Valuetainment - September 26, 2026


＂Don't Even Bring Me the Deal＂ - The Red Flags That KILL an Investment

Hosted by
Patrick Bet-David
Mentioned
Christopher Tom Penn Shaq Kobe
＂Worse Than a Recession＂ - Tony Robbins Breaks Down Ray Dalio's Warning on U.S. Debt ＂Mormons Figured This Out＂ - Tony Robbins on Why Young Americans Need to Serve

Episode Stats


Length

14 minutes

Words per minute

219.1

Word count

3,164

Sentence count

215

Harmful content

Toxicity

3

sentences flagged


Transcript

Transcript generated with Whisper (turbo).
Toxicity classifications generated with s-nlp/roberta_toxicity_classifier .
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
00:00:00 Okay, when I sell my business, I want the best tax and investment advice.
00:00:04 I want to help my kids, and I want to give back to the community.
00:00:07 Ooh, then it's the vacation of a lifetime.
00:00:12 I wonder if my out-of-office has a forever setting.
00:00:15 An IG Private Wealth Advisor creates the clarity you need
00:00:19 with plans that harmonize your business, your family, and your dreams.
00:00:23 Get financial advice that puts you at the center.
00:00:26 Find your advisor at igprivatewealth.com.
00:00:30 We have a saying as a firm that we're freakish about alignment.
00:00:32 So everything is about alignment.
00:00:34 We're the largest investor in everything that we do.
00:00:36 We've got $750 million of our own money, investor in our own vehicles.
00:00:39 So we always lead with our own money.
00:00:42 That's alignment.
00:00:42 Doesn't mean it's going to work, but it means we're aligned.
00:00:44 If we're not willing to bet our money, why should you bet your money?
00:00:47 Exactly.
00:00:47 But so what happened is the industry has continued to grow.
00:00:51 The ability to raise funds is highly dependent on how much of your own capital you're going to put in,
00:00:55 which is typically 2% to 5% of whatever it is.
00:00:57 So just use 5% because it makes the math easy.
00:00:59 You raise a billion-dollar fund, you've got to put up $50 million in your own money.
00:01:02 That's great.
00:01:03 You have a good track record.
00:01:04 You want to raise a $2 billion fund, now it's $100 million.
00:01:06 You want to raise a $5 billion fund, that's $250 million, and you haven't gotten your 50 back.
00:01:10 So where are you going to get the money?
00:01:11 That's why people will sell a stake to firms like ours because of the fact that they need growth capital
00:01:16 to be able to reinvest in their business, be able to grow.
00:01:19 And, oh, by the way, when they raise that $5 billion fund,
00:01:22 they're going to get 2% management fee on average, some higher, some lower,
00:01:25 and they're going to get literally that billion dollars, okay?
00:01:29 over a course of five years
00:01:31 just from managing that portfolio?
00:01:34 Five years, I'll use $10 billion.
00:01:36 $10 billion.
00:01:36 $10 billion is five years.
00:01:37 $200 million is 10 years.
00:01:39 So $200 million on a $10 billion fund.
00:01:42 Do that for five years because it's locked up.
00:01:44 It's contractual obligated.
00:01:45 You're talking about a billion dollars.
00:01:46 And oh, by the way, you take that $10 billion,
00:01:47 you turn it into $20 billion,
00:01:49 you get paid 20% of the profits.
00:01:50 You make an extra $2 billion.
00:01:52 That's what the opportunity is
00:01:54 to own a private asset management firm,
00:01:56 whether it be a $500 million firm,
00:01:58 a $5 billion firm, or a $10 billion firm.
00:02:00 That's why people will sell a stake.
00:02:03 And if we buy, let's say, 13% of somebody's position,
00:02:06 they still got 87%.
00:02:07 We're very aligned.
00:02:08 And that economic outcome
00:02:10 is what makes owning a private asset management firm
00:02:13 such an attractive business model.
00:02:15 I mean, imagine this.
00:02:16 You've got a lot of different businesses.
00:02:17 Imagine if you had customers
00:02:18 who are not allowed to fire you
00:02:19 and they have to give you a five-year contract.
00:02:22 It's pretty easy to budget
00:02:23 if you know your revenue for the next five years.
00:02:25 And oh, by the way,
00:02:26 if you have a billion dollar fund it takes you 20 people if you raise a two billion dollar fund it
00:02:30 doesn't take you 40 people it might take you another five or six so you have this huge operating
00:02:35 leverage the average operating margin for private asset management firms just for management fees
00:02:40 is 60 profit margins then on top of that they get the carry then on top of that they get the return
00:02:46 on their money they put in their own fund and they get the growth of the enterprise value because if
00:02:51 they grow from $3 billion to $30 billion, obviously they're worth a lot more money.
