On this episode of Fund Flow, McGuireWoods’ Jon Finger sits down with Andy Lee, founder and chief investment officer of Parallaxes Capital, the first firm to focus exclusively on monetizing tax receivable agreements as an investment strategy. Andy wanted to establish a firm that wasn’t afraid to think differently and take a long-term view on investments.

“We're not going to capture your run-of-the-mill investor. We're very focused on finding early adopters and demonstrating, and ultimately achieving, results for them,” Andy says. “We've not tried to raise scaled funds, not because we can’t. It's more so for us [that] each fund has given us the avenue through which we are able to solve a different problem set each time.”

Jon and Andy discuss how tax receivable agreements work, why they’re valuable, and how Andy built a fund focused on them. They also discuss what general partners need to consider when choosing to partner with limited partners, based on Parallaxes Capital’s approach to investments, and how finding LPs has changed from fund to fund.

💡 Featured Guest 💡

Name: Andy Lee

What he does: Andy is the founder of Parallaxes Capital. Previously, he was with Lone Star Funds, focused on investing in the Americas. He began his career at Citigroup. He graduated from the University of Illinois at Urbana-Champaign with a Bachelor’s in Finance and Accountancy and a Master’s in Accountancy. Andy has been featured in publications including Capital Allocators, Institutional Investor, NBC, Forbes (as part of the 2020 Class of 30 under 30), ReOrg Radio, and Fitch’s LevFin Insights.

Organization: Parallaxes Capital

Connect: LinkedIn

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You are listening to Fund Flow, a podcast for emerging managers offering insights into the journey of new and aspiring fund managers seeking to have access in a crowded market. Tune in as McGuireWoods partner and host, Jon Finger, is joined by guests ranging from first time fund managers to proven emerging managers, experienced LPs poised to back emerging managers and other key participants in the emerging manager ecosystem. Hear their real world perspectives and gain actionable tips to help inform your strategy and position yourself for a successful fund closing.

Welcome to Fund Flow, a podcast for emerging managers. I'm Jon Finger and today I'm here with Andy Lee, the founder and chief investment officer of Parallaxes Capital. Andy formed Parallaxes Capital in 2017 after a career in investment banking at Citigroup and private equity at Lone Star Funds. Parallax Capital has raised four funds focused on the investment strategy of monetizing tax receivable agreements where they are a pioneer in the space as the first asset manager to focus exclusively on this strategy. A handful of Andy's accomplishments include features in Capital Allocators Institutional Investor, NBC, Forbes 30 under 30, and as a speaker at universities across the country. Andy, thanks so much for joining us today.

Thank you for taking the time today.

Likewise. I want to start if you don't mind and talk about your investment history and how it led you to establish Parallaxes Capital.

Yeah, so let me just share like a quick founding story. I'm from the middle of nowhere, Champaign, Illinois and I had the option to go to college a little early. I went to college when I was 15. When I graduated I was a little too young to sign a lease in New York City and so my dad refused me. He wanted me to go pursue a PhD and I refused. Ultimately, he won because I couldn't sign up a lease without a guarantor and so I did a master's degree and I did a master's in accountancy with a focus on taxation. The only reason I did that just to be frank, was twofold. One, it had a no coursework participation at school, so you didn't even show up to class and two, it had an open book exam at the end of the year. For someone who didn't really want to go to class, that was an absolute godsend.

Fast-forward, I went to Citigroup. I was in the M and A team and there the head of the group basically came out and said, "Andy, don't you have a masters in tax?" I was like, "It's not worth the paper it's printed on." He didn't care. He was like, "You are working on this transaction." It was the buyback of a TRA between a coal producer, Cloud Peak Energy and Rio Tinto, a global major in mining. And I was like, this is super interesting, someone should provide third party liquidity to it. But didn't think much of it went on to a firm in Dallas, Lone Star Funds, where I was basically told, "Andy, the only way you got promoted in this group is for you to create something." And so there were a number of things that we looked at in earnest.

The one that got the furthest on was in creating and monetizing tax receivable agreements. We created two at the firm and ultimately the firm said, "Let's consider this as an investing opportunity and how much can you deploy annually?" I said, "150 million." They said, "That's just way too small." Lone Star, when I left, was encroaching on almost a hundred billion of assets. With that, several of the partners basically said, "Look, Andy, why don't you go do this and we'll give you some money to go do it." That was six years ago. We've since raised four funds from large leading endowments and foundations and are entirely focused on the space that we focus on today.

That's great. So before we talk more about the domain and the strategy, what drew you to feel like, I want to become a fund manager?

