that have smaller clients or maybe not sufficient scale or the clients aren't
16:27 Speaker 01 aren't big enough or their investment teams are not sophisticated enough to develop you know, direct access to top opportunities in private markets. It's really, it's really hard to develop that access. It's taken, we've been doing this 20 years and probably spent the great majority of that time cultivating the access that we have today.
16:48 Speaker 01 So I think they have a place, but for I think it's for exceptional opportunities where they're producing sufficient liquidity to match the redemption liquidity requirements of the fund structure. I think when you have a redemption timeline mismatch is when you kind of run into problems and more than likely, to her point, you probably run into gating and not as much liquidity as you thought was there in the first place.
17:22 Speaker 01 We use interval funds, I would say, very sparingly. There are a couple of situations where they work well. But for the most part, our private markets access is it's illiquid, we know it's illiquid, our clients know it's illiquid, and we have solved the liquidity on their balance sheets elsewhere in advance, which allows us to not sort of wrap illiquid assets in semi-liquid vehicles, which. To your point is where problems arise.
17:52 David Weisburd? So what's the best practice today, Q3 2025, when it comes to cash flow management for family offices? So you you commit $10 million into a private equity fund. You know it's going to be drawn over the next three to five years. What practical tools toolkit do you have to manage the liquidity?
18:11 Speaker 01 Good question and difficult problem. I think when you're making a single commitment to a fund, you have a difficult time predicting when exactly the capital calls will be made. Most funds do not do that on a very predictable schedule. But when you have dozens or hundreds of funds where collectively you can manage the liquidity, kind of the combined liquidity forecasts of those as a group, it can start to get much more predictable. And so the way we think about that is to kind of break commitments down into short term needs, say
18:53 Speaker 01 the next six months or so, where we'll keep forecasted liquidity that should be needed to cover things like personal burn rates and any known upcoming expenses in the short term, plus those capital calls that are in the next six months or so. Keep those in very liquid, short duration treasuries or money markets or something that's quickly available. And then things that are a little bit longer term, call it six months to 18 months or so, we can put in something that's a little longer duration that may be semi liquid credit fund or commitments that we've previously made to semi liquid credit where
19:34 Speaker 01 we can redeem them over that timeline in advance of those upcoming capital calls. And then for the capital calls that are quite a bit further out, you know, two plus years out, we can deploy those into longer duration. What we try not to do is have
19:52 Speaker 01 More equity exposure than necessary to those assets. What we don't want to be doing is redeeming or selling assets at the wrong time in the event that the markets get crossed. We don't want to be raising liquidity from the wrong assets at the wrong time. So we try to make sure we keep those extra liquid, have some margin for error and have several buckets we can get liquidity from if there is a more of an unexpected raise required.
20:24 David Weisburd? Double click on the issues that arise from getting liquidity from, quote unquote, the wrong assets on the wrong time. Is it some tax drag? Is it just that you're selling at the absolute wrong time? Tell me more about that.
20:37 Speaker 01 Well, I mean, if you look historically at times when equity markets have had a sort of a quick drawdown and if we had been expecting to be able to get capital from equity markets for capital calls in April or May of 2020, because those were, quote unquote, liquid buckets, but they're equities and they obviously got beat up tremendously in a short period of time. If we were having to sell assets and move out of those equity positions at that point, we would have been selling at the bottom. And it's never a recipe for maximizing value.
21:19 Speaker 01 So we try to make sure, because we're making, at the moment, 14 billion of capital, almost 7 billion of that is deployed into things that are not stocks and bonds. So we have a tremendous, on a blended basis across our client base, we have a tremendous amount of non-liquid commitment capital. And so it's important to make sure we understand the calculus for those capital calls and the sources that will fund those future capital obligations. So you just don't want to be in a position where you're selling at the same time everyone else in the market is selling. We want to be opportunistic buyers when there's a drawdown in public markets or in other asset classes, not a seller.
