Brian O’Malley

Yeah, it's budgeting, it's bandwidth, and it's also political capital.

All three of those add up.

And then one other thing I want to say earlier about your point about just all this complexity, you also have on the backdrop a relatively imperfect mark-to-market process for how to actually value these end assets.

So not only do you have, you know, 10 plus years waiting for liquidity in a lot of cases,

the value of some of these underlying companies is somewhat ambiguous.

At the end of the day, you'll take the write-up if one person agreed to a valuation, but that might not have actually been the market clearing price if this was ultimately a public company.

On the flip side, I have companies that have been profitable for years.

They're now doing almost $200 million in revenue, but they're still marked at the last round was at $150 million or something like that.

How one firm versus another actually values their companies and the incentives behind that, that is another tricky element that the savviest LPs understand and really dig under the covers to understand the intrinsic value of these portfolios as opposed to just the reported value of these portfolios.

There's incentive on marking as well.

I had Professor Steve Kaplan, University of Chicago researcher say,

arguably the best researcher in the space.

And he mentioned that one of his studies looked at how are funds marking their positions and those with more vintages, the more established managers were actually slightly under marking their TVPI and emerging managers were over marking.

Why?

Because if you're on your fund six, fund seven, the way that you lose an LP's check is actually to lose credibility or confidence, right?

by default, LPs have incentive to re-opt, which is another incentive thing we won't go into.

But when you're an emerging manager, you're trying to kind of get new LPs, you need to show top, top quartile, ideally top decile performance.

Their incentive, again, is to overmark and

Some of these biases are unconscious and some of them are conscious and it's just brutal market dynamics lead to kind of very interesting behaviors to say the least.

Definitely.