Transcript
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Part of what we look for in investment or we're
looking for exciting entrepreneurs that we
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share their vision, that we believe with our
time, resources, capital, and connections, we
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can accelerate the trajectory that they're
already on.
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So the first thing we look for is, is there an
alignment of mission?
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Do we believe in their core thesis and believe
that they have the ability to execute to get to
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where they want to go?
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What are some of your pet peeves when it comes
to emerging managers?
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I hate this notion of surprises where if there
is we're human, we're fallible, we all make
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mistakes, we've all had errors.
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And if you're not forthright about that, huge
pet peeve of ours.
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We believe in humility.
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We believe that it's important to never forget
where you came from.
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I don't care how successful you were.
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We all put our pants on one leg at a time.
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And in remembering that we are extraordinarily
relationship driven and team members.
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We're always looking for we versus I.
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And in terms of emerging managers just being
very upfront and open.
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This is where I'm excited.
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These are the things I'm worried about and this
is what the past could look at if all things go
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well.
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We're trying to look for unique ways to make
money, unique things that the average investor
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isn't seeing, whether that's deploying, you
know, water purification or cleaning, you know,
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investing in Africa.
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What are some destructive behaviors that you
see other LPs do?
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Mike, I've been really excited to chat ever
since our friend Vinu from Longview Asset
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Management made the introduction.
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Welcome to the 10X Capital podcast.
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It's great to be here, David.
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Thanks for having me.
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So tell me about Levi Family Partners.
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So Levi Family Partners is the family office of
Larry Levy and his children.
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Larry created Levi Restaurants, which is where
he's one of the largest sports catering
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organizations in the world.
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So I think hot dogs, hamburger, beer, food at
the various events across the globe, everything
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from Wrigley Field in Chicago, where I am, to
Wimbledon, to the New York Open.
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And he sold that business in 2006, which
created the family office that I'm part of.
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For Levy Family Partners, what's your
investment strategy?
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So we have 4 main verticals that we invest in.
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We have a real estate team managed by the
Diversified Fund, some of the most iconic
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office buildings in the top cities across the
US.
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We have a restaurant team.
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We have an internally managed hedge fund,
including a specialist and activist fund that
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focuses on small cap stocks.
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And then I oversee our venture capital, private
equity, and classified elsewhere investments.
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If I could be blunt, what part of the strategy
is beta?
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What part of the strategy is alpha?
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In my world, it's entirely alpha.
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We're focusing on finding outsized returns that
can give asymmetric return potential with
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limited risk.
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We are not looking in my side for beta at all.
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And tell me about how you look holistically at
your portfolio.
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We're not looking at investments just for the
economic return and limited risk.
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It's got to be something that activates the
family's core, their generational beliefs, and
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things that they really want to be part of with
their capital.
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How many venture funds in your portfolio?
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And talk to me about your venture portfolio.
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So part of what we do in designing our
investment program is we're very cognizant that
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there are certain things we know very, very
well and a lot more that we don't.
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So we try to do is build something called the
knowledge ecosystem.
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We try to find sectors that are interesting to
us and find the world class experts in those
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space to compound our knowledge base and help
us filter out good investments from bad.
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So for example, we know very little about self
driving cars, but we found a world class
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manager in Muneeb that is our essentially our
rabbi in helping us understand investments in
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that space.
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And by building our portfolio of this way, we
are able to invest in things.
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And then we find a deal in real estate prop
tech.
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I can go to Modern Ventures and say to this PM
Constance, what do you think about this?
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And so I'm getting access to world class
expertise.
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And if they like it, we'll co invest together.
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And if not, it's very hard for me to do a deal
if an expert doesn't like it that we don't
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know.
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Talk to me about your sourcing funnel for
direct deals.
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How do you source is it all through your
current GP network, or are you also sourcing
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outside of your GP network?
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Do you have a grading system for direct deals?
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That's another great question because there is
no shortage of interesting things out there to
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invest in.
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Part of what we look for in investment or we're
looking for exciting entrepreneurs that we
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share their vision, that we believe with our
time, resources, capital and connections, we
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can accelerate the trajectory that they're
already on.
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So the first thing we look for is, is there an
alignment of mission?
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Do we believe in their core thesis and believe
that they have the ability to execute to get to
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where they want to go?