I think Parallaxes as a firm is an expression of who I am as an individual. I think very early on I recognized that I was somewhat an odd duck and this was my means of expressing myself and building an organization that brought out and expressed what I wanted to be in this world. And so there are several attributes that form that is being different. We don't look like most fund managers, we don't build ourselves like most fund managers from an organizational chart perspective and our go to market looks very different in that regard. We look a lot more like an operating company than necessarily a fund management business and so I think those are all expressions of who I am as an individual more than anything else.

That's great. So certainly for myself and for a lot of the other listeners, maybe just as a threshold matter, can you explain what are tax receivable agreements and why you believe they're an attractive investment opportunity?

Absolutely. So a tax receivable agreement, for all intents and purposes, reminds many of where pharmaceutical royalties were in the 1990s and where musical royalties were in the 2000s. They are long-dated, uncorrelated annuity-like cash flows in just a totally different space than what most have trafficked and it's a large emerging asset class that has many attributes that people prize. I would actually articulate that tax is a single largest asset class that most have never heard of. There are only two things that are inevitable in life, one, death, two, taxes. For many who have invested in might that be longevity oriented assets like life settlements or structured settlements, we're almost the flip of that with our focus on taxation. And so what is a tax receivable agreement? A tax receivable agreement effectively is just a contract between two consenting parties.

Given your work in M and A, think about it as when you're selling a business, oftentimes they may have valuable tax attributes that they're conveying onto the buyer and they're seeking for consideration to be paid to them for it. And that's is exactly what I do. I effectively create a market for these assets primarily in the secondary format for public companies. So what we have names in our portfolio today include the likes of a RE/MAX, a Shake Shack, a Duff and Phelps, among others, so large scale public businesses and it's primarily a function of the fact that unlike in the traditional private equity context where there is a strong appreciation for the value of tax assets and the cash tax savings that they are able to deliver to the buyer, public markets are less focused on it primarily given the rise in migration away from active management to passive management.

Most passive managers are very metrics oriented, might that be revenue growth, EBITDA multiples, EBIT multiples, rarely if ever are they focused on the bottom line, and that being free cash flow. They don't have a means to standardize, among other things, working capital changes as well as asset intensity and let alone cash tax burdens. And so it's a fundamental misunderstanding on the part of investors in the public markets which result in private equity firms who are acutely aware of the value of tax asset effectively extracting it for themselves via this arrangement. What we do is effectively providing secondary liquidity to that, delivering what is effectively an uncorrelated return to our own investors.

And what factors about TRAs led you to focus on this segment as something you really thought could be differentiated and attractive as an emerging manager?

Yeah, so I think it's really the tip of the spear as to a larger opportunity set. Look, we live in a world where we primarily traffic a niche within this larger opportunity set. A tax receivable agreement is really just a factoring arrangement for all intents and purposes and it delivers five attributes that people prize. One, it delivers an uncorrelated return, two, that is cash yielding in nature, three, that serves as a call option on corporate tax rates. There are two other attributes that are attractive, that being a tax deferral mechanism and then thereafter paying long-term cap gains and those are attributes that only taxables really care about, but those are all attractive to some of our underlying investors, some of them to that third attribute around serving as call optionality is almost a tail hedge as it pertains to potentially higher corporate tax rates.

To the extent that obviously we had a more recent grid lockdown as it pertains to the White House as well as the Republican party on a deficit spend. That's something that many are fast realizing that it's not a if, it's more so a when as it pertains to when corporate tax rates may go up. And so that potentially serves as an inflection relative to most assets. In an investor's portfolio, those likely would have a negative drawdown as it pertains to potentially higher corporate tax rates. We have an inverse relationship to that, we actually benefit as tax rates go up and so those are inherently attributes that investors find to be valuable in the context of a broader portfolio.

Absolutely, that makes sense. Earlier on here, Andy, you alluded to your time at Lone Star, but I guess beyond just that anecdote and maybe that's where it starts and ends, but thinking back to 2018, what were the indicators, both kind of internally with you, with the team, but then externally in the market, particularly this segment that gave you the confidence that it was time to raise a fund?

Yeah, so let's start with, I don't know if I had aspirations or was as ambitious to ultimately be where we are today. Oftentimes, I tell many who are starting out in the fund management business that every avalanche starts over a snowflake. You just got to start rolling downhill at some point. When we first raised our first fund in 2018, my notion was that our fund two was going to be in 2022. Ultimately, we raised our fund two in 2019 instead and subsequently effectively raised a new fund every year since we got started. So I don't know if that was necessarily a grand plan. We put one foot in front of the other seeking to be stewards of the capital that had been entrusted to us but also seeking to under promise and over deliver.

