Rachel Li, CFA

A recent analysis of 8,500 private equity portfolios revealed a 97% failure rate in accurately pricing time decay. This isn't a strategy problem; it's a velocity problem. Your capital is sitting stagnant while algorithmic systems are executing at light-speed. Three realities of slow capital: - Manual deal flow analysis introduces lag, costing you basis points with every hour of human deliberation. - Your "diversification" is a myth. It's a static defense in a dynamic environment, easily outmaneuvered by high-frequency asset rotation. - While you are in meetings, our system has already repriced, rebalanced, and redeployed assets across three continents. The market doesn't reward hard work. It rewards speed. ⏱️ Stop guessing. Get your Sovereign Score: https://lnkd.in/gfpYaXBA https://lnkd.in/gvUMDm-f #CapitalVelocity #Alpha #AlgorithmicTrading #PrivateEquity #WealthManagement

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Colibri Strategies' first Perspectives paper is live.   The $72 Million Question: What Emerging Manager Exclusion Actually Costs Your Portfolio translates Colibri Institute's empirical research into a direct practice framework for institutional allocators.   The core finding from CI's analysis of 2,471 U.S. VC funds: emerging managers outperform established peers by 7.2 percentage points in IRR and 0.34x in TVPI. On a $100M allocation, that gap represents approximately $72 million in foregone value over a fund lifecycle.   This paper addresses three questions most institutions have never formally answered:   → Have we quantified the opportunity cost of our current EM allocation weight? → Do our screening criteria predict performance or institutional embeddedness? → Is our VC portfolio structured to capture alpha, or to manage career risk?   Alongside the paper: a free Opportunity Cost Calculator that generates a customized estimate in 90 seconds using your institution's own parameters.   Both are open-access. Both are built to be used in IC conversations.   Paper + Calculator: https://lnkd.in/dMhHDtMh   #VentureCapital  #EmergingManagers  #InstitutionalInvesting  #PortfolioConstruction  #ColibríStrategies

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#DidYouKnow? Stripe is quietly engineering the permanent replacement to IPOs. It has both good and bad aspects, but should ultimately be instructive for many #funders and practicioners like ourselves as well as for some of the #founders of the most successful and dominant platforms out there. This is a courtesy extract from Linas Beliūnas’ newsletter. The news 🗞️ FinTech giant Stripe has figured out how to be public without being public, and the market is pricing that in. The payments company is arranging a tender offer at a $140 billion valuation, up 31% from its $107 billion mark last fall and well past its 2021 peak of $95 billion. Wow! 😳Bloomberg reported the news today, noting terms could still shift. Stripe declined to comment. The company hasn’t raised primary capital since its $6.5 billion Series I in 2023, led by Thrive Capital. And honestly, it doesn’t need to. Stripe hit full-year profitability in 2024. Let’s take a quick look at this. More on this 👉 First and foremost, what matters here isn’t the number. It’s the mechanism. Since 2024, Stripe has run recurring tender offers as a standing liquidity program for employees and early investors. Co-founder John Collison told Bloomberg in January that Stripe is “still not in any rush” to go public. At $140 billion, with regular secondary sales and no quarterly earnings calls to manage, the rush is hard to see. The tender offer isn’t a waypoint to an IPO. It’s becoming a substitute for one. Stripe is building the payment rails for a world where software buys things from other software, and it’s doing so while processing roughly 1.3% of global GDP through its existing stack. That’s a completely different game to play. THE TAKEAWAY ✈️ What’s next? 🤔 Looking ahead, here’s what to watch. If Stripe can keep running tenders at rising valuations every six to nine months, it removes the single strongest argument for going public: employee liquidity. That changes the calculus for every late-stage company watching from the sidelines. The second-order effect is a growing class of $50B+ private companies that never IPO at all, with secondary markets becoming the de facto exit for early investors. The obvious losers here are investment banks waiting on IPO fees and public-market investors locked out of the best returns. That said, the question isn’t whether Stripe will IPO. It’s whether the IPO, as a default endpoint, still makes sense for companies that can engineer their own liquidity at will. ICYMI: Stripe’s Agentic Commerce Suite signals a new era in AI-powered payments 🤖💳 [what it’s all about & why it’s huge, why FinTech giant’s strategy here is brilliant & what to expect next + bonus dive into Stripe’s quest to become the financial backbone of the AI economy & 100+ battle‑tested tools and frameworks to accelerate your AI projects inside]. Make sure to follow Linas Beliūnas on LinkedIn and Substack for pertinent fintech insights.

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For decades, Strategic Asset Allocation (SAA) has been the dominant organizing structure for institutional portfolios. Is it still right for today’s environment? In a recent paper, my KKR colleague Henry McVey and his team explain why broad market exposure alone may be less likely to deliver the outcomes it once did, and why a different mindset, the Total Portfolio Approach (TPA), is gaining traction. They provide an overview of TPA’s core mechanics, highlight how it differs from SAA, and explain why it may be particularly relevant for private market investors. Read the full piece to learn more: https://go.kkr.com/3NuNURo

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At the J.P. Morgan Quantitative Investment Solutions Forum, WorldQuant’s Paul Griffin joined Pusheng Zhang of Cubist Systematic Strategies for a panel discussion moderated by Max Hardy of J.P. Morgan on how AI is rapidly shifting from hype to execution. One key point Paul emphasized was that, as AI tools and data become more widely accessible, firms should focus on what they can uniquely build, including proprietary data and the context developed through research over time. The discussion also underscored the importance of experimenting aggressively, while recognizing the critical role humans continue to play in defining the framework and setting the right constraints.

