Episode summary
Why the Best Fund Managers Rarely Raise More Capital
How I Invest With David Weisburd
· · 35 min · Hosts: David Weisburd · Guests: Luke Sarsfield
Summary
Luke Sarsfield argues that Ridgepost Capital’s model is built around alignment more than asset gathering: the firm takes all of the management-fee stream but leaves most carried interest with the underlying managers so they stay motivated to generate durable returns for LPs. He says that structure helps reward investment skill, improves LP relationships, and keeps the platform focused on persistent alpha rather than chasing the next capital raise.
A major theme is hidden concentration risk in large private portfolios. Sarsfield says many LPs think they are diversified across several big managers, but the underlying assets can still be highly correlated because those firms often play in the same parts of the market. He argues that middle and lower middle market specialists can offer genuine diversification, but only if they have the scale, stability, and expertise to operate there well.
The conversation also centers on long-term thinking inside a public company. Sarsfield says quarterly reporting creates short-term pressure, but Ridgepost tries to counter that by clearly communicating its long-term vision, measuring execution against it, and hiring people who value culture, mentorship, and debate without groupthink. He repeatedly returns to the idea that relationships, talent, and trust compound over time more powerfully than short-term fees.
Key takeaways
- Sarsfield says Ridgepost keeps most carry with the managers because alignment with LPs is “really critical to the models.”
- The guest argues that LPs in large private portfolios may have more correlation risk than they realize, even when they have many managers.
- He says private-market manager sales can vary widely, but a vibrant middle for private managers is often around 10 to 15 times on an EBITDA or FRE basis.
- Sarsfield says the best asset managers share longevity, culture, and strong people, and that generational transition is one of the hardest problems in the business.
- He says Ridgepost’s mission is simple: deliver world-class risk-adjusted returns for LPs, and shareholder value should follow from that.
- On recruitment, he says organizations need trust and high character, but also people willing to challenge the leader and prevent groupthink.
Notable quotes
“We collect 100% of the management fee stream, the fee-related revenue, and typically then we own just a little bit”
“But we leave most of that behind with the underlying managers. We think that obviously it's a great tool to incent the wonderful investors”
“I notice when I look at my mixology in the private part of my portfolio that even though I may have it spread across several of those larger managers, there's actually a fair bit of inherent correlation in my portfolio”
“The sequence. We've got to deliver the outcome, then the good things will happen. It's not the other way around”
“Ultimately, this is a people business. And so, the most important thing is the people”
How the episode opens
Today's guest is Luke Sarsfield, the CEO of Richpost, a publicly traded company. Luke was a global co-head of asset management at Goldman Sachs for 23 years before becoming CEO of Richpost. And Richpost solves a very big problem in asset management, which is how can managers continue to perform despite this incentive to always be raising more and more capital.
Today we go deep into how managers can be incentivized to continue performing for our limited partners, what breaks as managers scale, and what the market is today for GPs that are looking to sell. Without further ado, here's my conversation with Luke. Luke, you're chairman and CEO of Richpost, which owns some of the most prolific asset management firms in the world like RCP, TrueBridge, Bonaccord.
Before we get into the business, maybe talk about exactly what you own in these firms.
We collect 100% of the management fee stream, the fee-related revenue, and typically then we own just a little bit, just a small percentage of the carried interest or the incentive fee. But we leave most of that behind with the underlying managers. We think that obviously it's a great tool to incent the wonderful investors that we have at each of those franchises, but it also creates great alignment between them and their limited partners.
And that alignment is really critical to the models.
When I heard about the business, I had to get you on because I think it's solves the biggest issue in asset management today, maybe outside of liquidity. And the second biggest issue in asset management today is what LPs disparagingly call asset gatherers versus investors.
Number one is we exist to serve our LPs, right? We want them to have a great investing experience. We want to generate consistent, persistent, durable alpha in whatever strategy we're executing for them on.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private market incentives
- carried interest vs management fees
- hidden correlation risk in private equity
- public vs private market short termism
- manager scale and long term thinking
Companies and tickers mentioned
- GS
- Ridgepost Capital
- Goldman Sachs Asset Management
- AlphaSense
Watch the episode
Watch “Why the Best Fund Managers Rarely Raise More Capital” 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.