A big part of what I tried to do from an expectation management perspective is I tell LPs as well as my own team, my goal in life is to bury expectations under the ground such that I never have to lift my heel as it pertains to clearing the bar. And so that's a big part of what we've been trying to do as it pertains to building the firm, as it pertains to market validation on both the internal and external side. Just to buttress the point, it was a lot of brain damage, finding product market fit on the fundraising side of the equation. Our fund one I did 800 meetings in over the course of six months in order to end up with 16 LPs. That was just a ton of brain damage and-

A ton of rejection, right?

Absolutely. And while in the moment it was incredibly painful, on hindsight, I'm so thankful for that experience in understanding what was important to investors, and what ultimately would help us with the key concerns that we could over time address, and who were investors that we would never be able to get an investment from? And so I think that trials and tribulations that we endured in 2017 to raise our fund one very much prepared us longer term for what it was going to look like. I think investors were very candid as to what they needed to see in order to prove things out.

Because look, more than anything else, we need to earn a spot in people's portfolio. They have a variety of options of strong GPs that they have in their book today as well as others that they have built relationships for the last five to seven years. And so in order to earn a spot in someone's portfolio, we need to demonstrate that we were differentiated, that we could deliver on what we said we the value prop that we had put forth and ultimately that we were sincere about building that relationship and that all just took time for us to understand. We made so many mistakes along the way, but for that I am thankful.

Yeah, no doubt. You talked about the mistakes, and just jumping around a little bit, and then I'll kind of come back to the line we were on. What were some of those biggest mistakes maybe? Maybe just one or two?

Oh, we have made so many, let's start with that. I can think of one that I still to this day kick myself incredibly hard whereby I didn't fully appreciate what was being articulated on the other side and what they were necessarily seeking to address from a risk perspective. Because look, investing in an emerging manager, obviously the individual may be a rockstar investor, but he or she might be a first time operator of a fund management business. And those two ultimately need to be congruent as it pertains to helping de-risk on the operational side, but ultimately achieving that return that earns you a spot in the context of an investor's portfolio. And so there were items that we got pretty far along in negotiating an LPA with an investor when they started putting guardrails that had not been set out from the start. Obviously, for us at that point of time, we viewed it, viewed it as a retrade, but in reality it's just as they got further along in their diligence, they just needed to address it to get through their investment committee.

And I think back then when I was young and stupid, I viewed it as, if this is how they behave upfront, that's not a relationship you want to get into. And so ultimately they did not invest in our fund one, they invested in subsequent vehicles, but that's something I just kicked myself. Those were difficult discussions that if I knew better and had someone like a Jon Finger to guide me, I would've better appreciated what they were trying to achieve. But back then I just didn't fully appreciate some of the risks and some of the concerns that they were trying to address back then and that was a $25 million ticket we could have gotten in our fund one.

That's great. Well I appreciate you sharing that. I'm sure obviously you learned a lot from it, so I appreciate that. Thinking back to the early days, how long and what was the process by which you and your team really developed and refined the investment strategy?

Yeah, so look, I think that we've thought about it in two formats. One is product and two, go to market. So it looks a little bit like a tech firm in that regard. From a product perspective, we were very focused on what is it that we promised our investor that would ultimately help us achieve returns that we set out to achieve, but also allow us to raise our next vehicle. So what were the items? So in our fund one it was, could you do deals away from Lone Star? We did five deals in six months in our fund one in order to prove that we could do deals. In fund two, the question mark was, could you actually scale that deployment? And so our fund one was a $25 million vehicle, our fund two was an $85 million vehicle. We were able to accomplish both. Our fund three was, can you return money?

And so we needed to demonstrate a capacity to achieve DPI, which we were very much able to do as a result of a number of fronts in our portfolio. And so understanding the problem set that a LP was going to judge you on was very important in that regard. And so we built the team accordingly to help us address each of those underlying concerns from a product perspective as it pertains to A, building out the credit underwriting skillset in order for us to scale. Two, the underlying go to market in places that would have first adoption as it pertain to selling their tax assets and ultimately building out the product which a LP is buying, i.e. your team, your track record, your processes, those were all things that we needed to refine over time in order to help address concerns that people had raised as to why they said no initially and upfront in previous fundraisers.

And every time we came back to them we said, "Jon, you said that one of the challenges that we had and why you didn't give us commitment in the last fund was because we couldn't do X. Here is our solution to X, Y, and Z. Please let us know if that was sufficient to help you address your concern." And they may bring up a new concern thereafter, but I think for a lot of LPs they were like, Parallaxes really listens to our concerns and finds a way to effectively manage and address that concern as effectively as possible. Which has helped us to effectively increase our throughput and conversion as it pertains to LPs.

