Erik Serrano - Investing in Investment Firms - [Invest Like the Best, EP.358]

This podcast episode delves into the intricacies of investing in investment firms, emphasizing the importance of resilience and variant perception in successful GPs, as well as highlighting key takeaways from Project Legends and insights from experienced investors and founders on building and managing investment firms, including knowledge transfer, product design, and alignment between stakeholders. Takeaways • Successful GPs possess resilience and variant perception, allowing them to overcome adversity and make contrarian investment decisions. • Effective communication and aligning incentives between the principal and agent are crucial for successful investment decisions. • A true partnership between the investment firm and the founder is essential for maximizing returns. • Successful GPs match their skills and compulsions to the platform they're building, understanding stakeholders' wants and designing structures that extract value for all involved. • Specialization and passion are key factors in identifying good GPs, while red flags include a lack of openness to feedback, self-awareness, and a tendency to overestimate knowledge. • Simplicity and transparency are important in investment strategies, as investors may be hesitant to invest in overly complex or opaque strategies. • Knowledge transfer between founders and asset owners is essential for co-investments, including insights on founder selection, referencing techniques, and macro insights. • Aligning subscription and redemption structures with investment strategies is important for managing investment firms, along with future-proofing to anticipate and mitigate risks. • Fundless sponsors can provide value to asset owners beyond performance by providing knowledge transfer, capacity, discounted fees, and access to new opportunities. • A balance between personal life and professional success is important for investors, with a focus on prioritizing family and relationships while pursuing financial goals.