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Assuming we believe that we will call in a
world class group of experts, know that we have
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through our network.
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Part of the beauty of being part of the family
office network is we collaborate with other
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families.
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So if there's a deal in hotel space, we can
talk to the Pritzkers.
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If there is a deal that's in, you know, skiing,
we can talk to the Crown family.
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And through expertise and combining what we
know best with the other families, we're able
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to filter out a lot of bad things that way.
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Double click a little bit on the initial
diligence process.
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So we start with a high level premise of the
inverse of the American criminal justice
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system.
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In the American criminal justice system, you
are innocent until proven guilty.
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Our investment philosophy is exact opposite.
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Everyone is guilty until proven innocent.
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So everything needs to be triangulated.
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Everything needs to be double clicked,
especially when we're in the early stage
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companies when we don't have the benefit of
audited financials all the time.
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We don't have the benefit of having things gone
through an SEC process where a lot of the bad
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things have been filtered out.
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So by starting with a heuristic of you are
guilty until proven innocent, it allows us then
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to triangulate absolutely every claim that has
been made to make sure that what's being
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presented is somewhat close to accurate because
there seems to be a lot of art in what's
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presented to us at this early stage.
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How would you categorize Levy Family Partners?
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Are you in a capital appreciation and evergreen
type of maximizing returns?
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Are you defensive in terms of capital
preservation?
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How would you define yourselves?
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When I look at Larry Levy, who I have the
fortune to work for, Larry is a consummate
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entrepreneur.
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He is someone that is an optimist.
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He's someone that believes that our best days
are ahead of us and that we should be deploying
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into the American dream, which is best
expressed through the entrepreneur.
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And we believe this is the greatest country on
the planet, the best place in the world to be
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deploying capital and by putting money with
some of the best investment in FA in
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entrepreneurs out there.
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So we are in capital appreciation investment
mode because of prudent steward of capital.
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It's important to have a certain base of a
steady income that you know, for more reserves.
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But the vast majority of what we're doing is
for capital appreciation and taking investing
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in things that we really believe in.
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So double click on that.
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How much of the capital is going into things
like venture and how much are coming into
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things like fixed income and more public
securities?
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You know, we really don't get into numbers.
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That's, you know, as part of our that's not
something that we typically share.
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But I would say roughly 30 to 35% is in the
venture private equity investment stop, and
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then the rest deploy between our internally
managed hedge fund, the restaurant team, and
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the real estate team.
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Talk to me about how you plan for drawdowns
across venture funds.
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So you have a vintage and it's obviously a
private equity style drawdown vehicle.
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And how do you plan for that?
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We have a very, very robust accounting team in
back office that's really terrific and helping
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us, you know, make sure that we're on top of
our liquidity needs.
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You know, we're in constant communication with
our managers.
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We're in constant communication with underlying
funds.
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Some on a daily basis, some on a week basis,
certainly on a monthly basis.
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And we hate surprises.
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You know, we want to be on top of things.
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So if something big is happening, we're well
aware of it.
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We make a plan accordingly.
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And we obviously reserve you know, we make our
commitments contingent on where our liquidity
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is at that moment.
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And we have a full expectation that if there's
gonna be a drawdown, we're trying to be more
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aggressive in our internal marketing just so
we're prepared.
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And in those cases where you are surprised,
what are some remedies for when you don't have
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capital?
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Are you taking out loans?
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Are you selling public securities?
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That's a that's a great question.
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I mean, first of all, if we would never make
outsized bets that are things that, you know,
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we wouldn't be immediately able to satiate if
they were called.
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If you commit to something, you should expect
that it's going to be drawn in a short order.
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And so we'll never make a bet that we aren't
able to fill.
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It's just not who we are.
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And if we need liquidity, we have liquidity.
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There are all sorts of buckets that we have.
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By having a very diversified portfolio, we're
able to pull liquidity from different areas.
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Is that all in treasuries?
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How do you manage the securities that you're
matching against the liabilities of the
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drawdowns?
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So Larry's son, Ari, is an expert in publicly
traded securities and cash and liquidity.
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And he's really that's his mandate as part of
our liquid book and with part of his internally
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managed hedge fund.