22:03 David Weisburd? One of the dirty little secrets of fund of funds is that they love to overcommit to venture funds because they get some distributions back and. Is there ever a reason to over commit in your equity bucket, knowing that you would have to sell some of your public bucket in order to make up in these a couple of standard deviation liquidity crunches?
22:23 Speaker 01 Yeah, I think most CIOs that do endowment style investing would say it's logical to over commit somewhat over time, knowing that you're going to be feathering in multiple vintages and that most of these funds take three plus years to deploy. But it really depends on, I think you have to get a bit more granular and look at the underlying history of each GP platform, each fund platform. What has been their timeline? What is their expectation? What has been their expectation or track record of returning capital? And that's an area where you need to be really careful because there have historically been
23:07 Speaker 01 periods where DPI is limited and we're kind of at the tail end of one of those right now, where there are plenty of new venture and private equity funds and real estate funds created in 2020 and 2021, but not nearly as much capital, even though there's a lot of value being created in many of those fund platforms, not as much value has been returned to LPs. So if you over committed too much, you may have gotten over your skis and created a problem.
23:37 David Weisburd? Said another way, when there's not a lot of DPI, in many markets, it's highly correlated. So you might think you have commitment, private credit or private equity, but if there's just no DPI, it could be correlated even across asset classes.
23:51 Speaker 01 That's right.
23:53 David Weisburd? And it seems like the only solution that people talk about really is secondaries, selling, and of course, it could be painful to sell at a 10, 15, 20% discount. You talked about selling out of your public book, which is also painful. Are there practical lending tools that are available to high net worth investors? Double click a little bit on other tools that are available to solve this problem.
24:24 Speaker 01 For us, if we are sellers in the secondary markets, it's likely because there was a meaningful, unexpected material capital need that wasn't forecast. We love the secondary market. It provides all kinds of liquidity for early employees, early investors, founders, certainly in the venture market, but also even for tail interests in LP commitments and private equity. But I would say more often than not, we are a buyer because of the discounts you referenced. Probably 19 out of 20 times we're engaged in secondaries, it's because we're buying something, not selling.
25:05 Speaker 01 If we're selling, it's probably because there was a large, unforecasted capital need that we didn't see coming, which, wearing the CFO hat, that would be a mistake that we would be sort of navigating around in not necessarily hours, but sometimes things come up in terms of demand for capital and we have to navigate those. But it is a great tool.
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26:17 David Weisburd? And unlike endowments and pension funds and foundations, you have to deal with the taxable aspect of your investor base and your client base. Tell me about how that differs your asset allocation strategy and also what tools do you use in order to make decisions on a post-tax basis?
26:38 Speaker 01 Yes, a great majority of our clients are taxable investors, except for some of their entities like IRAs, 401ks and family foundations, which there are many. But we use many approaches to navigate tax. Every investment that we look at, we're looking at the net of tax effect and making sure that we're putting it in the right entity, the right time, the right place. For example, if someone has a meaningful income that's easily covering their personal expenses, we're not going to create a lot of ordinary income taxable gains elsewhere in the portfolio.
27:23 Speaker 01 But for someone who is a senior executive and retires and suddenly no longer has that income, then we may layer in a radically different approach to yield creation. But we use many, many tools to navigate the tax picture. For early-stage investing, we do a lot of seed and up through Series A investments in venture capital that create QSBS, Qualified Small Business Stock Gains, that create a lot of headroom for tax-free growth.
28:04 Speaker 01 We use Qualified Opportunity Zone investments in real estate to defer taxes and then grow tax-free over the last several years. And there's been a new version of that that just passed legislation. We use Tax Alpha Long Short Equity Strategies through firms like Quantino and AQR, 13030 and many flavors of that to accomplish different things that generate material tax alpha. We use a lot of estate planning vehicles, Spouse Lifetime Access Trust, Gratz, CLATs,
28:45 Speaker 01 CRTs, do generational gifting along the way, private placement life insurance, donor advised funds and foundations. I mean, there obviously are many tools, but we're using them all.
