How Should Fund Managers Approach Pension Plans in Private Market Investing? Featuring Edward Comerford

With Edward Comerford,
Director of Private Markets, San Francisco Employees' Retirement System (SFERS)
This week on Swimming with Allocators, Earnest and Alexa welcome Edward Comerford, Director of Private Markets at the San Francisco Employees’ Retirement System (SFERS). They delve into Edward’s role in managing San Francisco's private market portfolio, his experience with private markets investing, and the unique mission of pension plans. The conversation covers the significance of venture capital in pension portfolios, the challenges of market fluctuations, and the importance of consistent investment strategies. Edward also reminisces about his business school days with Earnest, including their shared passion for basketball. The episode provides insights into the thoughtful approach required for pension plan investment management and the evolving landscape of venture capital. Also, don’t miss our insider segment as Nik Talreja of talks about how Sydecar is revolutionizing venture capital operations.

Highlights from this week’s conversation include:

  • Edward and Earnest’s Basketball Memories (0:47)
  • The importance of pension investments (5:42)
  • How fund managers should approach pension plans (7:59)
  • Unique challenges of pension plans (10:41)
  • Role of venture in the portfolio (13:02)
  • Impact of public markets on venture deployment (14:14)
  • Looking for new managers in 2024 (16:11)
  • Investment vehicles (18:17)
  • Insider Segment: Revolutionizing Venture Capital Operations (20:44)
  • Fund administration best practices (23:24)
  • Trends in SPVs (24:52)
  • Warehousing deals (28:33)
  • Comparison and tracking of managers (31:02)
  • DPI and Valuation Accuracy (32:50)
  • Liquidity and Capital Strategies (35:06)
  • Zombie Funds and Succession Planning (37:44)
  • Venture Capital and Portfolio Diversification (44:08)
  • Final Thoughts and Takeaways (45:38)


The San Francisco Employees’ Retirement System (SFERS) is dedicated to securing, protecting, and prudently investing pension trust assets, administering mandated benefits programs, and providing promised benefits to more than 77,000 active, vested, and retired City and County of San Francisco employees and their survivors. SFERS administers two benefit programs, a $33 billion Pension Plan (defined benefit plan) and a voluntary employee 457(b) Deferred Compensation Plan. For more information, visit their website. is a frictionless deal execution platform for venture investors. Our platform handles back-office operations for venture investors, automating banking, compliance, contracts, and reporting so that customers can focus on making deals and building relationships. Learn more at

Swimming with Allocators is a podcast that dives into the intriguing world of Venture Capital from an LP (Limited Partner) perspective. Hosts Alexa Binns and Earnest Sweat are seasoned professionals who have donned various hats in the VC ecosystem. Each episode, we explore where the future opportunities lie in the VC landscape with insights from top LPs on their investment strategies and industry experts shedding light on emerging trends and technologies. 

The information provided on this podcast does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this podcast are for general informational purposes only.


Earnest Sweat 00:02
Today we are speaking with Edward Comerford, Director at San Francisco Employees Retirement System. Ed is a part of a team responsible for investing in San Francisco’s private market portfolio, responsible for sourcing and underwriting private equity, mid market managers, emerging managers, sector specialists and CO investments, and has over a decade of experience in private markets investing including managing his own real estate firm. Thanks, Ed, for joining us today on swimming with alligators. No, thanks

Edward Comerford 00:43
very much. Thanks, Alexa, I really appreciate you bringing me here.

Alexa Binns 00:47
This is fun for me to know there’s someone on who knew Earnest Before I did add you to our business school classmates? Are there any things I should know about either of your favorite stories? To think the

Edward Comerford 01:01
I think the big thing with Earnest This I remember learning pretty early on, you know, business school and my man who. So we had open gym at Kellogg, two hours a day, five days a week type thing. And there was a crew of us that would build our class schedules and social schedules around being able to play basketball and Earnest Was there a bunch all the time and he was always tearing up the court posted on the court every time and really cohorts together. And so when time came for in a neuros They cut up the teams by cohort and so I was thinking yeah, we have this in a bag. We’re gonna win it all. We got the best player in the school. And kind of the way it played out is we had Earnest. Absolute stud and then like the rest of the court where’s the best way to say this?

Earnest Sweat 01:56
They were business school students there. Yeah.

Edward Comerford 02:00
The mind is willing the body to be athletic and lucky. So there was a little bit of a rough go there. But uh, but yeah, he will definitely shine on the basketball court.