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So he's constantly on top of that, and we spend
a lot of time in our weekly investment
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committee meetings understanding where
liquidity is at the moment and making sure that
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we're in a good position.
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Again, we never wanna be surprised in the
negative side.
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Let's double click again on your diligence
process.
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What do you like to see in the data room?
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I absolutely believe in quality over quantity.
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I find that there's a lot of fluff out there
and a lot of things are unnecessary.
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If I'm doing my job right, it's filtering
through all the unnecessary things and being
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here are the 7 salient points that we need to
know to make an investment decision.
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And how do we get rid of the fluff?
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What are those things that you wish managers
would have in their data room?
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And what are some things that you wish that you
consider fluff that you wouldn't want them to
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have in their data?
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So first of all, going back to this notion of
hating surprises, I never want to be surprised.
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I always, if there's something negative that's
going to happen or there's something in the
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dead room, very likely we are going to find it.
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And I'd much rather proactively say, here is
something when you do your diligence, you are
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going to find, and here is why it is not an
issue.
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If we do our diligence and certain material
facts are not there, that's a red flag and very
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likely we're not gonna do an investment.
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Versus here's something that happened, why I
believe it wasn't a big deal, and here's why
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we've what the lesson that we've learned from
that mistake or this error, and here's why it
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will never ever happen again.
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So again, I never want to be surprised.
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I want to know what the issues are.
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And I want it to be a collaborative effort.
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We're looking for teammates.
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We're never going to be investing in things
that are, that we're looking for on the outside
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are distressed.
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We're going to be looking for someone that we
believe in their vision and we believe in
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radical transparency, radical openness, and we
want to know, look, it's easy to be your friend
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in the good times, but to know who's gonna be
there when the cold wind blows.
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Who's gonna be in the trenches?
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This is a battlefield.
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This is the war.
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It's a team.
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And if we're gonna invest, we're on your side.
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But we've got to know that you're on ours as
well.
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What are some of your pet peeves when it comes
to emerging managers?
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So one I would say is exactly what we were just
talking about.
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I hate this notion of surprises where if there
is we're human, we're fallible, we all make
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mistakes, we've all had errors.
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And if you're not forthright about that, huge
pet peeve of ours.
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We believe in humility.
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We believe that it's important to never forget
where you came from.
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I don't care how successful you were.
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We all put our pants on one leg at a time.
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And in remembering that we are extraordinarily
relationship driven and team members, and we're
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always looking for we versus I.
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And in terms of emerging managers, just being
very upfront and open.
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This is where I'm excited.
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These are the things I'm worried about, and
this is what the past could look at if all
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things go well.
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Given you have such a focus on reputation and
trustworthiness, what percentage of your
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managers are you sourcing from co investors and
what percentage are you sourcing directly?
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Cold.
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I would say 60% come from our fund managers and
4 come cold.
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You know, with our thesis driven, you know,
we're constantly by applying creativity to the
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investment philosophy or the investment
process, we're trying to look for unique ways
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to make money, unique things that the average
investor isn't seeing, whether that's
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deploying, you know, water purification or
cleaning, you know, investing in Africa.
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In terms of planning and allocating to certain
asset classes like private equity, do you think
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about it holistically, or are you just
basically deploying on a one off basis?
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You know, the family would like to look at
things in individuality, you know, in
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individual investment, things that speak to
them.
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And they never wanna have an artificial
parameter prevent them from deploying capital
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on something that they're very, very excited
about or saying, I need to add to this exposure
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just to fill in this artificial bucket of
having x percent in a certain asset class.
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They're much more deal specific.
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If If there's something that they love and it
speaks to them and they think that we can add a
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lot of value in, then we're going to go in it,
irrespective of kind of where we are in the
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portfolio.
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Now, year end, we do take a step back and say,
how do we look?
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How does our portfolio from a percentage?
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Are we out of whack in a certain area?
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If we are, then we'll proactively try to fix
it.
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But we're not going to automatically add things
that don't fit unless there's an organic desire
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and something that really speaks to the family
and what their beliefs are.
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What do you wish you knew before you started at
Levy Family Partners?
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You know, at business school, they said
investing was just all up into the right.
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You know, it takes a lot of work, and this is a
full contact sport.
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And it's a lot of fun, but it's a lot of work
and it's grinding.