Andy, can you elaborate on your second cookie philosophy and how that has affected partnering with investors?

Yeah, so look, the second cookie philosophy is a focus on delayed gratification. I'm sure many are familiar with the marshmallow test among others. This was a variation of it whereby if you're willing to wait, you might get two cookies instead of one. I think there are a number of items associated with that. Let me just build on. So like Parallaxes as a name just frankly was named for a number of items. The first of which obviously is an ode to our old firm. Parallax as a term is an astronomy term where you look at a planet from a different angle and you arrive at a different vantage point. And so obviously coming out of Lone Star, that was my ode to the firm in that regard, one. Two, a secular meaning of it refers to the plurality of the word parallaxes whereby instead of looking at a problem from a single angle, you look at it from multiple angles and so you have different solutions to a problem set instead of a single solution.

Then ultimately goes through my faith, I'm a Christian and in this life Christians are not so much focused on the here and now, they are much more focus on salvation above all else. And so as I think about it being a second cookie, much of life pertains to being focused on a lot on the here and now. And so as even thinking about tax receivables, our first fund was actually a 21 year fund that required LPs that were incredibly patient, had the willingness to go out on the risk spectrum as it pertains to asset classes, somewhat taking career risk on us but also being thought leaders in that regard. And so it really speaks to being willing to be different. To our preface, when we talked about Parallaxes more generally, there are a number of items as it pertains to investors that we engage with.

We're not going to capture your run-of-the-mill investor. We're very focused on finding early adopters and demonstrating, and ultimately achieving results for them. We've not tried to raise scaled funds, not because we couldn't, it's more so for us, each fund has given us the avenue through which we are able to solve a different problem set each time. Might that be in our fund one, can you deploy money away from Lone Star? Or fund two, can you scale that deployment? All of which items that we have sought to be very thoughtful about and have ultimately achieved as it pertains to finding earlier adopters and ultimately delivering on the value prop that we set out.

So you touched on it a little bit on various comments, but as you think about a strategic view as a GP, what were the most important considerations for you as the GP when deciding LPs that you wanted to pursue a partnership with?

Yeah, I think there are a number of items that I would focus on primarily that A, we're looking for LPs that have relatively patient capital versus most traditional funds that have the ability and capacity to return capital, especially in the credit space on a weekly, maybe monthly basis. And that was on multiple proof points that you could point to. We only are able as an asset class to return capital once a year and so the proof points are relatively long in between. And so that requires someone who is willing to dig in and do the work to understand why that is the case and finding a solution to structure around that concern. Two, as a reference, we had a relatively long dated first fund and even our funds today, while they are shorter and eight years in nature, that's still longer than the traditional credit fund.

And so we're often looking for people who are thinking more so in decades in what they're trying to build, and so less so on people who are focused on the here and now. And lastly, we're looking for durable returns. We're not looking to hit out of the ballpark. And so that requires a number of things. That requires someone who is very focused on reinvestment risks. You might deliver someone a 100% IRR, but you had it outstanding for two weeks. You can't eat IRR, you ultimately need MOIC. And so in that regard, finding somewhere who didn't want to be trapped in cash and being quickly deployed and being deployed in a strong risk adjusted return was very important to us and look, ultimately we're a new strategy and so many have not seen a similar fund before.

And so being able to help them understand our value prop and what we're going to deliver to their portfolio year in, year out, might that be in a bull market or a bear market, specifically speaking to that uncorrelated return is very important and so many LPs would say, "We're looking for uncorrelated returns." And then they get it and they're like... It's almost like the dog that chased the car. By the time they get the car, they have no idea what they got. And so trying to find LPs who are aligned in that regard, who are really looking for that level of differentiation, uncorrelated nature, it was very important to us.

Did you notice as your vintages have evolved, did that probably rightful hesitation that some LPs had with your first fund with a relatively niche strategy, do you feel like it's gotten easier on the second, third funds? How has that evolved?

It's so much easier relative to when we first started. When we first started, people were like, "Are you even 21?" Because we were going out for a 21 year fund and I was like, "I'll just take that as a compliment." I was 26 when we were raised our first fund and it was incredibly challenging in that regard. Over time the first question was, "Is what you're even buying real?" And so we needed to show among other things, deployment and return of capital more importantly for them to realize it was real, for them to see others go ahead of them. So finding early adopters, I think that's really where a lot of GPs fall short. They're very focused on cultivating large LPs that their former fund managers, employers might have had, but those LPs only would come to you in a fund five, fund six, fund seven, they rarely, if ever come to you in a fund one.