Alexa Binns 02:15
Yeah, I have no idea. Earnest Yeah, it

Earnest Sweat 02:18
was a pretty good basketball player. I mean, depending on who you talk to about what aspect of my life, my High High School teammates will probably be like, he was okay. But as I got to more and more unathletic communities, I started to shine a lot more. But you know, the whole story I play this quick, you know, I played LeBron James when I was in high school, right, like, and Chris Paul, I was pretty good. I was on a pretty good traveling team. So yeah, that

Edward Comerford 02:49
was pretty good. That’s a decent gap between Braun and CP three and me. Yeah. And then from you to the rest of us, I kill off probably,

Earnest Sweat 03:00
I am doing a podcast and those two are still playing at the highest level with 20 year olds. So yeah.

Alexa Binns 03:08
Little one day there’ll be retiring and doing what we do. So it’ll all come full circle. Speaking of full circle, are there from your career journey? Cure? curious why you chose spurs, after you’ve been at hull capital and USP, you’ve done your own real estate thing, though.

Edward Comerford 03:27
So yeah, I was looking for a few different things. And I was fortunate enough to find them all in Spring. So the first one is kind of the structure. Yeah. The, one of the key lessons in my opinion, the one of the really key things in all the private markets, but especially in venture, you know, is commitment to consistent deployment, you know, a commitment to the asset class, right? It’s, we’re talking about a 10 year long asset class that can be cyclical, like and is illiquid. So a group like spurs shield that had been investing in VC since like the 90s. You know, has shown that long term commitment and long term stable deployment there was really important Yeah, and yeah, so that was that was an important box to check. Yeah, another one likes furs like the mission appealed to me or my mom was an educator here in California for her entire career. And so there’s people at CalSTERS hustling everyday for her retirement. And so that means something I was born in San Francisco so giving back to the people who are spent their careers in San Francisco helping San Francisco means a lot and then the way that teams approach towards private markets the team’s approach towards venture was an important one too and here it’s not really a set it and forget it mentality. It’s continually trying to evolve to find that next good manager, keep pushing the portfolio forward, thinking about what can we do better, you know, where’s it what’s, what’s the old sports analogies skate to where the puck is going, not where it’s at. So like, we try to encompass that as best we can, you know, and so I think That combination was important. And that wasn’t necessarily expecting to find it at a pension plan, but you do, you can kind of look through the traditional. The common thinking, I guess, around pension plans and kind of seeing the value underneath, really made this an attractive landing place for me and my career.

Earnest Sweat 05:20
As a native San Franciscan, I think that’s right. Could you speak just kind of like your position? And how do you take that seriously, and kind of like the importance of investing on behalf of folks who work for San Francisco? Yeah, so

Edward Comerford 05:42
There’s no, the idea of a pension is somewhat of an antiquated one to begin with, but it’s not something, the 60s 70s You saw it all over the place now, not so much for a host of reasons. And in cases like this, where if people are going to specifically select to working for a city, a government, you know, any sort of institution like that, where they know that I’ve given up some upfront for this security on the background, I mean, that’s a meaningful trade, and people are relying on this pension, retirement, we have something for the kids to help their kids along the way. So it’s a, you know, for people that make that trade off, I think it’s really important to deliver you on the back half of that trade and not have something that poof disappear. At the end. And the overall structure of pensions is a little bit tough, too, because I would like to get in trouble. For this one, it’s a little bit of a pyramid scheme, right? Like you need the new employees, paying the growing number of employees really helps to kind of keep everything working the way it should. And one way we can help alleviate some of those pressures, is by performing really well on the investment side, right. And so that’s where, at least for me, the mission speaks where we really feel like you can step in and do a lot to drive performance to drive our returns that can help ensure this retirement that was promised that contractually promised the people but people that specifically gave up money up front to have that stability on the back end to make sure that comes to fruition. Right. So I think that’s, that’s really important for that social contract, I guess, if you would between the city, and the employees have worked out,

Earnest Sweat 07:24
given that there’s such a strong mission? How should a fund manager approach pension plans? And kind of the context around this question and why I love doing this podcast is because I think there’s a lot of misconceptions on just what allocators do and what their purpose is, and most think it is just like, make the rich richer, right? This is not the case. And so since there’s this unique mission for pension plans, how do you think fund managers should approach? You know, someone like you to

Alexa Binns 07:59
bribery, I think works. That’s definitely

Earnest Sweat 08:05
out we tried not to, like have this edit it was fine.

