E199: How Rahul Moodgal Raised $99 Billion by Playing the Long Game

0:00Rahul, welcome to the HowInvest podcast.

0:03Rahul Moodgal:Thank you, David. A real honor to be here with you. It's an honor to have you. So before we got started today, I wanted to confirm exactly how much you've raised. So you haven't quite raised$100 billion. You raised$99 billion. But I'm excited to hear the blueprint on how to raise$99 billion. And I'm excited to have you on the podcast. Thank you. You're really kind. I don't know if it's a blueprint, but it's my way. and I think there's no right way to do it. There's just lots of different ways. Tell me the story about how you raised money at the Bear Stearns Cap intro event in 2006. Okay. So at the time I worked for TCI, the Children's Investment Fund, which is founded by Chris Hon and I was head of investor relations and we built a platform which grew to five managers, TCI being obviously the anchor main fund on the platform.

0:58And I had the honor of working with Chris and then raising money for him and the other managers he brought to the platform and looking after all the clients. And so we had taken on an ex-Fidelity fund manager who was raising a fund in the European large cap space. It's interesting, but it doesn't get you all excited, particularly in 2005 when people had too much money to put to work. So Bear Stearns invited us, trying to engage us. I went and did two round tables of 12 investors and I sat in that first room and I did the usual pitch about the fund, the platform, what they were doing, the rest of it and somehow I kind of came out of my body and I could see myself talking and I just thought this is awful, it's so boring, it's not compelling and everyone's asleep and I was just bored of what I was doing and saying and I thought I've got another chance in an hour to do this a different way.

1:58And I had to simply come up with another way of trying to make it more interesting, both for me and for the investors. And so I went into second session. And by the way, from that first group of 12 investors, zero people invested and had any follow-up or interest. I went into the second meeting and I started off by saying, these are the reasons that people don't invest with us. And you can see people's faces going, what what's going on here people don't do that they always pitch and all of a sudden I got people engaged because it was doing the complete opposite of what they expected me to do number one and number two as I went through the negative those are positives for some people because it was different it was contrarian it was trying to fill a spot in their portfolios where other people weren't fitting and people got really engaged and at the end of that session I had big follow-up and And eight of those 12 people in that room actually ended up investing with us.

2:54So I thought, wow, this is actually a very different way to do this. And it changes your initial interaction with people.

3:01Rahul Moodgal:Extremely stark differences at the same cap intro event. Double click on why you think starting with the negatives had such a powerful effect on the audience. First thing is very obvious is that it was just different. Because they're all used to hearing the same old nonsense. This is my fun. this is what I do this is how I'm different most of the time it's not different and the reality is I'll quote Anders Hall at Vanderbilt University who says the world doesn't need another fund there's enough funds out there and so when you're doing that you have to try and engage but I'll take you to the next level and I think the key thing that everyone forgets about this industry the funds come and go the performance come and goes it's relationships it's all about relationships and I think when an investor an LP tries to meet a manager a GP yes the stress you know everything's there but the key thing they're trying to do is understand who this human being is how do they deal with stress how do they deal with bad times and it's the same way that when you meet another human being and you want to determine if they're going to be in your universe if they have the same values as you if they're going to be someone you're going to have a relationship either personally or as a friendship level you want to know what are they correct what are the things that drive them crazy what the moments that they're going to lose the shit or you know be unbalanced and you just want to know all the bad stuff as soon as you can because you want to know am I going to make an effort is this going to work out so I just kind of think people just didn't expect that and straight away they're able to sort of do a checklist to say well that's one less thing I have to worry about that's one less thing I have to worry about you know we are concentrated we had lockups we had high fees we had all the things that people wouldn't know straight away because they'll buy into the strategy.

4:41And then when they're doing the deep dive, the negatives start coming. But if you give them negatives at the beginning, actually, in spite of all that, I'm still interested. So it's kind of like you take your clothes off and say, this is who I am. Are you interested or not? And then you go forward and start saying, well, this is who I am inside.

5:01Rahul Moodgal:Intuitively, you would feel like that strategy would maybe appeal to two of the 12 investors, and then you wouldn't waste any time on the other 10. And it was a win-win. You'd build this deep relationship with these two, but you got eight of them to invest. So somehow this very, very specific type of strategy and this very specific segmentation appeal to a majority of investors. Why do you think that is? I'm not going to say it was a strategy that was different. I'm going to say it was the initiation of the relationship that was different. So, you know, when you meet people the first time and especially when you have friendships with people that are very very long term you never ever forget how you met them ever right it may be oh I met them because I spilled a drink on them in the bar or I met them at a party they had no one to speak to I do and so we just started speaking you always remember those things and so for all of those people and I speak to many of those people still now they always say I never forget when I first met you and you did that pitch to me, it was just so different.