28:59 David Weisburd? You mentioned tax loss harvesting. It's probably the hottest tool right now in tax planning on the high net worth side. Tell me about that. And also, you mentioned the 13030, but there's bigger, there's 300, 200. Tell me about these strategies. A, when you use them, and also, when could they go awry?
29:21 Speaker 01 Quantino, AQR, and others have these strategies that, and they work in many scenarios. So there are kind of different flavors of them, but the first and probably largest one of those is called the 13030. And think of, think of the 100 part of the 130 as being a core portfolio. And the 30 up and 30 down is where we borrow against the base position to add 30% levered access to the longs that the manager likes.
29:59 Speaker 01 And then we simultaneously short 30% and get a short interest rebate from the custodian that covers the costs almost entirely of the margin.
30:11 Speaker 01 So that the net effect of that is you're getting the core underlying exposure you would have had to begin with, whether that's in an S and P 500 portfolio, or it's in concentrated assets that you don't even want to sell. You can do that as well. They call it an overlay portfolio. And then in a market where, you know, good things go up, you lose on the shorts. And in a market where things go down, you make money on the shorts but lose on the 30% long. You're always in a position where you're able to harvest losses in a good market or a bad market. And in a normal tax loss harvesting separate account,
30:53 Speaker 01 you would see somewhere between 50 and 100 basis points of tax alpha created. In these, in this 13030 strategy, it's about three times that. And to your point, it doesn't have to be limited to 30% leverage. You can do 45, 45 with no change in documentation. And you can go substantially higher than that, which some people use with, compare that with fixed income. You can go 225 in both directions.
31:24 Speaker 01 The more leverage you use, the more you probably will want really stable assets as the sort of core exposure. Otherwise, it's your question of what can go wrong. Capital, you can get a margin call and have to unwind the strategy. But it's a powerful, you asked, why would someone use that? It's a powerful way to generate tax losses to offset other gains that we're seeing elsewhere in the portfolio. So if someone has a concentrated, low basis position, maybe they took their company public or received a public company interest from some other company that they sold to that public company. If you have
32:07 Speaker 01 a low basis position and you're expecting to harvest material gains, or you just did harvest material gains, these losses can be used to offset those gains. And it's become popular, I would say, very quickly.
32:22 David Weisburd? Yeah. So, taking a step back, why would a wealthy family invest in private markets? What's the rationale there?
32:33 Speaker 01 Well, private markets drive large portions of the economy. In fact, 87% of all companies in the United States with more than 100 million of revenue are private. The average new public company in the year 2000 was four and a half years old. And there were many of them on a regular basis becoming public. The average new public company now is over 12 years old. And a lot of that has been enabled by the secondary market we talked about earlier. But companies like SpaceX and Anduril and OpenAI and Anthropic and Stripe are worth 50 billion to hundreds of billions of dollars. And if you're waiting for those
33:18 Speaker 01 companies to become public, you're missing out on critical years of massive growth. And as an example, Anthropic, over the last four years, went from, five years ago it didn't exist, but went, over the last four years, it went from 10 million of revenue to 100 million of revenue, to a billion last year, and is projecting, this is public information, but is projecting 10-plus billion in revenue this year. That's 1,000% annual growth year-over-year for years.
33:51 Speaker 01 For four years in a row and the average of the S and P 500 last year was just over 5%. There's a lot of other data around this, but private markets is just a really important place to be invested for those who can and with the democratization of private markets, making that more accessible, some of that via new legislation. I think that's important to make it available to more people, but for now, the ultra net worth crowd, if they have the right advice, they can get access to a lot of the most interesting companies in the world.
34:26 David Weisburd? I had the CIO of Hurdle Callahan, Brad Conger. One of the things that he's really analyzes that how much small cap value has changed in the public markets. So obviously there was this value versus growth kind of lost decade and then it's bounced back a little bit, but fundamentally what is value companies in the public markets today, fundamentally the companies are different. So he argues that there's a lot of adverse selections, that only the companies that have to go public at the smaller end are now small, small cap value. And then also a lot of those smaller cap companies actually fall in large cap companies. So they're just like poorly managed, large cap companies.
