E321: Why Most LPs Have No Idea What’s in Their Portfolio

0:00Ryan Eisenman:So for context, give me a sense for how big Arch is today.

0:04David Weisburd:Today we support about 550 clients. Our clients have$405 billion in assets on the platform. We're a solution for tracking, managing, and automating all the paperwork around alternative investments. So the assets we serve are stakes in private equity, hedge funds, venture, credit funds, some crypto, anything that's not a stock or bond.

0:25Ryan Eisenman:So you support$405 billion in assets. Tell me about what that looks like.

0:31David Weisburd:Without Arch and PreArch, a lot of LPs are logging manually into all these different data rooms. They're going into Interlinks, Carta, Juniper Square, platforms that are not necessarily built for LPs to understand their investments. And they're getting PDFs that they then have to read and put into spreadsheets. We go get all that data and that information on the LPs behalf. behalf. Our clients are global banks, RAAs, about 200 single family offices, institutional allocators. And they use us to get all the information from these different funds and their fund platforms, structure it, standardize it, and then give them dashboards, analytics, and insights on their portfolio.

1:08David Weisburd:So we become kind of like the Schwab-like operating system, bringing to private markets what platforms like Schwab and Robinhood brought to public markets.

1:17Ryan Eisenman:How does that practically help LPs?

1:21David Weisburd:One, it saves them a lot of time. So instead of having to hire analysts who spend a lot of their day going into portals and platforms, they can now have that process automated for them. The second thing is it's really hard to make good decisions if you don't understand your data and understand the signal within your data. And so it could be things like, has this manager performed or how much unfunded commitments do I have across these investments or these entities down to how much SpaceX do I have in my portfolio? and how much drive do I have? And am I a net buyer or seller at this price? So we give our clients an unfair advantage as they look at the market by helping them understand their existing data and then also power some of their future facing decisions.

2:04Ryan Eisenman:What are some second order effects of that?

2:07David Weisburd:Well, it's hard for people to make allocations to new funds if they don't know how much they owe to pass funds. So a lot of folks don't have good understanding of the liquidity needs in their portfolio. And do they have$1 million or$5 million or$10 million of net commitments that are going to be called in the next one, three, five years? So that's one important consideration. The second is being able to understand the performance of the funds that you're in when you're looking to re-up within those managers. And they're also introducing AI tools around evaluating new opportunities. So when a manager sends you their docs, it's 100-page limited partner agreements that have deeply buried on page 69, the terms and the carry and how expenses are treated within the fund.

2:49David Weisburd:We can use AI and a specialized AI model to pull that out automatically and give people a full readout of what should I know about this fund as I'm looking to invest. And so those are some of the newer tools that we're developing around driving better decisions through data.

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4:30Ryan Eisenman:I kind of think about this as mental compute. So you could only handle so much abstraction and so much thought in a single day. And if you're spending that compute on figuring out what's my portfolio, how much compute do you have left over for sourcing new managers, building relationships, fundraising, all those things that LPs need to do?

4:48David Weisburd:Yeah, exactly. I think we don't value our time well. And we get sucked into a lot of distractions that are not what we actually need to be working on. And so it's not a good allocation of someone's time to spend that time taking numbers off of a document and putting it into a spreadsheet. That time should be spent in thinking about what investments do I need to make? How do I actually want to allocate capital? If I want to invest in venture capital or private equity, who are the best managers and how do I get a warm introduction to them so that I can invest in their fund?

5:17Ryan Eisenman:As an LP goes from 10 to 25 to 50 fund investments, what typically breaks down?

5:23David Weisburd:They typically at some point need to hire someone. They might already use an investment advisor. This is why about half our business comes through investment advisors and banks today, where they're doing this work on behalf of their clients. But then those advisors often have high hundreds or thousands or tens of thousands of investments. And then it is just utter chaos. They're getting emails every day, every hour of the day that need to be responded to. and then you have to make sure you don't miss capital calls, that you route all the K-1s to the accountant that's on each account, that you receive distributions correctly, that you could reconcile that the distributions arrived and the capital calls went out.

6:00David Weisburd:And then you're not even thinking about what's in an investment letter or what do I actually need to know about these investments. The tracking becomes a job, and it becomes a job that often is handled by teams once you get into high volume of these investments.

6:13Ryan Eisenman:What's the legacy solution before Arch? What were family offices doing?

6:18David Weisburd:Mostly manual. So you'll see family offices that have a few analysts. They're managing this information on Excel spreadsheets. Maybe they're using a reporting system, but they're updating that reporting system manually or GL. And then we've seen family offices that print the capital call and put it on someone's desk. And then someone goes through the paper on their desk to pay capital calls.