6:05They were just a bit shocked that someone had gone into a room doing that because it's always about being the cheerleader for the manager you're working with. You're still the cheerleader, but what you're doing is saying, this is what's under the bonnet, first of all. Everyone's showing you the beautiful car, but not showing you what's under the bonnet straight away. But I went the opposite way and saying, this is what's under the bonnet. And then you can see how that makes up the car.

6:28Rahul Moodgal:I think in general, that's a very underrated aspect of fundraising is the anchor on how you first meet the person. In my world, I like to be introduced by a highly credible mutual party, which forever anchors you as this person introduced you to him versus just kind of off the cuff, or maybe even you listen to someone's presentation, you come in with a lower status and you're forever anchored as an audience member. These things could play a big role in how the relationship plays out. 200 % agree. and David it plays into in my mind so many people who do what I do are focused on that transaction this is not what it's about the fact is a number of those investors I've worked with now across different managers they've moved shop and I've worked with different managers and they always remember how we first met they don't even remember the investment they remember the relationship right because people transcend organizations this is not about executing this is about am i going to be able to pick up the phone and call david in 20 years time yes because i didn't pitch him i wasn't aggressive about selling him something and it didn't matter to me whether they invested or what mattered to me is that we built a relationship where we mutually respect each other's space and time and we call each other and talk about things and that's i think the big thing that everyone misses when they do what I do.

7:54They always focus on the short term. I care about, is that person who I sat in the room with in 2006 going to take my call if I call them tomorrow, 20 years later? That's the difference. And when you have those relationships, they always remember how you met them and the fact that you've worked with them through different guises, good times, bad times, and you've just communicated and stayed in touch. And I think that's the key thing about it.

8:17Rahul Moodgal:Over time, have you also learned who you want to invest into over 20 years or who you want to take money from? Don't want to work with everybody. I think I've, I've, it's kind of like a human being's evolution and maturity. When you don't own it better, you want to work with everyone. But I think over time, I'm not really arsy about many things, but I am really picky on the quality of capital that I work with, because it's about long term relationships. and it's about people understanding what you do versus what they want and how you fit into each other's universes. I'll happily speak to people that I wouldn't work with but I'm really picky about who I have as clients because there's just got to be that understanding of what you do versus what fits what they do and a lot of times there isn't a fit but to me it doesn't matter.

9:15So I've spent a lot of time trying to nurture relationships with the best organizations. And I split investors into asset owners and asset allocators. Now, there are good asset allocator investors, but I tend to focus on asset owners. And what I mean by that are the people who are the fiduciaries for that capital itself, or that the principles of that capital. And so you're dealing with the people who are making the final decisions. And part of this stems from having a few bad experiences, Whereas if you work with gatekeepers, asset allocators, you never know what's going on on the other end. So I want to know who are the underlying investors who are giving us capital, because then I can understand what their time horizon is, what are the parameters they invest in, what are the things they look for, number one.

10:06Number two, when you work with asset allocators, a lot of the time they're protecting their business first and then thinking about investing second. And I'll give you an example. you know one of the firms i worked at we had a huge firm as a client that had 20 billion dollars and they had 70 million with us and they phoned me up and saying we want to give you guys much more capital so we can be 200 250 million out of our 20 billion with you it's like great we're closed but there'll come a point where we'll call you and there'll be opportunities two weeks later they called me saying we need to redeem I said sorry we spoke to you two weeks ago and you wanted to add you know 180 million to us when the opportunities came and now you want to redeem it what's going on they never ever told the story but through two or three connections I found out that they had a huge corporate pension plan that was their biggest client decided to pull the money and rather than being transparent about it and telling us look we're interested but things have change and longer term we still want to get there we don't want to get there they just went cold turkey on us and my pm i'd never seen him get angry not the one i work with now but one i'd worked with previously just got just went mad and said you guys had promised me you were long term you were committed and all this stuff and we said we'd work with you but you weren't transparent about it and so those people were interested in protecting their business and we just didn't know what was going on underneath because we never knew who the clients were that had money from them and that they give money to us and so that's why i always worry where there's intermediaries now that's not all always true there are good allocators but it's just one of those things where i'm much more hesitant because they've they've got two angles so they've got to keep these people happy that give them the money and then they've got to allocate that money versus me just dealing you know a to b directly the rather than a via b to c so that's that's kind of how I think about it.