00:02:55 And we now have over 100 different firms that we own stakes in that manage collectively
00:02:59 $2.9 trillion in assets and have $12 billion of contractually obligated management fees
00:03:07 over the next 10 years.
00:03:09 They don't even ever have to raise another dollar, and they're going to make $12 billion
00:03:12 of revenue.
00:03:13 That's the sustainability, which is not correlated.
00:03:15 How hard is it to get into the business?
00:03:17 Oh, it's very, very hard.
00:03:18 It's extremely difficult.
00:03:19 What does it take to create a PE firm?
00:03:21 And succeed.
00:03:22 You've got to have a great track record.
00:03:23 You've got to have people that believe in you.
00:03:24 And then you've got to deliver performance.
00:03:26 Okay, so if I talk about putting a winning team, I'm talking to Tom Penn.
00:03:31 I asked him this question because he used to do the –
00:03:33 remember he used to do the collective bargaining agreements on ESPN.
00:03:36 He was so good at it.
00:03:37 I love when he does it.
00:03:38 But if I want to put a winning team and I ask Shaq or the late Kobe or Magic,
00:03:43 I said, what matters the most?
00:03:44 The owner, the coach, the player, superstar, you know, GM, what are the –
00:03:49 And then they would all give their philosophy on what's the most important hire.
00:03:52 On a P, if somebody wants to start a PE firm, what are the sequence, five steps, and what matters the most?
00:03:58 Private equity firm, I would answer very different than private credit or private real estate, but I'll answer your question with PE.
00:04:02 Yes.
00:04:03 You've got to have somebody who is the superstar investor who can convince people that they are the right person to back.
00:04:08 They obviously need strong partners that are going to be able to bring skill sets that are complementary to theirs.
00:04:13 You have to have somebody who has the relationship.
00:04:15 So one is somebody like you.
00:04:17 That certainly is one way to do that.
00:04:19 What's true?
00:04:20 And to be clear, there are firms that have different formulas,
00:04:23 but I'm going to give you what I see the most common
00:04:24 to where you have somebody who's a dominant personality,
00:04:27 a dominant investor who's got a great track record,
00:04:30 builds a team around them that allows them to have enormous credibility
00:04:34 to where people know that what they do, they have an edge.
00:04:37 And that's the key.
00:04:38 That's the formula that most people don't have.
00:04:40 Oh, I'm going to go buy stuff and it's going to be great.
00:04:42 No, it can't be financial engineering.
00:04:44 They've got to be able to add value.
00:04:45 They've got to be able to add alpha, as we call it, in the industry.
00:04:49 So what is it that they do that's totally different?
00:04:51 As an example, there's a firm literally right down the road from here called TriVest,
00:04:54 one of our favorite firms of one of our largest positions.
00:04:57 TriVest is an amazing firm, 30 years old.
00:05:00 All they do is invest in founder and family-owned businesses.
00:05:04 They're the first institutional capital in, and they go in and they make those companies better.
00:05:09 They buy it at, let's just say, seven times cash flow.
00:05:12 They put a little bit of leverage on it.
00:05:13 They grow the business dramatically.
00:05:15 They make it more profitable, better profit margins, professionalize everything they're
00:05:19 doing, and then they're able to sell it at 10 to 12 times.
00:05:22 It's not a complicated strategy, but literally in their history, they have what they call
00:05:27 the path to 3X.
00:05:29 They have done that on every fund they've ever done.
00:05:32 In 45 years.
00:05:34 In 35 years or so.
00:05:36 So they are a systematic alpha creator across generations of leadership, too.
00:05:42 They've actually had generational change over that period of time.
00:05:44 So I'm tracking. So far, you need a Christopher. What's the two? I need the four steps.
00:05:48 You definitely need at least two or three other really solid investment people that know how to break down opportunities to be able to build those businesses once you've acquired your stake or acquired the firm as a whole.
00:06:01 They're primarily control, as an example, using them, and I could give you 50 other examples.
00:06:05 But in that case, you also need to have somebody who's good at relationship management.
00:06:09 Somebody's got to have the relationships with either the institutions, the family offices,
00:06:13 or other large pools of capital that are going to give you money to manage.
00:06:17 You have to have a great operations, compliance, regulatory person, because this is a very regulated business.
00:06:22 Are you a Series 7, 66?
