Episode summary
What should LPs Do When There is No DPI?
How I Invest With David Weisburd
· · Hosts: David Weisburd · Guests: Alex Ambroz
Summary
The central argument is that private markets have entered a prolonged liquidity drought, and LPs need to stop assuming distributions will revert to historical norms. Alex Ambroz says private asset distribution yield, which historically hovered around 20% to 25%, has fallen to about 12% over the last four years and may be only 9% to 12% in 2025. He argues that this breaks portfolio pacing models, creates denominator effects, and forces institutions to sell public assets or otherwise adapt to a much slower return of capital.
Ambroz walks through the main liquidity tools and their tradeoffs: continuation vehicles can preserve upside but delay cash, while secondaries provide liquidity at a haircut and can damage GP relationships. He says some vintage 2020 and 2021 funds have DPI below 0.1, while private credit remains the exception because its distribution profile has stayed closer to historical expectations. He also argues that the market structure now favors companies staying private longer, making “private is the new public” more than a slogan.
The episode also covers LP incentives and process. Ambroz says many institutions cannot borrow at the portfolio level, and that career risk, principal-agent problems, and internal politics make it hard to pressure GPs on marks. On AI, he says the tools can remove administrative work but cannot replace allocator judgment. For fund selection, he recommends using factor analysis to separate true alpha from disguised beta, rather than relying only on CAPM.
Key takeaways
- Alex Ambroz says private asset distribution yield has fallen from a historical 20% to 25% range to about 12% recently, with 2025 looking like 9% to 12%.
- He argues the drop in DPI creates a downward spiral of illiquidity because LPs cannot fund new commitments and spending needs from distributions.
- Ambroz says secondaries can unlock cash but often require a discount to NAV and can hurt future GP access and relationships.
- He says private credit is the lone major exception, with distribution yields still near 22% to 24% over the last couple of years.
- Ambroz argues LPs should extend their liquidity models and not rely on IPOs as a release valve for private-market assets.
- He says factor analysis is essential because many LP reports overemphasize beta and miss other sources of factor exposure.
Notable quotes
“The portfolio grinds to a halt. You know, full stop uh literally full stop”
“I think CVS have now reached hundred billion dollars. I think CVS are here to stay for many of the reasons that we talked about”
“private is the new public”
“AI tools, I'll give you a few examples of where we see allocators using them. Uh, they can be useful, but we can't just offload the most important part about being an allocator”
How the episode opens
So Alex, you have one of the most prolific career backgrounds of any guest, having been at Morgan Creek, JP Morgan, Cleveland Clinic, and most recently CIO of Aberdine Investments Ireland. You have a deeper pulse on the LP community than almost anybody that I know. Give me a sense for the biggest issues facing LPs today.
pensions, endowments, foundations, family offices, outsource CIO firms, consultant firms. You know, we talk to a lot of allocators, and we try to listen to them about what they're interested in, what they're worried about. And three big ones that have been coming up, uh, two that we hear about a lot and one that we ask about a lot.
The two that we hear about a lot are the lack of distributions and the changing nature of distributions from private asset funds. something that's really accelerated in the last it's been happening for the last 10 years but really the last five years. The second one is the absolute meteoric rise of AI tools generally.
And then specifically for allocators and investors, you know, people who are assessing markets and funds, you know, how can they use AI tools and are AI tools going to replace us as investment professionals? And then the third one factor model assessment of how their individual funds are doing you know and how they can assess importantly the most important question in any fund evaluation process. Am I paying alpha fees for beta performance?
I
Do want to get into whether AI tools are going to replace the two of us as well as factor analysis. But first let's start on the DPI question. maybe set some context for where DPI was in 2024 and 2025 versus historically.
So that would be distribution as a percent of NAV.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- dpi crisis
- private market liquidity
- continuation vehicles
- secondary sales
- denominator effect
Companies and tickers mentioned
- Morgan Creek Capital
- J.P. Morgan
- Cleveland Clinic
- Aberdeen Standard Investments
- AlphaSense
Watch the episode
Watch “What should LPs Do When There is No DPI?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