12:02So I do really care about the quality of capital. I don't care about the size of the capital, if it's five bucks or 500 or whatever, I care about the quality. That's just so important to me.

12:12Rahul Moodgal:A lot of people, when they reach a certain level of success, they see being able to pick their clients as, in many ways, the ultimate luxury, being able to deal with who you want to deal with. Is there also a cold, hard, rationalist approach to why you want to build relationships with certain types of people or is it more of a quality of life aspect? It's not quality of life. I certainly want to continue loving what I do. I'm honored to love what I do in terms of the day-to-day, the people I work with and the investors I get to work with. It's great. I want to interact with people who are smart, thoughtful, who challenge me, who I learn from, I get to interact with and who I can help.

12:55And I particularly love mission driven organizations who are doing incredible work where I can help them meet other equally driven mission based people or people who work in the same missions as them help them find investment ideas bring them together allow them to share the things they're worried about the concerns they have about things in the portfolio in the world in terms of government policy whatever it may be those are things that I get real energy from building to people together is what I just love. I love people and I love seeing them interact, share ideas, compound knowledge. You know, I've stolen that one line from Ted Seides, but that's literally what we both love doing.

13:34And that's, I just get such a pleasure from doing that. When I was a kid, I wanted to be a diplomat and I think I get to do that in this world of finance. That's really what I love doing.

13:44Rahul Moodgal:I've been really thinking about this concept. There's no real term in the market for it. I I call it LP capture and where an otherwise good manager could be captured so much by his LPs and the feedback from his LPs that could actually affect a strategy. The relationship between GPs and LPs could be bi-directional and the opposite is true too. You might have the Yale endowment or a very high profile endowment that's coming to you in the depths of a bear market where there's blood on the streets and saying, we want to back you. Here's$200 million to go out and buy these damaged assets you could actually get propelled by your lps as well but i think not enough is talked about how lps could actually improve the performance of the gps not just gps improving lp returns absolutely agree with that and i think it's this this it's such a complex thing to talk about this because I think when people start out a lot of people are what I call refugees when you build your own firm you're a refugee when you're a refugee you leave for a better life where you're in control right there's either something you didn't like at your previous firm or you didn't you stopped fitting in or what you're doing didn't work in or whatever it may be but you leave for a better life where you're in control the thing is a lot of the people who leave for a better life to be in control have no idea how to build a business because they've usually worked at a shop where everything has been done for them right they have a hr person they have a coo they have someone who does the fundraising they have someone who does the reporting they don't need to get involved in anything but when they leave all of a sudden they're very exposed and they need to know how everything is done and so i think one of the things i've seen smart people do is to create an lp advisory committee on a lp advisory board an lpac whatever it may be where they get one or more smart investors who are working with them to be kind of a bench of safe people that they can talk to about things they're thinking about with their organization we're thinking about a b and c or we're not sure how to think about fees or we're going to hire whatever it may be but they're a group of people who are fully supportive and I think this plays into one of the things that I really say to people today more than ever is when you're investing time in building a business, the LPs obviously are interested in your strategy, but they want to know more what you're trying to build.

16:18Because if you make an investment and it goes wrong, fine, you'll lose money. But if you build a firm and you build it the wrong way, you're dead. So it's not about strategy, it's about structure. So what are you trying to build here? What's the culture? What's the structure of your fees, of your fund, of your team, of your incentives? And if you get that right and do it properly, you'll build a great organization, which then means you'll flourish and then you'll keep your investors forever. Because people initially start out by having a fund, but does that fund become an asset manager? So these are all the kind of things I think people spend a lot of time doing.

16:54So I will say to people, get one page, do a timeline. We're 2025 now. By 2030, where do you want to be? Think about three things. Assets, infrastructure, people. As your assets grow, how many more people do you need to hire? What infrastructure do you need to build? And what's your capacity on terms of assets under management? What's your break even? How much do you think you can manage without hurting yourself? And you just need to spend time thinking about this. Because when a manager opens, a lot of times they're just open and they're like, I can't raise any money. I'm like, yes, because as far as the investors can see, you're open forever.