Edward Comerford 08:14
Don’t work. They’re not, there’s a really, the mission, the sanctity of the mission, I think is so important that we try to separate that from the investment side, right. So from what we’re doing, from where I sit, maximizing the level of return per unit of risk, however you want to calculate that is 100%, that, you know, in venture in the role that venture plays, we achieve that goal by focusing on growth, that is our long venture capital is our long term growth driver for for the planet. Right, and we don’t want to dilute that by adding extra missions or side quests or whatever the heck you want to call it, right? Which is a little bit different than an endowment or foundation, which can make other financial choices, you know, to emphasize something else besides risk adjusted return in their investing? Right. So from that point of view, like, you know, a lot of the mission type investing stuff we’ve been discussing a lot. There’s definitely political pressure to focus on some different, you know, Mission type investing things, but I think we’ve really strove to keep that risk adjusted return as the only like, it’s very difficult to serve multiple investors and do so successfully right. So if we know that and surrounding the pensioner skin, how can you know, receiving their pension benefits is the guiding light and you kind of work backwards from that then, you know, we’re 100% risk adjustments are in focus. Yeah, we don’t necessarily have the flexibility of taking other aspects into account. Stop saying, yellow will never do anything yesterday or whatever do no juror when it comes to different mentions like that all can that we all take that into consideration when we’re looking through risk profiles. But as far as saying we’re going to try to achieve high returns and do X like No, no X, were solely returned driven investor speaking

Alexa Binns 10:25
sort of to pension plans in general, are there eccentricities of how they work that make them unique LP or, or more challenging to work with or easier to work with?

Edward Comerford 10:41
You know, everyone knows the perception out there, right? It’s dumb money, that’s a ton of red tape, and there’s always a decade behind the trends. And in those, I’m not gonna, you know, and a lot of us perceptions exist for a reason. But I don’t think it’s quite as bad as what everyone thinks there’s going to be more red tape I joke a little bit about, yeah, pay for services, right? There’s a ton of structure in there to make sure that stuff doesn’t happen. And that’s not able to happen. You know, so there’s going to be a little more red tape, yeah, we’re probably not going to be as nimble as some family offices. That’s what I would recommend. GPS do and, you know, maybe, now this may be an interesting time in the universe to say this, right? Because you’re struggling to raise capital, just go get that dollar, prove it out and come back, right. But if you’re fortunate enough to be in a position where you have some options when it comes to LPs, like do some homework, help us to figure out which organizations have consistently deployed, you know, are willing to be forthright into the decision making, right, and those are the levels that we can control? And that we try to control like consistency, honesty, transparency, that doesn’t matter if you’re an elf, or a family office or a public pension, right, that kind of talks about the quality of the organization. And so from that point of view, I think we just strive to run a really high quality organization. And that’s gonna, I think, offset a lot of like, the pain points that I think most GPS would would think of when it comes to dealing with the public pension for California baseball with pension plans, we’re gonna have disclosure requirements, there’s always going to be some stuff that we can’t get away from that’s going to be suboptimal, maybe, from some people’s point of view. But I think the quality organization now I’m definitely talking to my own Buckcherry a little bit. I think the quality of the organization is massively important in a lot of cases and can overshadow some of the standard perceptions about dealing with public pensions. You

Earnest Sweat 12:56
lead the team responsible for private equity investments, what’s the role of venture in your portfolio?

Edward Comerford 13:02
Yeah, so ventures 100%, our growth track. Venture capital is our growth engine. And it’s specifically achieving growth through innovation. From both a bottle term, like the US economy point of view, and I think it was sums I think ties pretty directly to investing like innovation is super critical and important. And we’ve believed that that power of innovation, you know, going back for over 30 years now, has put us in a position to drive up performance. I think we’re north by 20% IRR in our VC portfolio since inception, because of this focus on innovation and focus on what comes next. And yeah, I think it’s important to view each asset class and understand what its role is in the portfolio. And from a growth driver innovation driver event VC is 100%. That does what we do with it.