6:40Ryan Eisenman:One of the most underreported things in private markets is that most of institutional capital has allocated. They've picked their 15, 25 core managers. They're continuing to invest with those. Where is the net new capital coming from in terms of from the LPs investing to GPs?

6:57David Weisburd:This is a big issue for managers that are starting to raise now or trying to raise. We were speaking at a conference last week and learned in the presentation that from 2022 peaks to today, especially the venture asset class, the venture asset class raised 15 % of the capital in 2025 that it raised in 2022. So there's just significantly less LP dollars being committed, especially to venture capital, because most of the major institutional investors, especially endowments, are overexposed to venture specifically and to privates. So they're not allocating to new venture managers, even if the manager has returned well.

7:34David Weisburd:Luckily, this is coinciding with a big shift of capital coming from the wealth channel. And so you see family offices that have been investing in privates for a long, long time, but there's more family offices today and family offices seem to be increasing their allocation to privates, but especially RAAs, registered investment advisors, multifamily offices in the bank channel are kind of making up for a lot of that gap because there's significant net new dollars coming from that channel.

7:57Ryan Eisenman:Do you see that in the numbers?

7:59David Weisburd:We see this in the numbers where we'll serve firms. It'll say this wasn't a problem for me three years ago, five years ago, because I had a couple hundred alternative investments and most of my clients weren't investing in this asset class. But now people are asking for these investments and then they now have a thousand or three thousand or five thousand positions that need to be tracked and managed.

8:18Ryan Eisenman:There's no real Morningstar for private funds. Why is it so hard to value private funds?

8:24David Weisburd:Everyone reports differently. Today we collect information from 50 ,000 unique investments and they all use a different format, a different portal, do their accounting slightly differently and all this data is trapped in PDFs. And it's super fragmented. Like the top producer of information produces about 7 % of the information that we receive today. And so we collect from 800 different portals and platforms. There's just a lot of work needed to go first, get all the documents and structure the data, then standardize it and understand the accounting treatment of every fund and every fund admin and then make it useful.

9:00David Weisburd:So it's a lot of work that we've done over the last eight years to get to this point. but there just isn't a consistent standard around how data is distributed. Even something like OPA only touches a percent of the market.

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12:20David Weisburd:Yes and no. And one of the kind of issues with ILPA adoption is ILPA is really only pushed by large institutional LPs. And so funds that are sub-institutional have no incentive to adopt something like an ILPA. And I think you probably will see more APIs become available and more like push for standardization. But this is an industry that moves extremely slowly. So we're kind of in the background working on some efforts around standardization and creating kind of like a standard API that people can push data into and pull data out of. So this can be kind of like the plat of its category. But we're not waiting for that to happen.

12:57David Weisburd:So we're kind of meeting the industry where it is today.

13:01Ryan Eisenman:And you see ground truth data on where LPs are allocating today. Are there new asset classes or new structure where LPs are really deploying capital?

13:11David Weisburd:um we see a lot of just like evolution of what is the hot manager the hot strategy so there's there's shifts it does seem like some of the the conversations that hedge funds are back and people are interested in more hedge fund investing we're seeing a lot of fund-to-funds pop up around kind of like hedge fund exposure and being a fund-to-funds for hedge funds specifically and so there's always kind of like a little bit of a trend and and then there's also the like independent sponsor world where we're seeing a lot of dollars go in in that direction as well.

13:38Ryan Eisenman:I want to actually talk about that. So a lot of LPs privately tell me that they're not as interested in blind pool funds. They're interested in investing in independent sponsors or co-invest. How much do you see that actually in your data? And are LPs really starting to deploy more into deal by deal vehicles?

13:58David Weisburd:And this is more of kind of qualitative from the conversation we're having with clients with LPs, but they are, we're seeing them deploy more in kind of deal by deal structures and independent sponsors. I think it's hard. It kind of goes back to some of the pain points around private markets, where if you invest in a drawdown fund and you don't know over what period your money is going to be called, there's a drag on your returns of needing to do something with that capital. And then in the meantime, if you invest in an independent sponsor, you're typically investing 100 % on day one. And we've seen pretty good results from some of those investments.

14:31David Weisburd:And I think there's an ability to just be really intentional about what you're actually investing in. And I think there's also like a little bit of a different duration on those assets that sometimes makes it more appealing to the LP.

14:42Ryan Eisenman:It comes down to not only economics, but also discretion. Also, you don't have to wait for your capital to be called over two to three years. You get to deploy it. So there's less drag on the investment.

14:53David Weisburd:Exactly.