17:32You don't have a capacity limit on what you're trying to do. There's something niche you're not trying to capture. You're just open. When you're just open, you're never going to be a priority to investors. So think about all of these things. Think about what you're trying to do, what you're trying to capture, what you're trying to solve for. Again, in the words of Anders, the world doesn't need another fund. so i think to that point it's always about thinking about the organization and then help the lps helping the gps generate institutional alpha you know gp alpha helping to think about team incentives team structures you know we talk to our clients regularly about things like this we're very open with them you know we hire someone it doesn't work out we'll tell them why it doesn't work out and be honest with them.

18:19And then also ask them their opinions about things they've seen. They've been doing this a lot longer than we have. They've invested managers for a lot longer than we've been around. What are the things that have worked in terms of evolution, team build out, culture, retaining talent, all those sorts of things. So there's nothing wrong in asking. And I think when you ask, people feel really honored and humbled to be asked. They really feel like you really care about their opinion and it really matters and of course they've got immense experience so i think it's a great thing that enough is not done on that side to capture that in terms of asking your lps for feedback asking your lps for your feet for feedback asking them for thoughts on an organization on culture on structure on incentives on retention all of those things i don't think enough is done on that and it doesn't have to be everyone it's just you know one or two i've had a number of friends have been in situations and they've called me they said they're gonna we're we're struggling with a b and c um we don't know what to do i'm like which investors are you closest to they said well these three i'm like pick up the phone and call them they're like really i'm like yeah and in each of those situations those investors have been so empathetic to them but have really appreciate them being called on you know taken over the wall and them explaining what's going on.

19:40And they'll be like, okay, thank you for telling us this is what we think. And this is how we think you should communicate it as well. Because when you're on the other side of that, it really matters. The communication is so important because you don't want to lose control of the messaging of something because a rumor mill can start if it gets into the wrong hands, right?

19:58Rahul Moodgal:When I interviewed John Merrill, he worked closely with David Swenson. One of the things that you said about him who kind of populized this Yale endowment model is that he was a great ecosystem player. He knew how to get the right economics for Yale. He knew how to get the right economics for the GP, and he knew how to get the right economics for the co-investors. He knew how to build ecosystems in sustainable ways. Is this a trait that you see around the top LPs or do some of the top LPs have very sharp elbows? Talk to me about the pros and cons on those approaches. There may never, ever be anyone like David Svensson.

20:30I was lucky to work with him across two managers his ability to sniff out talent and it's about finding those human beings that um were just special for 10 years plus I had dinner with David our team had dinner with it was incredible and he'd say the same thing to me every year we just want to find smart people that do something consistently that allows to sleep at night it's that simple it wasn't about oh let's look at their historical track record with historical track records tell you nothing it's like what is special about these people do they have integrity are they good for distrares of the capital of the Yale University and that was something special when he built the model it was at a time you know doing privates in the 80s and 90s that most people were not touching that he was a revolutionary he implemented that model and it worked incredibly well and look there are there are investors who have sharp elbows but one thing that I would say and I say to a number of investors I'm close to is that I think a lot of these guys should spend a lot of time effectively pitching their organizations to gps about why their capital is the best around what's their mission what do they do with that money what happens to the returns that are generated by the gp what do they what impact does it have on the community on the world whatever it may be and so a lot of times particularly for capacity constrained managers which are often the best managers in the world there are shell publishers because people are fighting to get in to these guys.

22:16So I almost think those guys need to be as much flag bearers for their organizations as the GPs are for their organizations. This is all about alignment more than anything. And even when you think about what I do, I think the most important, the number one factor is this, is finding the alignment between your IR, your marketer, your fundraiser, whatever you want to call them, and the principal. You need to have that alignment. it's so important you know if you don't have that alignment then the the ir person always running too fast or too slow it just needs you need to sit down and say what is the plan here what organization you're trying to build are you in a rush do you want the best quality capital what what is it that you're trying to achieve and you need to have that alignment that's the number one thing that you need to find when when you work with someone and you know i remember when i moved over from TCI to work for Parvis and we had a terrible 2008 and I said to Eduardo it will take us five years to build this firm back but I'm in and he said I'm trusting you however long it takes let's just get the best investors which what we did we took five years we got the best investors and we closed and it was perfect and that alignment was there he understood that I was going to focus on the best quality capital that it was going to take time and this is not about performance that The big thing that people get wrong, how many people, you've met them, I've met them, hey, my returns are amazing, but I can't raise money.