Earnest Sweat 13:58
Was there in these last couple of years any issues with the public markets, and they’re kind of a roller coaster and having you kind of relook at your venture and maybe being overweight at any point. Did that ever impact your deployment? So

Edward Comerford 14:14
we’re fortunate that it has, you know, definitely the domino effect. I think every LP that’s invested in private markets, investing in venture has dealt with that at some point since 2021 2020, the pullbacks, etc. This is where it organizationally has that long history in VC investing having a long history in private markets investing and understanding that there’s gonna be boom times and there’s gonna be busy times the portfolio was 50% in 2021 on the VC side like that, even without like the subsequent pullback in 2022. Yeah, we’re gonna be above allocation. But understanding that this is something that happens in a long term volatile and liquid asset class Understanding that we’re not managing the venture capital portfolio to hit targets of 2025. We’re trying to hit targets and 2035. So how do we set a consistent deployment rate that, you know, maybe takes up heretics down here but doesn’t have those wild swings? which end up building in inherent? Your risks associated with different different deployment years, you know, you’re trying to diversify, you have good vintage or diversity diversification that’s consistent and not like, Okay, so now we’re going to under allocate coming into what could be a good market and then over allocate, you know, it’s gonna be a hotter market. How do you avoid that? Right. So having that long term view is important. And we’re fortunate that, you know, our leadership understands that and has our backing and they’ll push and we’ll ask questions, but as long as our messaging is consistent in our messaging is based in like, the fact that based messaging, then we’ve been fortunate that everyone’s understood and are consistently deployment, excuse me, has been able to be consistent. And

Alexa Binns 16:06
and with your deployment, will you be looking for new managers in 2024? I’d

Edward Comerford 16:12
say we’re always looking for new managers. So probably, if I think about VC, the higher priority items right now, we’ve spent a lot of time in Europe. Recently, it’s been part of our portfolio. If you look back at the performance, yeah, and this is where Vc is really neat. A lot of asset classes in the US have really dominated performance over the last decade in venture because of that ability to really generate breakout performance repeatedly. It’s less of a US centric asset class, I think us is going to be the vast majority of what we do, but we have good US exposure. We have good AIPAC exposure. And so we’re making sure we’re not missing anything in Europe. So we’re spending extra time thinking about that right now. And then you’re looking at our current portfolio. Yeah. You know, everyone was written up, I mentioned, we’re 50 plus percent 20. Valuations haven’t come down in a, you know, it is at a similar rate, you know, and yeah, growth will make up some of that. But, you know, whose valuations Do you trust, you know, who maybe over extended a little bit during the hot time, so we’re going so going through and doing that analysis now, I’m sure will lead to opportunity, the future for new relationships, I say like in a perfect world would be adding a new relationship a year or so we don’t always hit that sometimes it’s too. But I think their goal to continually Refresh is important because it’s a group. So this group is the VC group’s age and there’s turnover amongst professionals, you know, there can be a little bit of style drift. Now there’s, there’s always something to think about when it comes to reopen, there will always be opportunities for new managers. Specifically, on our end, we also have a vehicle set up for new relationships. So we’re not ready for a full squares check. And we want to put in 2 million, 5 million, or something like that. That’s also a really great way we found to start developing a relationship, get that firsthand seat, you know, and for something that from now on can graduate into the portfolio.

Earnest Sweat 18:17
Can you talk about those two vehicles one day, kind of the core vehicle? What type of, you know, what, what does that fund manager look like? What Did that fun look like? And then I would love to hear about that, you know, two, five $10 million checks? What does that fun look like?

Edward Comerford 18:37
Yeah, yeah, so I’d say the, for the primary portfolio, you know, I don’t know if this is going to be anything unique or different from any other VC allocator out there, right, but established group strong performance, conviction that they’re sticking to their knitting conviction that they’re able to continue to generate that performance going forward. Yeah, and like sizes vary anything from $20 million funding to some of the, like, the bigger groups out there. So those will usually be checked in 20 to 70 range, I guess, depending on conviction level, detail, blah, blah, blah, etcetera. You know, for the, you know, I call it I don’t want to call it a strictly Emerging Manager Fund, because that’s maybe emerging relationship fund, I’d be a better way to think about it. Those can be a combination of newer groups that have a very promising background, but maybe a less built out actual history working together was no round ship transactions. Those could be groups that are entering like a newer market. Like if we’re doing something an NGO probably goes through something like that. It’s for AI groups to note for a new AI focus group, that might be a good vehicle for something like then, you know, we’re very interesting, you know, upwards 30 in the US unclear maybe if it’s going to be quite as impactful as like the shifting SaaS was. So I What’s the market really look like 1015 years from now, but like, probably worth building starting to build relationships and thinking about who could be a good partner their long term, or groups that are going through pivots, you have a bunch of old partners who have moved on the next generation is taking over now they’re building up their track record. So group said that maybe don’t have the perfect mix that you look for as an LP, but have a lot of promising signs that we can, like I said, start small check of the front row seats are doing that relationship in person, and you’re looking for funding to down the line to graduate.