35:08 David Weisburd? Whereas before you had companies go public earlier, now they're actually private companies. So to be truly diversified today, you do need access to the, the private markets. You can't really be diversified just through the public markets.
35:24 Speaker 01 Exactly. It's a good observation. Public markets are very different than they were 20 years ago and there are, just aren't as many of them. There's not as much sort of velocity of new issue coming, coming to the market. And it's unfortunate for retail investors, for smaller investors, but for ultra high net worth investors, you sort of have a captive market with relatively exclusive access. But I, you know, a lot of that has been created by the regulatory environment that makes it very costly to be a public company.
36:03 Speaker 01 And so if, if you have secondary markets as a, as a founder or early employee or early investor to kind of take the pressure off of boards of private companies to become public. Then the runway for them to remain public just can be in place for a lot longer.
36:24 David Weisburd? Do you worry that the democratization of the private markets, more people having access to that is going to drive down the returns? In other words, it's just supply and demand, more demand chasing finite supply will drive down returns?
36:37 Speaker 01 I think that the pie is growing fast enough that that's less of an issue. And I think the sort of social dynamics of giving more people access to those markets are probably more important than the returns of the of the top 0.01%, which I say selflessly, given that that is my client base.
37:00 David Weisburd? I think also net new companies should be funded startups. And you could argue, maybe the risk return isn't even there for investors. But if they are funded, there's they're going to be now series A companies, series B companies. So the pie could grow. But in terms of private credit, it's arguably the hottest asset class over the last several years. Are you concerned that it's overheating today and that there's too much money chasing too few opportunities?
37:29 Speaker 01 Again, that's another market where the pie is growing quickly. And 20 years ago, a lot of private credit deals were happening with banks. And because, again, because of the regulatory environment, making it more and more difficult for banks to lend and threading the needle on their tier one capital requirements, that market has been pushed to private credit lenders. We think private credit has, can offer very attractive risk adjusted returns and often with lower volatility than public markets. For taxable investors,
38:14 Speaker 01 It's tricky to navigate and we sometimes use tax advantage wrappers to use private credit where we would do less of that for our taxable investment accounts, but still there's a lot of, there are a lot of interesting platforms that do a tremendous job at scale, firms like Cliffwater, that have grown, to your point, quickly alongside many others, but that drive great risk-adjusted returns and have giant pools of borrowers and are able to navigate the liquidity that they're offering to their LPs.
38:57 David Weisburd? And just to double click on that, you're using private credit, which to a lot of people is attractive, but essentially, short-term income could be up to 50%. You're putting into nontaxable entities like PPLI or private placement life insurance. Tell me about that. I've heard conflicting things on PPLI. Some people say that it's very complicated. Some people say it's just a 1099 every year. How complex of a structure is that and at which asset size does it become practical to pay for a vehicle like that?
39:33 Speaker 01 The accessibility of PPLI has changed rather dramatically in the last few years. It used to be a tool for only very ultra high net worth families and the typical PPLI commitments that were being made were many, many tens of millions. Those are still happening, but that has the infrastructure and the platforms that offer that have.
40:05 Speaker 01 Made it very effective tool at much smaller levels. Single digit millions, which is still a lot, but it's. They've perfected that and you can put many kinds of investments in PPLI. Cash, stocks, bonds, private investments and they grow without being taxed and you can take them out later. If you do it in a tax efficient or you can get the capital out later in a tax efficient way and can borrow against it along the way. So it's a great tool. I would say it's not completely gone mainstream, but it likely will unless there's a legislation
40:47 Speaker 01 change, but that's been forecast for a long time and hasn't happened to date.
40:52 David Weisburd? If you could go back 19 years ago, when you co-founded CapRock, was one piece of advice that you wish you knew that would have either accelerated your career or helped you avoid costly mistakes?