00:06:23 So we are not a broker-dealer, so all we are are 65.
00:06:27 RIA, we're a registered investment advisor.
00:06:29 That's all of our people are 65.
00:06:31 So the reason why I'm asking this question, say you have, you run a consult.
00:06:35 This is a selfish question here.
00:06:36 This is purely for me, so if you don't want to listen, you want to listen, it's up to you.
00:06:39 So say you have a consulting firm that you get deals that always come through to you.
00:06:44 Companies ranging from $5 million all the way up to $385 million in EBITDA, and we consult for them.
00:06:49 Could be multi-million dollar engagement, but we have constant deal flow coming in.
00:06:53 What do you do with the access to these deals that are coming to you of founders, they own majority of the company, and they would like to team up with our firm.
00:07:02 What do you do with the access to these types of deals that are coming your way?
00:07:05 It depends. It really is if you want to be the investor in that opportunity that you're helping
00:07:09 to improve. I mean, the vast majority of firms, actually, that's what they really are to the
00:07:13 firms that they acquire. They're a consultant. They come in as an advisor to be in the boardroom
00:07:19 to say, look, we got to make some tough decisions. We got to set really good goals. We got to make
00:07:23 sure that we get there. So you can absolutely translate that into a role of the investor in
00:07:29 that company. There's a lot of consulting firms that take, instead of a hard dollar fee, they
00:07:34 It will actually take a percentage of the company.
00:07:35 And we do that as well.
00:07:36 That's a way to monetize that.
00:07:38 We'll do cash and equity.
00:07:39 That's right.
00:07:40 Somebody could certainly do a fund once they have a proven track record.
00:07:43 The key is, for anybody, you've got to be able to show the good, the bad, and the ugly in how you've done.
00:07:47 You can't cherry pick just the winners and say, look how great I am.
00:07:50 So when you have to, you know, we look at 2,000 investments a year.
00:07:53 We might make 20 or 30 a year.
00:07:55 So somebody's got to literally convince me, and I'm not easy to convince,
00:07:59 that they can actually do this over and over and over and over again.
00:08:03 at good markets, bad markets, and that they're not just somebody that's really, really good.
00:08:07 Perfect. So that follows up with another question for you. So when you look at a deal coming in,
00:08:11 we scored a eight-point system that we look at to see if this is something for us to entertain
00:08:16 or not. And we've made, God knows, a lot of mistakes. I mean, we've made these mistakes
00:08:20 where it's like, oh my God, I like the guy's percentage. This is not the way to do it.
00:08:25 What used to matter to you 20 years ago when you were a little bit more green,
00:08:29 not unless you've been around for 30 years, but what used to matter to you 20 years ago where
00:08:32 no longer impresses you and what matters today when you say i think this is something we should
00:08:37 invest in the track record itself impresses me very little it really does and that's something
00:08:42 that will surprise a lot of people the track record obviously i want to know it's there but
00:08:46 more importantly i want to know the why behind it right you know as an example there was a great
00:08:50 firm i mean a well-known firm i'm not going to use their name they came into the office a couple
00:08:53 of months ago they have a fantastic track record but if you actually dig into it in every single
00:08:59 fund they've had one investment that has made basically the entire track record real and
00:09:04 everything else is very mediocre and they've just been able to do that every single fund well i don't
00:09:09 want to be in the one where they don't have that happen and that everything is mediocre or that
00:09:13 everything is just average but also what matters to me and i think to most great allocators is
00:09:19 persistency not not performance the persistency of the performance how do you measure that so do
00:09:26 they had every fund, I mean, perfect example would be is every fund is between 14 and the 16%
00:09:30 internal rate of return. That's a lot of persistency. That's highly unusual, but there's
00:09:34 a reason why they created that consistency off of five, six, seven, eight, 10 funds. If you have
00:09:39 one fund that's two and one fund that's 30 and one funds at three and one funds at 40. Okay.
00:09:43 That's not persistency. That's inconsistency. I don't know which one I'm going to get the bad
00:09:47 one or the good one. So what matters to me the most is persistency. And the other thing that
00:09:52 really i didn't care about much then but i cared more is pedigree okay yes i want to know that they