Earnest Sweat 20:43
Now we’re gonna take a quick break to speak with our sponsor. On

Alexa Binns 20:48
The show today has industry expert and sponsor Hugh Baron, who runs the venture capital practice at global executive search firm, Armstrong International. Thank you for partnering on the show.

Alexa Binns 25:10
Any advice for folks looking to work in venture?

Hugh Barran 25:14
Yeah, sure. So I would, you know, from, from, from the people I speak to, you know, and what I would, you know, I think if you are currently in banking, currently at a startup, whatever, whatever it might be, I think at the end of the day, you know, venture firms invest in technology, you know, most of that most of that technology is software based. So if you can find, and it’s about being authentic, and I think that’s, that’s when I speak to VCs, and hiring for VCs on the investment side is, you know, authenticating curiosity, you know, so what did you, what do you do outside of your day to day that shows that you’re passionate about X, Y, or Zed because that’s venture at the end of the day, it’s 24/7, all consuming industry. And if you don’t love it, there are easier ways to make money. That’s why That’s why I say to everybody, so you know, if you’re if you’re two years into Goldman, you’re three years in consulting or your your, your whatever startup just I would say pick two areas, it can be food, technically, crypto, it can be AI, it can be deep tech, whatever, find what you’re passionate about, and I think go super deep in those areas. And the first thing I’d say is, it will probably, you know, don’t expect it to happen in the next six months, it might take two years. But you just have to prove that and do enjoy it at the end of the day because it’s access to a harder job that is too consuming for you not to be not to know, absolutely love it and want to do it you know, outside of your day to day work. So I think you know, if you can authenticate, find what you’re interested in, authenticate that curiosity, write a blog, post, whatever, start a podcast, go on to meet founders in your spare time, find what companies are interested in. If you’ve got the money, try an angel to invest in stuff that you find interesting. I think that’s just you got to show that you’re, you know, you’re kind of in it for the long haul, I think then that will really impress most venture funds.

Alexa Binns 27:02
I will say the best advice I got breaking into venture with Rebecca Camden said, you can start doing the job. When you don’t work for a specific fund. Learn how to filter and you can start sending great deals to the people who have been kind enough to take a coffee chat with you. And you can prove you know how to do the job before you’re in it. So I love that advice that maybe the job comes two years later, but you can actually start doing venture, you can start sourcing and filtering for 20 companies at once. 20 funds at once because they haven’t got dibs on you yet. Yeah, exactly.

Hugh Barran 27:41
And, you know, I do also like the Paul Graham quote, which is like, if you have people go to and say I want to go into VC go to a startup first because in startups because that’s what you might never have to work again. And you have invaluable experience to help a founder. So I would also echo that echo that as well.

Alexa Binns 27:56
From your perspective, what does venture look like going forward?

Hugh Barran 28:01
Look, I think we’re in an interesting, I think we’re in a, you know, an interesting spot where I think we’re in a recalibration and restructuring of how venture has been for the last 20 years, which was, you know, bluntly, investing in FinTech, you know, consumer tech, an enterprise and b2b SaaS companies, I was coming at 90%, of where venture dollars, when I, you know, I do think, you know, with the use of AI a lot, building those companies, you know, making engineers more efficient is going to come dramatically down. And I really hope, you know, venture goes back to solving the really, really hard stuff, you know, nothing against 15 minute delivery, but if there’s more, there’s more venture dollars that goes into whether it’s hardware and climate tech, you know, AI and robotics. You know, some of the areas of defense tech and aerospace, I think are super, super important. Globally, if we can see more venture dollars, just, you know, risk capital going into solving real problems. I think that’s where the rest are, that’s where I hope the next 20 years are. That’s where I think there’s going to be some really interesting returns. I think software and SAS have had a great 20 years, but it’s coming to an end. And then the next 20 years is focused on solving real real problems with real capital. And so and I’ll speak to one fund the other day that said, you know, we’d want 80% Today percent of our portfolio is software. 20% is hard tech and b2c, and we’d want that to be 50/50 over the next five to 10 years.