41:05 Speaker 01 When we set out to build this nearly two decades ago, our aspirations for what was possible were kind of based on where the world had come from and we spent, for the first five years or so, we spent most of our time talking about what is a family office, evangelizing the category, talking about why should I, why should I pursue private markets at all? What does it mean to have an aligned approach to family office investing? How do you contrast that with a bank or a broker? There was all this sort of field building that was required in order to tell the story
41:50 Speaker 01 and certainly most people at that point didn't know who CapRock was. Fast forward today, in the ultra high net worth space, most families understand what alignment means and why it's important. Almost everyone these days understands that private markets are a key part of the total capital market scene, especially amongst the most innovative companies and that great risk adjusted returns are.
42:22 Speaker 01 Or possible in things like private equity and private real estate and private credit.
42:30 Speaker 01 And they understand some differentiation between the brokerage platforms and independent firms in terms of alignment. And in most cases, when we meet with someone, they know who CapRock is. And so that makes the whole thing dramatically easier to scale when you don't have to spend all of your time evangelizing the category and can really talk about what we can do for a family more directly. I think if I were to go back and replay some of what we did and do it differently,
43:10 Speaker 01 I think I would do it faster and be more bold in terms of the internal investments that we made to scale more quickly. For 16 years, in our case, every investment in infrastructure and team and office and the entire platform was a personal capital call. And I think that made us reticent to make too many investments at the same time. And these days, it's much more obvious what the opportunity is. And we've been able to achieve sufficient scale that we also understand that when we
43:52 Speaker 01 get more scale, to a degree, we get better. The opportunity set improves, the infrastructure improves. And so there's a sweet spot where
44:06 Speaker 01 scale makes you better. But above a certain point, scale tends to
44:16 Speaker 01 I've noticed with some of our peers, with too much scale, then the whole thing can become productized or mechanized such that you lose the personal touch. But I think we've done a good job of managing that the balance of do a lot for a small number of families and understand that we're not trying to do this for everyone.
44:37 David Weisburd? Speaking of scale, a lot of multifamily offices, they used to offer these kind of venture co-invests, like you mentioned Sironic, Anthropic, SpaceX, and then they stopped doing it because they found that even if somebody gets a 10x in one vehicle, a 0x in another vehicle, it was destructive to kind of the relationship with the client. How have you been able to scale that? And what's your philosophy around that?
44:59 Speaker 01 We've made many, many of those investments. We do them a couple of ways. We do them in pooled vehicles that I mentioned earlier are fee-free and carry-free. Those are really parts of a portfolio. And so if you have an outsized positive outcome or negative outcome, it's still part of a portfolio. But we also do for kind of high conviction opportunities where we think, you know, there's a substantial upside opportunity and a very low probability of a negative outcome. And if there are sufficient slots available and there's sufficient capital available, in addition to doing those co-investments through
45:42 Speaker 01 the pooled vehicles, we will do them, you know, direct with clients.
45:48 Speaker 01 I think many clients appreciate being part of those things and especially with a platform that is not wrapping them in extra economics and to be able to deliver things like SpaceX or Anthropic or, you know, some of the other names you just mentioned, direct to clients and in many cases, direct to the cap table of those companies or in, you know, very efficient SPVs alongside world-class general partners of, you know, top quartile or better venture funds and private equity funds. That's a pretty special opportunity. And those are, you know, many of those businesses have become, have become, you know, category winners and our clients have been, been able to watch and be part of that, that journey, you know,
46:32 Speaker 01 long before the average investor is at the table in public markets.
46:40 David Weisburd? Well, Greg, this has been an incredible deep dive on high networks and family offices. Appreciate you taking the time and look forward to continuing the conversation live.
46:51 Speaker 01 Thank you. I appreciate it. Thanks for having me and enjoy the conversation.
46:55 David Weisburd? 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 we review the episode's analytics. Thank you for your support.
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