Episode summary
Inside GEM: How a $12.5 Billion Platform Selects Outlier Funds
How I Invest With David Weisburd
· · Hosts: David Weisburd · Guests: Kate Simpson
Summary
Kate Simpson says GEM, a $12.5 billion platform founded in 2007, has expanded from a discretionary OCIO business into more targeted alternatives work, including venture investing. Her path from the UNC endowment to fund-of-funds investing shaped her view that venture manager selection is a craft built on asking better questions, maintaining long-term relationships, and doing disciplined reference work.
A central theme is that venture is becoming two markets at once: a discovery game for smaller emerging managers and an access game for a shrinking set of large, established brands. Simpson argues that LPs need a framework for evaluating sourcing, picking, and winning, and she says GEM’s team uses a “what you need to believe” model to test fund size, ownership targets, and reserve strategy against a realistic path to 5x. She emphasizes that venture returns still depend on power-law outcomes, so fund size and construction matter.
She also argues that today’s market is unusually difficult because dispersion is high and liquidity has been weak. In her view, the best LPs add value through patience, research partnership, and being consistently present in the ecosystem, while still giving managers room to build over multiple funds.
Key takeaways
- Simpson says GEM reviews hundreds of venture managers a year and differentiates them by sourcing, picking, and winning rather than by track record alone.
- She argues that references matter most when they are detailed, candid, and often off-list, because “good” references are not the same as “glowing” ones.
- GEM’s “what you need to believe” model stress-tests whether a fund can plausibly reach 5x based on fund size, ownership, and reserve strategy.
- She says venture has bifurcated into an access game for large multi-stage firms and a discovery game for small early-stage managers.
- Simpson says the hardest part of being a venture LP today is the combination of wide dispersion, low distributions, and the need to identify power-law winners early.
Notable quotes
“The craft of doing references uh comes down to the types of questions you're asking of course, but also some pattern recognition”
“we build our own model which we call the what you need to believe model”
“VC is is obviously driven by power laws, right? Only a few companies each year drive returns in the industry and in our portfolio”
“there's there's two games on the field today. There's the access game in venture, there's the discovery game in venture”
How the episode opens
So Kate, you recently joined GEM, which is a 12.5 billion dollar AUM platform to lead the venture effort. For those not familiar with GEM, tell me about the platform.
GEM was founded in 2007, initially with the name Global Endowment Management, and its initial business and really still the core business today is as a leading fully discretionary outsource chief investment officer, OCIO. Um, today on that side of the business, we work with about 40 endowments and foundations and other small nonprofits. In more recent years, we've been partnering with a wider variety of LPs who want to leverage our research and our manager selection in more targeted ways across alternatives and and by that I mean in fund or fund of funds formats.
I want to get into some of your venture thesis in a bit, but first you joined the UNCC endowment immediately after undergrad. What did you learn at the UNCC endowment? How does that translate to how you invest today as a venture manager?
That first job opened up a career path that I didn't know existed, but came to really enjoy. Um, I certainly didn't set out to become a career LP. Not sure if anyone really does.
Um, the truth is I did not know what I wanted to do professionally after college. I had a lot of interest. I enjoyed a wide variety of subjects.
I did well in all of them. I really took advantage of a true kind of liberal arts education and I loved it. I was a generalist, if you will.
So the investment office at at UNCC um took a chance on hiring me. I was a history major. I was a clean slate when it came to finance and investing.
So I did have a steep and long learning curve and I was lucky to have a supportive me mentor.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture allocator diligence
- venture manager selection
- portfolio construction
- fund sizing and power-law outcomes
- lp vs gp dynamics
Companies and tickers mentioned
- GEM
Watch the episode
Watch “Inside GEM: How a $12.5 Billion Platform Selects Outlier Funds” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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