23:44If you focus on trying to raise money because your performance is good, you know what? When it's not good, those people are going to go away because they're investing in you for the wrong reason. It's about alignment of philosophy and process. That's what it's about.

23:57Rahul Moodgal:There's multiple layers of alignment here. One is making sure that everybody within your organization is thinking like a principal. and the best way to do that is to make them as a principal have them have equity in the fund or even an underlying manager and there's alignment with the lps how do you build that alignment and double click on that the initial starting point in terms of the team is right what is it that we're trying to achieve does everyone buy into that mission and does everyone have the willingness to participate in this culture of what this organization is that's literally how you start now sometimes you carry that culture away if you only have a team lift out they come with a culture sometimes you have a new culture that starts out and sometimes you have to brain wash young people and bring them in saying this is how we do things so there's no kind of one size fits all it's kind of case by case it happens and sometimes cultures evolve you know things change organizations grow they compress they change they become dynamic they become multi-product shops so I don't think there's one kind of size fits all for that but with GPs and LPs it's about spending the time at the beginning which most people who sit in my seat do not spend they go in and they pitch they don't spend time understanding who those organizations are what they're trying to do what they're focused on what their concerns are how they think about volatility fees structure liquidity all that sort of stuff right someone recently said to me and i love it alex chung at common spirit health who deserves a shout out um said to me this has really become about is this a jigsaw puzzle or is this a treasure hunt and if you think david spent some really was a jigsaw puzzle right where david had a model portfolio of things that he's trying to achieve right we're going to have a bit of timber a bit of international equities but domestic equities some private venture whatever and he had a structure of what he was trying to achieve and then your asset allocation moved based on what that jigsaw puzzle was going to be there were going to be some pieces that were bigger sometimes some that were smaller other times and then you've got seth alexander who's an a yell alum and obviously was on the team took a different strategy and said let's just go and find the best money managers in the world i don't care what asset class they're in i don't care what strategy they're in let's just go and find the best people the new talent on the street and go and back these people and that is really about you know a treasure hunt about finding that talent so it's very different now they both can achieve the same things they're doing in very different ways and i think more and more people have transitioned from the jigsaw to the treasure hunt now the jigsaw is still there with a lot of organizations but over time people are saying well how can we be more dynamic how can we build capital efficient how can we take advantage of opportunities that come how can we build tactical there's lots of different ways that people think about things now and the market's changed it's completely changed right so you have to think about how you become more dynamic as the market changes and as the world changes that the opportunities arise and and when you look at the very elite lps in the world many of them which are lps in your fund do they tend to be today more like jigsaw or treasure hunt lps i'll say hybrid they kind of have their base of what they're doing and the rest of it is kind of dynamic so you know visually i guess you you almost think about a building where you have temporary kind of marquees that come in different parts and are added on and taken away as and when the opportunities come.

27:50Rahul Moodgal:Last time we chatted, you said something that surprised me a bit. You said that the longer it takes for someone to invest into you, the longer they will stay with you. What did you mean by that? There's two aspects to it. The first aspect will be 20 years ago, there was so much money in the market. A lot of it was not high quality and people were just allocating it as and when they could and as and where they could. And a number of investors said to me, I wanted to get into the tier one managers and I couldn't. And so I gave the money to tier two and tier three managers. They were just interested in allocating, getting that exposure.