Alexa Binns 30:19
I can see, solving big major problems is also probably quite helpful for recruiting the best talent to this industry. That you are real. You have a real mission in the work that you’re doing. You are such a good partner to have in a venture. Thank you, folks who are interested in working with you. And Armstrong International, feel free to email Hugh at Armstrong i n And now back to our LP interview, comparing all these managers and tracking your existing ones, is there a little bit of work that needs to go into to make them apples to apples? Just curious how people are reporting? And, what do you do to sort of dig in or get under the hood on some other numbers? Yeah,

Edward Comerford 31:10
So this is where having the underlying portfolio level data really is important, because they will have lots of groups that will have overlapping holdings. And so it’s really easy to compare group access, holding it at 12 times, you know, you’re buying something at an eight times and it’s soft, right? Like who’s right who’s wrong? You know, so, so we definitely go in and try to make them. I don’t know if it’s necessary modifications, but just kind of get a sense, because I’m not gonna sit here and tell you, I’m an expert on what a VC company devaluation should be. No idea. But we can have a good idea, you know, if there’s some creative financing rounds that probably should have been done rounds, but weren’t okay. Like, then we’ll take a little bit about what’s already there, cut 1015 20% kind of stress test, a portfolio, things like that, you know, again, looking at those common investments that we’ve seen, either other managers or our managers have, like, make sure that everyone’s holding that in a reasonable basis. Yeah, so we definitely go through when we will omit it when you’re when we’re thinking through the data, try to get a good sense of these valuations compared to a group of peers feel middle of the road from conservative to aggressive groups that mark everything up 20%, like, a quarter before they start fundraising, that having this sufficiently frequence frequently, right? And those are kind of the signs, again, maybe there’s a little more weakness here than top line performance, suggests, er, and then just straight looking at dpi, you know, it’s, I think, is this becoming a little more popular to do when it kind of comes in and out of popularity, depending on the overarching market, but DPI like DPI doesn’t buy, right? But that’s the one thing where it’s 100%, your round trip there. So digging through DPI numbers, understanding, I think, can give you a really good sense of what’s real and what’s not right, comparing what was an investment, how that was two quarters one quarter, two quarters, four quarters before exit, and and exit. You know, maybe that’s a little more comfortable for PE than venture per se, but kind of getting a sense of how much valuations move between the few quarters prior to exit and natural logs that I think can give you a sense of how aggressive or conservative GP is, when it comes to valuations.

Earnest Sweat 33:32
Why do you think DPI goes in and out of favor and Vinter?

Edward Comerford 33:37
You also do so in times like this, where evaluations are gonna be down from a few years ago, and it’s a little bit unclear how accurate all the marks are, right? I think that’s a really stable metric that it’s really hard to tough to fudge, you know, in other times we’re valuing you sticking to 2019 2021 We’re valuations are kind of skyrocketing, I think double between 2018 2019 You know, then then I think it’s a lot easier to be like well, like everything’s trading for 15 times and GM revenue so the fact that they’re holding it at all it’s totally fine. Yeah, so it and IRS most people are paid off IRA to you know, and if you if there isn’t a reason to think that IR isn’t super accurate, it’s really easy to be like yeah, we’re just gonna go with the guys who pump are the hardest because my bonus or whatever is tight, my cups tied into that a little bit. Today when you’re looking at the IRR and you’re not 100% sure how accurate this is, you kind of fall back on something that’s a lot more stable as a valuation metric.

Earnest Sweat 34:49
That’s fascinating.

Alexa Binns 34:51
It is liquidity. Are you all patient capital? You’d rather everybody ride everything into the end? Or are there some other strategies that you’d prefer some of your managers started engaging with now?

Edward Comerford 35:10
This is this, this answer is gonna 100% change with every LP you talk to, from our point of view, I think the bias is to write things out. That said, Yes, like the details around each individual situation, you know, what can we do? What’s the best way to say this? If it’s an investment the manager strikes on, that they know really well, where it’s just a little bit of market headwinds. And underlying performance is good. The underlying metrics are really good revenues to draw. Well, you know, you have the ability to become EBIT DOT positive, you know, if you do it with, if you like, fiddle through go to work a little bit, yes, hang on to that thing and write it out. You know, if you’re writing out everything, because you can’t raise your neck, spine, and you’re trying to hang on to your fee base. I mean, that’s like a very much different situation, right? And then there’s a ton of situations kind of in between those extremes. And so I know this is a little bit of a soft answer. So maybe a little bit of a cop out. But generally, we could still write it out, like long term that is likely to create the most value. But if it’s not, like be realistic, if this really isn’t what I think long term, it’ll become obvious, like what the best moves are. And you know, as long as the process you apply to each situation where there’s a role, you’ll find that continuation vehicles, so I’ll shut things down. As long as our process you used to judge is the same and you really like what the investment a que shine through, then I think LPS will be understanding where I think tension comes up is when LPS start questioning whether the GPS is the investments best interest at heart and more thinking about what’s best for the GPS bucket.

