E310: The DPI Problem Plaguing Venture Capital & PE

The podcast explores the challenges facing Limited Partners (LPs) in private asset investments, particularly the decreasing distribution rates and the resulting illiquidity. Alex Ambroz, CIO of Aberdeen Investments Ireland, explains that distribution yields have dropped from a historical average of 25% to around 12%, causing a "downward spiral of illiquidity" as LPs struggle to meet spending needs and maintain portfolio allocations. He suggests that vintage 2020 and 2021 funds are showing DPIs of less than 0.1. The discussion covers potential solutions like secondary sales and continuation vehicles (CVs), while also addressing the principal-agent problem and the impact of career management on investment decisions. The conversation also touches on the controversial topic of private market valuations, the role of trust between LPs and GPs, and the potential for AI tools to assist in factor model assessment.

Outlines

Part 1: Liquidity Challenges, Distribution Trends

Part 2: GP-LP Dynamics, Continuation Vehicles

Part 3: Market Shifts, Structural Changes

Part 4: Valuation, AI, Future Tools

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How I Invest with David Weisburd

Part 1: Liquidity Challenges, Distribution Trends

Key Issues Facing LPs: Distribution Shortfalls, AI Tools, and Factor Model Assessment

The Impact of Declining Distribution Yields on Private Asset Portfolios

Illiquidity in Private Assets: Continuation Vehicles and Secondary Sales

Part 2: GP-LP Dynamics, Continuation Vehicles

Continuation Vehicles: LP Perspectives and the Importance of Access

What Top GPs Seek from LPs and Best Practices for CV Investment Decisions

Part 3: Market Shifts, Structural Changes

Borrowing Against Private Assets and the Shift to "Private is the New Public"

Adjusting Allocator Models for Extended Illiquidity in Private Assets

Incentives Driving Private Marks and the Potential Comeback of the Illiquidity Premium

Part 4: Valuation, AI, Future Tools

Private Marks, LP Pressure, and Principal-Agent Problems in Asset Allocation

AI Tools, Factor Model Assessment, and the Importance of Analysis

E310: The DPI Problem Plaguing Venture Capital & PE

How I Invest with David Weisburd

Part 1: Liquidity Challenges, Distribution Trends

00:00Key Issues Facing LPs: Distribution Shortfalls, AI Tools, and Factor Model Assessment

Key Issues Facing LPs: Distribution Shortfalls, AI Tools, and Factor Model Assessment

01:21The Impact of Declining Distribution Yields on Private Asset Portfolios

The Impact of Declining Distribution Yields on Private Asset Portfolios

07:03Illiquidity in Private Assets: Continuation Vehicles and Secondary Sales

Illiquidity in Private Assets: Continuation Vehicles and Secondary Sales

Part 2: GP-LP Dynamics, Continuation Vehicles

11:17Continuation Vehicles: LP Perspectives and the Importance of Access

Continuation Vehicles: LP Perspectives and the Importance of Access

15:33What Top GPs Seek from LPs and Best Practices for CV Investment Decisions

What Top GPs Seek from LPs and Best Practices for CV Investment Decisions

Part 3: Market Shifts, Structural Changes

19:45Borrowing Against Private Assets and the Shift to "Private is the New Public"

Borrowing Against Private Assets and the Shift to "Private is the New Public"

22:35Adjusting Allocator Models for Extended Illiquidity in Private Assets

Adjusting Allocator Models for Extended Illiquidity in Private Assets

24:51Incentives Driving Private Marks and the Potential Comeback of the Illiquidity Premium

Incentives Driving Private Marks and the Potential Comeback of the Illiquidity Premium

Part 4: Valuation, AI, Future Tools

27:35Private Marks, LP Pressure, and Principal-Agent Problems in Asset Allocation

Private Marks, LP Pressure, and Principal-Agent Problems in Asset Allocation

33:33AI Tools, Factor Model Assessment, and the Importance of Analysis

AI Tools, Factor Model Assessment, and the Importance of Analysis