The two-month sprint & "out of business" LPs & the blurring of LPs and GPs

As limited partners, it’s strange to realize that our “response” to the current crisis took place over the past five years. If our response only just began in March, it would be too late. If we’ve done our jobs correctly, then we already committed to GPs who prudently invested our capital over that time, who now have resilient portfolios and the dry powder to capitalize on further market distress. The outputs of our decisions today are (relatively) far in the future, but I believe the score will take care of itself.

But the last two months were still a sprint. Throughout a global pandemic, a shift to working from home, and onboarding and offboarding of team members, we didn’t hit pause—we continued to execute. Shifting between the immediate pipeline and the long view amidst those circumstances was a shock at first, but that feeling did fade. And with much of that immediate pipeline executed, I feel like I can come up for air at this point.

Coming for air feels like the end of the beginning. The immediate opportunity triage is over. To paraphrase Bill Gurley, our job is to partner with GPs who see the present clearly. We already know which of those GPs can stay active in the present—now we just need to find the ones who can become active as the crisis evolves and fades into a recovery.

Here are some recent reads/listens I enjoyed:

  • Learnings from our community. LPs may be “out of business” through year-end due to COVID, but not entirely. Barring exceptional circumstances (e.g. Benchmark deciding they need a Texas-based public pension LP, in which case, hello), if we’re meeting a GP for the first time this late in the year, then a commitment that same calendar year is unlikely. In normal times, we already have a sight-line to fully allocating our capital for a given year before it starts. In COVID times, we have even more options, so we can be more selective. Also, I disagree with Lindel saying his post “was way too long”. Being one of a few firms that are both direct and fund investors, Foundry Group can credibly deliver those insights. Whereas if I ever opine on direct investments, you can credibly unsubscribe.

  • Innovation from Asset Giants at Capital Constellation. What’s wonderful about this podcast is that it highlights LPs who approach the private markets not as allocators, but as investors. Wafra, Railpen, and the Alaska Permanent Fund are LPs with infinite time horizons, who had an idea to better align themselves with the other side of the table, and are actually executing on that idea. I found Daniel Adamson’s comments towards the end interesting as well, on being a contrarian in thinking about structure and not accepting the false distinctions between LP and GP. Such views have led large scale institutional LPs (mostly outside of the U.S.) to bring their investment activities more in-house. The world and the markets may present imperfect options for investment, but that doesn’t mean we shouldn’t try to create our own.

Happy Mother’s Day weekend. Here’s some In Rainbows.