Earnest Sweat 37:04
And it just made me think of at the time of recording, Alexa wrote about kind of like shutting down funds and zombie funds. So I’d love to hear both of your takes on this. But where do you think there is a fear of more zombie funds occurring? And? And how, how does a pension plan kind of stay on top of that?

Edward Comerford 37:29
Yeah. So I think, though, the fear around zombie funds is definitely ticked up, I think, for good reason, right? We’ve all seen the fundraising data that shows second time funds, you know, are having a much harder time fundraising than before, you know, and that’s, you know, if you don’t have a really lengthy track record with a bunch of LPs that are willing to give you like a well funded or to pass because about the environment, like it’s a really tough spot to be in. It’s, it’s, it’s really difficult. You know, I’d say, the deed structure that we set up that we talked about a little bit before was kind of like an early relationship feeder vehicle, and then a main vehicle, I think, helps buffer us a little bit. You know, by the time most of our relationships are probably not, for our core portfolio probably aren’t first or second time funds. So that I think gives you some buffer. Now, I would like to think we’re good enough to foresee the warning signs that we’re not gonna re up. But you know, that doesn’t mean that there’s always going to be like a handful of things in there that are working toward zombie status, you know, even if it’s not a recent commitment. Now, the commitments you made 1015 years ago are still floating around. Yeah. So this is where being, you know, having those open conversations with LPs, or between LPs and GPS, I think is important in yeah, I’ve never known a GP is gonna come to you and say, Yeah, I’m worried about being a zombie in two years, because X, Y, and Z. But usually, the signs are there, like, if you’re not hanging on to you’re not even top talent, but sort of like the next gen talent, if that’s turning, if you start seeing that wave of people, like I’m never gonna be able to carry on this, I’m gone. Like, bam, like something to think about, right? And then get those legal docs, you know, who can take it over what it’s a situation. Why really kind of be firm up on everyone’s rights there and they sit down and try to have that productive conversation. I’d say it’s what we try. What we’ve done historically in the past is every now and again, we’ll try to go through and do something like a secondary cleanup. And yeah, we’re getting paid 40 cents on the dollar for a bunch of stuff. But basic housekeeping can also help with those sorts of situations. You can only if you’re kind of on top of basic housekeeping and cleaning up some of the other things in the portfolio. I think that reduces the risk as well. But it’s definitely something I don’t have a little bit of an easy answer to. So I apologize for that. But definitely something we’re keeping more of an eye on and this is where that relationship Part of the GPL is dynamic. And most open conversations are really important. Because if you’ve been with somebody for 15 years, you know, and they kind of know who you are and where you’re from, they’re much more willing to be open about what’s going on.

Earnest Sweat 40:12
You want to get that heads up earlier, you don’t want to find out through LinkedIn. Yeah, my

Alexa Binns 40:19
My follow up to that to Ed was, if, if you do, if you do have a manager, who is going to move on and is interested in doing something else, these are such creative, talented people, they all have a million ideas of what they could be spending their time on. So my experience has been, you know, friends coming to me saying, I could go out to market, I could do this other thing. They’re just driven, they’re gonna be driven to either go hit the ground running or go raise fun two or three, or, you know, they’re excited about something else. From the LPC, is there a preference in how that’s managed? If somebody does want to step away? Is it there? Is there a way that they can do that, in a sense, that still gives you confidence in what they’re leaving behind? You know?

Edward Comerford 41:12
So this is where if, you know, if fun, the fiduciary is gonna move on. And this is even if it doesn’t trigger keepers, if it’s got three partners, two or three need to be there. Third one’s moving on. But you know, that they’re taking, but they were in charge of, say, roughly a third of the portfolio? Yeah. How do they approach and that’s, like, life happens, you know, we’re all human like, no, one’s a machine. You know, how do they go about doing that in a way that best positions the assets for success going down? Right? Are they one reason for leaving, thoughtful, and understandable and good, not just like, it’s getting hard, I’m on to the next thing. I don’t think that’s super common. You know, most of the people or VCs out there really kind of embrace the challenge. But we’ve definitely been instances in history, where I guess it’s getting hard to be if you’re just raising the capital.