00:10:00 went to a good school they have a good education you do but generally speaking i don't care that
00:10:05 much did that matter to you more too much when i was 20 years now it doesn't i mean i tell me why
00:10:09 why because of the fact that there's some of the best schools that put out some of the worst
00:10:13 investors okay and some some great investors too but you cannot just say because they went to x y
00:10:20 or z that they're a great investor certainly i respect their intellect to be able to go through
00:10:24 a great school but that doesn't mean they're a great investor i love what some of the smartest
00:10:27 people i know in this industry that could not make an investment to save their life what's an
00:10:32 eliminator what is it like if i see these and your team knows guys if i see these three things don't
00:10:37 even bring the opportunity to me what are those things first thing is if they don't have an
00:10:40 auditor run don't don't walk auditor meaning like audited financials like qov like quality of
00:10:46 Learnings type of thing?
00:10:46 It doesn't have to be a QOE, but they better have an audited financials, okay?
00:10:50 If there's no audited financials, I'm out, period.
00:10:52 That's how we avoided Madoff.
00:10:53 That entire story I could tell you, that's how we avoided Madoff.
00:10:56 Let me ask you, let's say a person doesn't have it.
00:10:58 Will you say, go do your audited financials and come back to us?
00:11:00 Absolutely.
00:11:01 Okay, kind of like if I'm a realtor and I'm showing a million-dollar property,
00:11:04 but you don't even have pre-approval lender, you know, a bank that's giving it to you.
00:11:07 Kind of like that.
00:11:08 Absolutely.
00:11:08 And it's got to be an auditor we know, and it's got to be one that we trust.
00:11:11 Top 50, like BKD?
00:11:13 I mean, there's some specialties in certain industries and sectors, technology in particular.
00:11:17 They don't have to be that big, but we have to know they've been around and that they're not obviously conflicted.
00:11:21 What are the other two?
00:11:22 The other two would be basically where they have been lucky, right?
00:11:25 There's so many people that have made a great track record because they started at the right time.
00:11:30 There's some people we looked at the other day.
00:11:31 They started in 2009 in real estate. 1.00
00:11:34 You had to pretty be stupid to not make money in 2009 buying real estate, okay? 0.99
00:11:39 There was 2006. 1.00
00:11:40 Different story.
00:11:41 That's a different story.
00:11:42 So, and that's the third thing.
00:11:43 You got destroyed.
00:11:44 I don't want them learning on my nickel, okay?
00:11:46 I don't want somebody figuring it out with my money, all right?
00:11:49 They need to have proven themselves through different cycles.
00:11:52 I'm tracking.
00:11:52 What's your third?
00:11:53 So, that's the third, is they can't learn on my nickel.
00:11:55 So, the second is, it can't be that they just got lucky with their record.
00:11:59 Okay, I got it.
00:11:59 I missed it.
00:12:00 I mean, there's so many times that I see people that they literally got involved in something,
00:12:03 you know, in healthcare or in technology or in consumer, and they just happened to hit a lucky trend.
00:12:09 Right.
00:12:09 But that doesn't mean they could do it again.
00:12:11 Great feedback.
00:12:11 You see the distinction of being willing to focus on what's the worst-case scenario
00:12:16 and can you survive that, can you succeed from that, the level of discipline that he has.
00:12:20 The reason he's got a 96% profitability rating over 25 years is the level of discipline.
00:12:26 It's 90% of what we see, we're not even going to consider.
00:12:29 We're not going to go deep, but not even consider,
00:12:31 because he has that level of focus and discipline.
00:12:32 And that level of discipline disappears when you get excited about something
00:12:35 based on the track record, based on the pedigree,
00:12:38 based on whatever elements push your buttons.
00:12:40 Oh, it's another AI company.
00:12:42 People then stop evaluating with depth.
00:12:44 And this is Christopher's greatest strength.
00:12:46 Okay, when I sell my business,
00:12:49 I want the best tax and investment advice.
00:12:51 I want to help my kids
00:12:52 and I want to give back to the community.
00:12:54 Ooh, then it's the vacation of a lifetime.
00:12:58 I wonder if my head of office has a forever setting.
00:13:02 An IG private wealth advisor creates the clarity you need
00:13:05 with plans that harmonize your business,
00:13:07 your family, and your dreams. Get financial advice that puts you at the center.
00:13:12 Find your advisor at idprivatewealth.com.
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