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And I think understanding the psychology and,
you know, these are founders with dreams and
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they've got their own mortgages and they've got
their families and really understanding the
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dynamics that go to play and under appreciating
the X factor that there are so many unknowns in
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the world that we're playing in.
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And how do you handle when the bad things
happen?
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You know, those are things that you don't
necessarily focus on the curve balls that are
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going to come along the way.
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It wasn't so long ago, you know, that Silicon
Valley Bank failed.
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Like that's not something we were expecting.
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You've got global macro events.
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You've got a pandemic.
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I mean, every day is something new.
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And how do you navigate the uncertainty?
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When you take a step back and focus on how
could you be more effective versus more
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efficient being working on the things that
really matter.
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As an LP, what are your points of leverage in
terms of generating returns?
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Where does a little bit go a long way?
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You know, one of the lessons that Larry taught
us from his many, many years of running Levy
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Restaurants is the value of Midwest service and
adding just as simple as it sounds, how can I
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add value?
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How can I be not just a check to you, but what
are the pain points that you're dealing with
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and how can we help alleviate them?
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What are the 1, 2 or 2 things that if we could
help you on would exponentially change your
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trajectory?
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I believe that if we can answer those types of
things and have an honest discussion and if
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there are certain things, David, that we don't
believe we can add value, knowing it's okay to
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be passive and to step back.
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We only wanna be helpful when we can and try
and understand what those pain points are.
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And if we aren't the right solution, how can we
find the right group?
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So for example, we have a 20 fourseven blood
pressure monitoring coming called LiveMetric
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that can identify a cardiac event ahead of
time.
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00:13:34,959 --> 00:13:39,679
The biggest pain point they have is how can you
get a wearable device that's comfortable on top
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of your Apple device?
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Because if I can give you something that you
can sleep and now putting you aside, if your
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parent can wear this while they're sleeping and
this device can identify a cardiac event before
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it happens and you can immediately alert
people, this is life changing.
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And what is the friction to get someone to wear
something like that at night?
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And so spending that kind of time understanding
what are the pain points to help change the
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00:13:58,500 --> 00:13:59,799
trajectory even further.
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00:14:02,980 --> 00:14:06,600
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00:14:06,820 --> 00:14:10,985
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00:14:10,985 --> 00:14:11,384
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00:14:11,384 --> 00:14:15,304
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00:14:15,304 --> 00:14:19,245
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Thank you for your support.
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00:14:21,144 --> 00:14:25,120
What are some of those pain points that GPs
oftentimes need help with, in your opinion?
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00:14:25,179 --> 00:14:29,980
The GPs, from my experience, get overwhelmed by
the vast majority of demands they have on their
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time, both from their portfolio and their
investors.
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00:14:32,700 --> 00:14:37,259
And helping them to take a step back and say,
how can we focus on what's really important in
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00:14:37,259 --> 00:14:41,914
alignment of interest and having this fund be
the most successful it possibly can and remove
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00:14:41,914 --> 00:14:42,574
the noise?
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00:14:42,714 --> 00:14:49,274
So whether that's having a quarterly call on
Zoom versus 30 individual calls, whether that's
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giving them the time and space if they're
dealing with a crisis to let them solve it and
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come to us a day or 2 later and giving them
that freedom to have the time to solve a
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00:14:57,790 --> 00:14:59,389
problem and do what they do best.
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00:14:59,389 --> 00:15:03,410
The reason we back them in the first place was
for their judgment and giving them the respect
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00:15:03,470 --> 00:15:07,684
to have the time to deploy it rather than be
dealing with other things that are not as
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00:15:07,684 --> 00:15:08,184
important.
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00:15:08,404 --> 00:15:10,024
So focusing on the one thing.
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00:15:10,085 --> 00:15:15,605
What are some destructive behaviors that you
see other LPs do in the ecosystem that you wish
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00:15:15,605 --> 00:15:16,985
other LPs would not do?
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00:15:17,045 --> 00:15:21,480
I can't speak for other LPs because I'm not
one, but I think the most important thing that
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00:15:21,480 --> 00:15:27,080
I have seen other LPs that is very destructive
is if you make a bet on a GP, you're basically
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00:15:27,080 --> 00:15:30,379
making a bet on their judgment and their
process and their philosophy.