Alexa Binns 42:13
Yeah, I’m an LP in a fund where one of the partners now manages is one of the portfolio companies, you know, as like, that’s still creating value for us, but much more hands on.

Edward Comerford 42:23
Yeah. So what’s a succession plan? Who’s going to be brought in? You know, Howard? How is it? How are the people that either remain, or the new people you’re bringing in to manage it out? How are they going to be? How are they set up? Are you putting them in a good position to have success? You know, that’s, I think, really what we care about is how you approach a situation, not that it happens, these things happen? Are you approaching it thoughtfully? Are you trying to uphold their fiduciary duty that, at least for us, is really important to me? Are you trying to do what’s best for the LPS? What’s best for the assets, what’s best for the investments? Because for people that are less focused on that, and I don’t think that happens often, but every now and again, you’ll have a contentious breakup and a bunch of the that’s where it probably gets more challenging, Gary, like, even if that sort of that contention, like, really try to do what’s best for the assets, LPs will remember that, you want to be able to raise funds down the line, like, the industry is small, and people talk man, like, like the word will get around, if you treated everything on the up and up and really tried to help things out and position the fund to be managed out as successfully as possible. As opposed to if you kind of just like up a month by people will remember that, like industry is small and crews will all people were

Earnest Sweat 43:42
from your seat, you’re looking at a lot of different asset classes in the private markets. Is it a good time to still be an inventor? Or is there something else that’s peaking your interest right now?

Edward Comerford 43:53
I think it’s a good time just to be in venture. And so I’m gonna maybe top down every different asset class has a role in the portfolio, and each asset class is genuinely trying to accomplish something different. Right? So like, what you’re trying to do in the credit markets is vastly different than you know, what we’re trying to do in the equity markets, you know, and the way you’re trying to create value across the different you can consider equity markets, oversimplification, like public equity, PE and venture, right, the way that there’s trying to create value is a little bit different and the tools they have at their disposal. Now, it’s, I don’t think I would have gotten that question from Earnest, you know, 234 years ago. And so from our point of view, and it’s understandable, that question enough today, right? It’s was a reasonable one, but from where we sit has our long term view on growth and innovation materially changed over the last handful of years. And from where I sit, no one has if you still believe in growth and innovation as key drivers of the US economy and of investment returns, that I think venture capitalists will make sense. If you have the ability to handle and liquidity and a long term asset classes and are comfortable with the volatility that comes with it, then 100% Venture I think should be a part of your portfolio.

Alexa Binns 47:58
And any final thoughts or things to share with his audience

Edward Comerford 48:03
for other allocators out there? Especially like ventures volatile, you know, in like, dive enough gray in my beard to remember? Yeah, you know, like the time And GFC was kind of like a dead period for venture. It wasn’t really, you know, and like that will happen. I’m sure it will happen again, like, I have no idea if it will happen now, or if it happened 50 years from now, but no long term VC isn’t an important growth driver. If your organization has the ability to handle the liquidity and the conviction to handle volatility, then I think this is a massively edited master costume portfolio.

Earnest Sweat 48:43
And as always, I appreciate your measured thoughtful approach with such complex concepts. And also for repping Kellogg so well, so thanks for being on Swimming with Allocators.

Edward Comerford 48:58
Appreciate you having me on. Earnest and Alexa, thank you so much!

Alexa Binns 49:04
See you later, Allocator!

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The Hosts

Earnest Sweat

Earnest Sweat is the Founding Partner of Public School Ventures, a dynamic syndicate of over 600 technical operators, go-to-market specialists, and LPs. Previously, Earnest built new venture capital practices at Prologis and GreatPoint Ventures. His focus is on investing in value chaintech, specifically vertical SaaS, applied AI, middleware, and B2B marketplaces, which are poised to revolutionize foundational industries like real estate, insurance and supply chain. Earnest has sourced and led investments in companies such as Flexport, Flexe, KlearNow, and Lula Insurance.

Alexa Binns

Alexa Binns is an angel investor and LP. An experienced investor and operator, she has climbed the ranks from associate to partner at Maven, Halogen, and Spacecadet Ventures and built digital and physical products for Kaiser, Disney, and Target. Alexa has worn every hat in venture from fundraising to sitting on boards. She invests in companies with mass consumer appeal, focusing on the future of shopping, health/wellness, and media/entertainment. Key angel investments include The Flex Co, Sana Health, and Chipper Cash.

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