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The Spring semester of System-Level Investing—the course Jon Lukomnik and I teach at Columbia | SIPA—continued this week. Last week, we focused on the enduring influence—and growing limitations—of Modern Portfolio Theory (MPT). MPT gave us diversification, indexation, benchmarking, and the architecture of asset management. It is deeply embedded in regulation, law, and academic finance. In short, it is how money is managed today. But that success has had performative effects. By optimizing portfolios security-by-security, MPT largely sidelines risks that cannot be diversified away—risks that emerge at the system level. As a result, long-term financial outcomes increasingly depend less on security selection and more on the condition of the environmental, social, and economic systems that underpin value creation. This week’s class picked up from there, examining the interrelationship between investing and the health of the capital markets themselves—and how those markets, in turn, depend on the health of the systems they are meant to serve. We introduced students to the major actors in the capital market system and explored how their roles and incentives align—or fail to align. A recurring theme was fragmentation: the sheer number of intermediaries involved in moving money from “point A” to “point B,” and how well-intended, proximate incentives can collectively produce a tragedy-of-the-commons dynamic—undermining both system stability and market efficiency. We closed with a case study of the Global Financial Crisis (2008–2009), illustrating how systemic failure can arise even when individual actors are each “doing their job,” and how gaps between financial markets and the real economy can amplify shocks rather than absorb them. We were fortunate to be joined by two outstanding practitioners: 🎤 Rodney Foxworth, CEO and Co-Founder of Worthmore, who grounded the discussion in place-based systems, community wealth, and the real-world consequences of capital allocation choices. 🎤 John Adler, Chief ESG Officer at the NYC Office of the Comptroller, who examined capital markets through the lens of public fiduciary duty, systemic risk, and long-term market integrity. Taken together, their perspectives underscored a core insight for students: investing is not simply in systems—it actively shapes them. Understanding that difference is increasingly central to fiduciary responsibility. #investing #fiduciaryduty #impactinvesting

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🔸 Wall Street’s New Life Line: Private Equity In barely a decade, private-equity firms have gone from fringe participants to dominant players — now controlling one-fifth of all U.S. annuity reserves. That’s a tenfold surge since 2011, fundamentally altering how retirement capital is invested. 🔹 Berkshire Hathaway’s Take Even Warren Buffett’s empire wants no part of it. Berkshire’s insurance chief says the firm “avoids competing in life insurance” — a subtle acknowledgment of how PE-owned rivals are playing a different game. 🔸 The Strategy Shift PE-managed insurers aren’t chasing traditional bond ladders. They’re deploying liabilities into private credit, structured notes, and illiquid yield plays once reserved for alternative funds. 🔹 Regulators Are Watching Supervisors are increasingly uneasy. Some smaller ratings agencies have been accused of inflating private credit grades, muddying true risk visibility. Yet the flows keep coming — as retirees, advisors, and corporate plans search for yield in a high-rate, low-trust world. 🔸 The Big Picture Insurance, once the embodiment of prudence, is now the frontier of financial engineering. And PE giants — from Apollo to Brookfield to KKR — are quietly becoming the new systemically important institutions of the decade ahead. #PrivateEquity #Insurance #Annuities #PrivateCredit #AlternativeInvestments #BerkshireHathaway #FinancialRegulation #YieldStrategy #InstitutionalInvesting #Alts #AssetManagement #MacroTrends

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Davidson Kempner's Suzanne Gibbons just published something that explains the private credit attention: the leverage numbers aren't real. Direct lending reports 5x. Strip out the accounting adjustments? 6.9x. That's the widest gap since 2015, when add-backs were half what they are today. Here's the problem: many of those adjustments are aspirational. Projected synergies fail to materialize, leaving capital structures more fragile than headline metrics suggest. Within the Kroll StepStone direct lending universe, loans with stressed interest coverage have more than doubled from 14% at year-end 2019 to 32% most recently. When stress hits, the gap between reported and real leverage matters. A 1.9-turn difference can raise loan-to-value ratios from 45% to 64%, leaving lenders with a meaningfully smaller cushion. The firms that sized to real leverage, not adjusted numbers, built different assumptions from the start. FT.com #PrivateCredit#PrivateCreditRecruitingAI

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Why 23 Equals 46: As I've shared previously, Direct Lending has 23% exposure to the software sector. Given most managers deploy 1x leverage, 23% actually understates the real gross position risk relative to net equity given leverage. Here's the math: BDCs and Direct Lending funds typically employ 1x leverage. That means for every $1 of equity, there's $2 invested as a result of financing. With 23% of total assets concentrated in software, the Fund/BDC has 46% of the fund's equity at-risk to this single sector (software), on average. This is an average: some managers may have more exposure to software than the stated 23% (46%), while other managers may have less exposure. Concentration risk is always dangerous. Leveraged concentration risk carries more acute risk. Banks that extended financing to BDCs and DL Funds have begun to take a closer look at their risk models, and are now asking hard questions about software exposure, as are investors. This story will take some time to play out (default rate, loss rate, etc.), but when the smoke clears, managers who have been disciplined in their underwriting and selective with their exposure to software exposure will likely be better positioned. We should expect significant variation in IRR/MOIC between the top quartile and those who navigate this well vs. those who were simply too aggressive, too concentrated, extended too much credit (Debt-to-EBITDA), and borrowed too much. Direct Lending typically employs one turn of financing, which is customary for the business. But the problem isn't one turn of leverage; the problem is the high concentration to software, and how highly leveraged these businesses are as a time of disruption. When your 46% software portfolio crashes, there's no Ctrl+Z!

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