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00:15:30,839 --> 00:15:33,820
If you have a difference in that philosophy at
the onset, you should not be investing.
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00:15:34,054 --> 00:15:38,214
But once you've deployed capital, at some
point, you need to give them some latitude to
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00:15:38,214 --> 00:15:39,514
make those investment decisions.
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00:15:39,975 --> 00:15:44,774
And I have seen a number of cases where LPs
have tried to infiltrate the GP thought process
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00:15:44,774 --> 00:15:49,539
for making investment decisions and doing it
very aggressively to the point where they are
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00:15:49,539 --> 00:15:54,179
in their train of thought, and it dilutes their
core competency and their core ability to make
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00:15:54,179 --> 00:15:55,079
investment decisions.
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00:15:55,379 --> 00:15:56,839
And I think that can be destructive.
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00:15:57,139 --> 00:16:00,899
When it comes to working out of family office,
what's the biggest advantage to working out of
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00:16:00,899 --> 00:16:03,745
family office versus work at an institutional
LP?
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00:16:04,205 --> 00:16:08,465
The greatest advantage of being in an orgiver
family office is I can go to prospective
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00:16:08,524 --> 00:16:11,644
investment, and I don't have a gun to my head
to raise the next fund.
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00:16:11,644 --> 00:16:13,725
I don't have a gun to my head to deploy
capital.
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00:16:13,725 --> 00:16:16,860
I don't have a gun to return capital as much as
I'd like to.
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00:16:16,940 --> 00:16:22,059
So I can go to a founder and say, what is the
natural path of the business if you capital
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00:16:22,059 --> 00:16:23,120
wasn't an issue?
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00:16:23,579 --> 00:16:28,620
What do you want this business to be if I took
the pressure of getting an exit in 3, 4 years
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00:16:28,620 --> 00:16:29,679
off of your shoulders?
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00:16:29,924 --> 00:16:35,764
And by giving them that ability to dream
without this artificial constraint of imposed
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00:16:35,764 --> 00:16:39,065
by me having not having a fundraising circle,
it's my biggest advantage.
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00:16:39,365 --> 00:16:40,725
A fund can't offer that.
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00:16:40,725 --> 00:16:45,639
They cannot allow a company to operate in for
an elongated period because they need to return
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00:16:45,639 --> 00:16:46,139
capital.
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00:16:46,199 --> 00:16:49,720
Now sometimes you're forced to, but in the
onset, I can say, what is your dream?
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00:16:49,720 --> 00:16:51,159
How can we help you achieve it?
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00:16:51,159 --> 00:16:56,144
What would you advise if a friend told you that
he or she wanted to work at a single family
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00:16:56,144 --> 00:16:56,464
office?
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00:16:56,464 --> 00:16:59,524
What would you advise that they consider before
taking on that role?
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00:16:59,825 --> 00:17:01,424
I think it's an alignment of interest.
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00:17:01,424 --> 00:17:04,005
Do you share the core philosophy of the family?
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00:17:04,464 --> 00:17:07,765
Do you understand what inherently drives them
across generations?
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00:17:08,230 --> 00:17:10,649
Do you believe in the things that they believe
in?
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00:17:10,789 --> 00:17:15,429
Just so I am beyond fortunate that the Levy
family, the values they share, I learn from
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00:17:15,429 --> 00:17:16,470
them every single day.
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00:17:16,470 --> 00:17:17,509
I admire them.
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00:17:17,509 --> 00:17:20,409
And being able to be in that ecosystem is
incredible.
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00:17:20,744 --> 00:17:22,984
Not all employees of family offices feel that
way.
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00:17:22,984 --> 00:17:25,805
I feel lucky every single day that I get to go
to work for them.
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00:17:25,865 --> 00:17:29,565
As the saying goes, when you know one family
office, you know one family office.
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00:17:29,785 --> 00:17:31,704
On that note, this has been a great chat.
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00:17:31,704 --> 00:17:33,785
David, I'm very grateful you spent the time
with me today.
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00:17:33,785 --> 00:17:34,345
Thank you, Mike.
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00:17:34,345 --> 00:17:36,446
Look forward to continuing conversation in
person.
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00:17:37,886 --> 00:17:41,906
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