28:29Post GFC, it's changed. and there's a real process now in terms of people investing capital where people are being much more thoughtful about what they're doing how they're doing it who they're doing with it it's almost like they've gone from saying actually i don't i don't i'm not interested in just what the performance number is i want to understand what the quality of that performance is where is it coming from how much of it is leverage how much is driven by one or two stocks versus a diversified portfolio so people are much more thoughtful about it and subsequently it takes longer and longer for people to do things and allocate capital to managers but I think post 2018-19-20 it's gotten even worse because a lot of investors have a lot of issues going on in their portfolio especially with covid there are interest rates inflation china illiquidity venture privates not paying out and people all of a sudden thought my goodness they've got a load of things on and then recently obviously with things like the endowment tax and everything everything was just put on pause and i think what you've got to understand it's not that people are not interested in doing work on you are not interested in investing you the priorities just change and they have so much more to deal with now and then governance issues and things like DEI ESG came into the agenda and people having to deal with all of those things as well and so I always akin it again back to human relationships is when you meet someone you know if you're meeting your partner your life partner and the longer it takes for you to get to know them and build up you really really know them if you take a long time before you commit and marry them versus meeting them in five minutes and they're marrying them five minutes later you don't really know that person so when people take their time i appreciate that they're trying to understand that if we go into their portfolio what they expect for us to do for their portfolio where are we going to be additive and really really just understand what our role is and how we're going to perform in certain market conditions what is it that we're really trying to solve for um and i always say to people it's like eating a sandwich if you eat the whole thing at once you'll be sick but if you take bites of it you can taste it and so people keep taking bites over a long period of time and getting to know us and tasting what we're like then really they get to know us and I think that for me I I love it and it's just about stepping in and it's appreciating respecting the fact that investors have a process but the reality is they spend 95 percent of their time doing research and only five percent investing so they need to do comparatives they need to see how we're going to fit in they're going to need to know who our peers are they're going to understand what the opportunity set is there's all these things to think about right as well as their daily jobs in terms of especially like a CIO managing a team reporting to a board thinking about governance team structures hiring letting go firing other managers all this sort of stuff's going on there's so much going on the problem is most people who sit in my seat think that the only thing that the LPs care about is them as the manager that they want to put in front of them you know we're one tiny bit of sand in this whole, you know, beach full of multiple billion grains of sand.

31:47It's just a tiny thing. And to try and be the one that gets someone's attention is always hard. And to get that attention just takes time. And I think that's the thing. It's about duration. It's not about execution. And that duration just shows respect. And it shows that you appreciate someone's process. but it also shows that you understand they've got a lot going on and back to the point i made at the beginning if you focus on duration those people are going to take your calls if you email them every five minutes go you're gonna invest my fund you're gonna invest my fund they're not

32:19Rahul Moodgal:going to answer your messages how do you reconcile this duration or this long-termism with check size i know you said you're fine if it's five bucks five million dollars but that almost by definition is not scalable. How do you make small check size work? My mentor taught me this and said, never underestimate the small investor. And I remember back at my first firm, we run a$3 million check from the University of Virginia, who at the time were investing via common fund into our EFA strategies. And two years later, University of Virginia gave us$400 million direct. right and that really was testimony to thinking like that and being long-term that sometimes the smallest guys become the biggest guys when i joined tci i'd worked for a fund of funds where i looked after all the international institutional clients and one of the clients i had was tim asak one of the government singapore's investment entities and we ran a portfolio of 50 million for them and two million of that was invested in TCI at the time and when I left working for that fund to join TCI they messaged me and said we want to be your first client that you've been on board and they were the first client I brought to TCI and they gave us 50 million and I just said to the head of um alternatives I said how come you're giving us 50 million you got to she said we use that portfolio as a means to screen ideas for the best ideas out there so that two million became 50 million again it was testimony to say think about these things being long term people move around things change I just care about the quality of relationships yes it's a lot of it can be a lot of relationships I don't have many of those small investors but I don't really care because they're as good to me as as the big ones because the missions they work for and the work they do is incredible and when you can be part of that and contribute to that and have relationships with those amazing people, that's all that matters.

34:19It really does. And I mean it sincerely. I don't, you know, some of the biggest allocators in the world, some of the biggest pools of capital in the world are a nightmare to deal with. So there's no correlation between quality of allocator or LP and size of asset.

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35:41Rahul Moodgal:But I think one of the things, even the hardcore capitalists, what they come around to this idea is in order to wake up every morning and to come in with full energy, you really do need a bigger why than just making money. And a lot of times you could borrow that why from the LPs from the mission. I know a lot of Sequoia partners talk about this, how focused they are on the end impact that they have. It sounds kind of like virtue signaling or like a bumper sticker, but there are true believers that truly come in every day and work either for the GP or for the LPs directly and are so focused on the mission that it does make them more and better investors.

