E308: The Future of LP Liquidity
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What is the main topic discussed in this episode?
When a lot of people hear leveraging your stocks, they inherently think that it's highly risky. Why is that a good idea for everyday investors?
Well, I mean, leverage, generally speaking, is associated with bad or potentially risky Again, I go back to the example, if you take a mortgage against your house, you are leveraging the place that you live in. You could lose that if you don't pay back the loan. And it's really a question of what kind of leverage you take, for what reason do you take it, right?
How does leveraging assets impact everyday investors?
If you're just taking crazy leverage, to get even more exposure to the market, well, just be aware back to our points about how to think about risk. Well, if that thing goes against you, you could lose all of your wealth very quickly. And as long as you understand the outcomes and you're a professional about it, then, you know, hedge funds do go to higher leverage and, you know, face outcomes. The question is if you wanted to use 50% of your portfolio against a house and you could meet those payments, That could just be another asset class where you might get a better lending rate, right? Because a house is not as efficient or not as liquid as equity market that someone that actually might lend you for buying a house at a much better rate than what a bank would give you, for example, against the deed of your house.
which might not be very easy to liquidate. So to me, leverage is just driving utility out of your assets. There could be bad leverage and there's good leverage. I mean, if you can borrow cheaper than what a bank would lend you, I would say, depending, again, for what you're using that loan for, that actually is a good outcome for the consumer because we're not getting away.
How does Canton enable that and what markets are you plugging into and going in between?
At the end of the day, what financial services are, are a bunch of ledgers that just agree on book entries or who owes who what money, or if I took a loan against something that the asset that I loaned against is... encumbered or cannot be used for something else. So that coordination of all of these ledgers is really where the inefficiency today exists. That's where all the operational costs, legal costs, all those legal documents that we sign. So really what blockchain technology in general and Canton inherently does the same, is really how do we streamline the management of these books and records across all these different financial players. So what we're doing is we're focusing on capital markets to begin with.
So we just announced with DTCC the first US treasury that would be able to be available on Canton. So you'll be able to move U.S. treasuries in real time, 24-7. We work on private markets, so private equity, private credit. But we do stuff in insurance, commodities, mortgages, and pretty much every financial instrument that you can imagine.
One of the biggest headwinds in LP world is DPI right now. It's the hottest topic. Every endowment, pension fund, foundation, family office is saying, I need to get capital return from private equity. Does Canton solve this problem over the long term? And if so, in what way? One of the hardest things of investing is seeing what's shifting before everyone else does. For decades, only the largest hedge funds could afford extensive channel research programs to spot inflection points before earnings and to stay ahead of consensus. Meanwhile, smaller funds have been forced to cobble together ad hoc channel intelligence or rely on stale reports from sell-side shops. But channel checks are no longer a luxury.
They're becoming table stakes for the industry. The challenge has always been scale, speed, and consistency. That's where AlphaSense comes in. AlphaSense is redefining channel research. Instead of static point-in-time reports, AlphaSense channel checks delivers a continuously refreshed view of demand, pricing, and competitive dynamics powered by interviews with real operators, suppliers, distributors, and channel partners across the value chain.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–0:32
2
How does leveraging assets impact everyday investors?
0:32–9:46
3
What role does blockchain play in capital markets?
9:46–16:13
4
How does Canton Network improve liquidity in private markets?
16:13–16:56
5
What challenges do Limited Partners face in capital return?
16:56–17:48
Speakers
2 identifiedMore from How I Invest with David Weisburd
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