“In private equity, some of the older tricks about just picking on more leverage are not going to work as well now because rates are higher. We need to have more focus on operational improvement and margin expansion. And in venture, you’re not expected to have good margins.” — Julia Rees Toader
Julia Rees Toader is the Founding Partner of PrinCap, an independent investment portfolio strategy firm working with institutions and individuals on manager selection, asset allocation, and strategic advisory. Prior to PrinCap, she was the Head of Portfolio Strategy and Head of Relationship Management at Heritage Holdings, a multi-family office. Before Heritage, Julia was the head of Portfolio Strategy at Goldman Sachs Asset Management ($3Tr assets under supervision). She and her team advised sovereign wealth funds, pensions, financial advisory firms, private banks, and other long-term asset owners on asset allocation. She studied mechanical engineering and computer science at Princeton University and is a CFA charterholder. Before Goldman Sachs, she worked on M&A and business development for an early-stage medical device biotech firm.
You can find Julia on her socials here:
LinkedIn: https://www.linkedin.com/in/julia-rees-toader-cfa-22871030/
Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.
OUTLINE:
(00:00) Intro
(01:38) A ‘happy accident’ at 16
(04:03) Julia’s first startup experience
(06:32) Why did Julia join Goldman Sachs?
(07:30) When did Julia’s appreciation for finance start?
(08:05) Conversations around the Rees and Toader dinner table
(09:48) Finance vs mechanical engineering
(13:26) On exceptional talent
(15:18) How to keep a cool head when you’re successful
(20:19) Do small emerging managers outperform?
(22:27) How do you know if a GP is founder-friendly?
(23:39) The bad pitch meeting
(25:00) Value adds in PE vs VC
(29:49) Difference between PE vs VC portfolio construction models
(31:19) Timelines to return in PE and VC
(33:17) Secondaries
(34:34) The ethics of continuation vehicles
(36:07) The subscription ask
(36:40) Are all secondaries created equal?
(38:30) What is 10+1+1?
(40:32) Hedge funds looking like private market funds
(41:16) What do you do when you have $3B?
(44:43) What is home country bias?
(46:40) How do you know you’re overweighted on allocation?
(47:15) The endowment effect in secondaries
(48:32) Leaderless investment committee sessions
(49:52) The merits of GP stakes
(54:10) Why private credit is interesting
(56:21) The duration of GP stakes
(57:36) The duration of hedge fund GP stakes
(58:11) How much GP stake is worth it?
(1:00:33) Hedge funds: How much is a good GP stake?
(1:02:00) How much is the max an LP wants to own of a hedge fund?
(1:03:12) Tax structuring is another form of alpha
(1:06:52) Cheetos Pelotazos
(1:09:15) Advice to women in finance
(1:12:28) Post-credit scene: Age of Empires, Starcraft, and Zelda
SELECT LINKS FROM THIS EPISODE:
- Heritage Holdings
- Goldman Sachs
- World Economic Forum
- Rebecca Goldman
- Soren Kierkegaard
- Bob Ross
- Princeton University
- Danny Meyer
- Setting the Table by Danny Meyer
- Wall Street Journal
- Fortune
- Morgan Stanley
- JP Morgan Chase
- Lehman Brothers
- Alexis Ohanian
- Yahoo!
- Rishi Taparia
- Garuda Ventures
- “The Premium of Originality, Revenue-per-Employee, & Citizen-driven Surveillance Apps” by Scott Belsky
- ElevenLabs
- “Why We Set a 20x Sales Quota” with Carles Reina from ElevenLabs on 20VC
- Keith Rabois
- Bytedance
- HongShan Capital Group (HSG) (fka Sequoia China)
- MSCI
- Vijen Patel
- The 81 Collection
- “81% of America is Underfunded” with Vijen Patel on Superclusters
- Qualified Small Business Stock (QSBS)
- 1031 Exchange
- Cheetos Pelotazos
- Age of Empires II
- Age of Empires IV
- Starcraft II
- The Legend of Zelda: Ocarina of Time
- Nintendo 64
SELECT QUOTES FROM THIS EPISODE:
“In private equity, you want to have that strong value creation playbook. It used to be that you could do quite well doing mostly financial engineering, roll-ups, that kind of thing. That still works, but I think a lot of the money in the next part of the cycle is going to come from improving the margins or increasing EBITDA, so making operational improvements. So private equity, some of the older tricks about just picking on more leverage are not going to work as well now because rates are higher. We need to have more focus on operational improvement and margin expansion. And in venture, you’re not expected to have good margins.” — Julia Rees Toader
“The providers of liquidity always get paid.” — Julia Rees Toader
“LPs and GPs both don’t want to be forced sellers.” — Julia Rees Toader
“Home country bias is the tendency of people to overallocate to their home market.” — Julia Rees Toader
“The endowment effect, which is the idea that if you own something, you think it’s more valuable than what anyone else is willing to pay for it.” — Julia Rees Toader
“Tax structuring is another form of alpha.” — Julia Rees Toader
“Alpha’s three things: information asymmetry, access, and, actually, taxes.” — Vijen Patel