36:17Rahul Moodgal:It makes them take that incremental call. It makes them take the incremental business trip. So I think it is something that's highly underrated in asset management. Massively underrated. And I know when I take my PM to see the work that one of our endowments does and we do a campus tour and we go and see all the things that they're doing with the money we're making and the money we're managing it just is the number one the most humbling experience ever but number two it just it it just re-energizes you and like wow if we make these guys money look at what they can do and we're lucky enough to have some amazing private family offices that work with us who do incredible philanthropy work and they also share what they do with the gains they make from their managers it's just incredible it's incredible these guys are just they're literally the work they're doing is just groundbreaking life-saving world-changing it's amazing and to be able to be in a situation where you can work in finance but have an impact on the world at the same time it's it's a dream right I studied development at university and so I really care about this stuff it's a really important thing for me I sit on a number of charity boards so this is the stuff that's real the reality is that everyone wants to make money and have a good life and do things but there comes a point where you're like okay what what are you working for to have more stuff what does it mean it doesn't bring you happiness right there's only so many cars you can drive so many houses you can stay in and whatever the reality is if you can do something in the world that either improves people's lives or gives people who don't have a voice a voice or you can save some historical artifacts whatever it may be the mission may be it's incredible because those people are using their wealth and their position and their platform for good and that for me is sharing values with the world and sharing people this is a mission and we all have a responsibility to some point to contribute right so this is a way to contribute as well it's that icky guy thing which i live my life by right you know what does the world need what do you love doing what can you get paid for you know it's just bringing all of that together um and it's it's great i want to really lock in in this concept that you're talking about which is if you pitch just performance to an lp the moment that performance goes away they'll redeem what what more is there to pitch than performance maybe you could distill the non-performance aspects that you're trying to align with lps around i always use this example with investors i'll say if you've got two managers that come to you and pitch you the same strategy and one analyzes 30 a year it gives you no access to the manager no portfolio transparency doesn't really report on what they're doing versus the manager who analyzes 15 a year is fully transparent about what's in the portfolio gives you full access to the team and will come and meet you which one you're going to invest with very few of them not all of them but very few of them will say the first one because what you've got to understand and seth alexander the one who taught me this more than anyone is when you work for an organization like he does he has a fiduciary responsibility to that organization and to a committee and to a board who he has to explain what he's doing to and when you sit in my seat you don't always see that you just see the person that's in front of you and you're like are they going to give me money or not but it's much more complex than that because ultimately it's not that person's capital they're allocating that capital on behalf of an organization and that comes a lot of layers of complexity and so I think when you're doing this you've really got to understand all of that there and that for me is a really really important thing which is why I spend time getting to know all these people and really really understanding that and so I think those people really want to find the partners who understand what they're trying to do and what they're trying to achieve and if you're able to explain to them when you've made money when you've lost money they're able to then report that back.

40:36But if you're constantly performing and all of a sudden you stop performing, they don't understand why you're not performing and you're not opening up to them, I think you're less likely to raise capital. Now, I'm not saying that's true in all cases, because clearly there are many organizations or platforms that are not transparent that continue to raise capital. But when you have a quality relationship between a manager and an investor, you achieve that through transparency and you achieve that through an alignment of values, philosophy and process. If it's a transactional relationship where it's all about you've made me money, oh no you haven't made me money, then I just don't think it's sustainable long term because it almost comes about what have you done for me lately.

41:18Every single manager in the world, doesn't matter how good they are, is going to have a tough time at some point, right? And so I always try and spend time with people trying to explain to them, do you understand what we do from a philosophical process and what our process is and how we find things and how we're different and why we're doing and sometimes it's going to work and sometimes it's not going to work so for example now my main manager i work with we invest in european equities and everyone's bullish on european equities and we've just said to them listen we're not buying into this bull market on european equities we think it's overstated and we're going to underperform this rally that's happening right now because we're not going to own those sectors and if you want to capture that rally and that momentum these are the people who should invest with don't invest with us because we're not going to perform in this market and we're just being honest about it because our philosophy and process doesn't align with that and it goes back to the point as well about when people invest with us we always say to them do not allocate full capital to us now because at some point we're going to underperform and there's going to be a market correction and that's when you should add to us so this is about finding a partnership it's a spirit of a partnership it's not about us and them and an allocator versus a manager it's not transactional it's about how can we work together for 20 years how can we be transparent with each other you know and really really help you achieve what you're trying to achieve and you allow us to do what we're doing it's that's a very different approach to having a marriage which is focused around if you want performance which is wealth versus one where the two people really respect each other and understand what they're bringing to the table i probably meet three to five new managers a week and they're like rahul look at my performance it's amazing and i can't raise money i'm like okay let's let's look at your performance let's look at your track record let's look at your presentation let's look about how you pitch and whatever it's obvious pretty soon into five or ten minutes into speaking to them why they're not raising money