And so finding out those early adopters was critical in that regard in order to get us to where we are today. I mean, items that have gotten easier, obviously a track record. That's less of a question now where people are squinting to understand what we did at Lone Star given it was a large firm and how do you attribute who did what at the firm. And so in that regard, now that we have had six years of durable returns delivering on what we said we were going to do and surpassing them, that's become easier.

And ultimately it's that relationship element where people have said, "Andy, we find what you do to be interesting, come back to me in the next fund." And we come back to them and they're like, "That's not what we expected. That's actually better than what we expected." It becomes harder and harder for people to say no. There will always be a world of people who would say no. It's finding a number of new LPs every vintage that would believe in your story to follow along with your legacy investors. And so long as you are a good steward of the capital that you have taken in, it just gets so much easier in time.

That's great. Super helpful. In talking about the TRA space as we think to the future, I have a couple questions, but maybe specifically around the TRA space, where do you see the opportunity? Where do you see the future for a fund manager in the space?

Look, gosh, it's a humongous space. So just to frame it, when I first left Lone Star, it was an eight billion dollar opportunity set. Today. That number's encroaching on almost 30 billion in the last six years. I mean, what we do today is a secondary market liquidity option. The larger opportunity is in primary origination. Think about all the deals that you do and all the tax assets that are somewhat given away as part of to ultimately get a transaction done. The solution that we would love to bring in a primary origination perspective to the middle market is something where rep and warranty was. Rep and warranty a decade ago unseen, unheard, today it'll be unthinkable to think that it's not part of every single transaction. That's very similar to what I believe that tax assets are going to be like in the next decade.

What we do today is a niche asset, in a decade it's going to be part of every single purchase agreement, it's going to be part of every transaction. Tax assets are just everywhere and all we're delivering is a factoring capacity against what is otherwise latent assets that sit in private equity portfolios where private equity is a growing mature industry that are looking for incremental solutions in order to realize value for investors.

And thinking more generally about emerging managers, and you certainly were one, I guess arguably still are one just at the very least based on the nature of your strategy, but in thinking about the past six years or so, what are your thoughts on the landscape currently for emerging managers? How you feel like that's evolved over the years? What are some of your observations?

So let me give you an observation and then let me tell you a hypothesis, I think as to why emerging managers have been more challenged more recently. As it pertains to adoption on emerging managers, a phenomenal opportunity set. There are so many new pockets of capital, might be the CalPERS program that got established with the likes of a TPG and Grosvenor, but there are so many people who have now created and adopted emerging manager programs. So I think on the demand side of the equation, there are so many new options being created and capital bases being activated to pursue the opportunity. So let's start with, I think the supply of capital to emerging managers has never been greater, one. Two, I think where emerging managers are incredibly challenged is the service that has been done to them by their legacy firms.

Not so much in not giving them portable track records, that's not what I'm referencing, but firms over the last decade and two decades have really scaled and become more execution oriented whereby in the first 10 to 15 years of your career you were more so an execution oriented individual, very much processing what was brought in. That ultimately made it very challenging for a director trying to make the leap to partner as it pertains to a go-to market and finding avenues through which they could express that.

What do I mean by that? As I mentioned, I did 800 LP meetings to get 16 ultimate commitments in our fund one, most fund managers are not set up well for that. They've been unfortunately sitting behind a desk cranking away for the last 15 years building up the execution skillset. They've never really had to go out and develop those relationships because the go to market processes as a result of the industry being relatively mature is well understood and has already been filled by the GPs and the previous predecessor funds. And so many of these individuals who are highly promising, they come out into this world and as an emerging manager and they're like, let me go get the likes of a CPPIB, let me go get a British Columbia. You might have good relationships with them as a result of co-investments that you might have done, but they're not for first adopters.

You needed to go build the relationships with the likes of a Grosvenor, the likes of a New Republic. People who are fast, on the curve, willing to do and look at emerging managers and are willing to take the risk. They've never invested in those relationships, one. And two, they've never learned to sell. And the big thing I always tell my guys and my colleagues at work, the most senior skillset in life is a sales job. You have to sell your wife on marrying you, you're going to sell your kids on eating vegetables, you have to sell LPs that you're going to be a good steward of their capital, that you know what you're going to do from an investor perspective, but you also understand what it means to build a business and that you are a business builder.

You're going to sell employees on the vision. Those are all things that many emerging managers really fail at. They are phenomenal at execution, but they're terrible at go-to-market. And so that's something that unfortunately as a industry, when we say that we lack talent in that regard, it's really on the go-to-market side that we've just not developed the next generation of individuals to be in a place to take that next step and to start their own firms.

That's great. I really appreciate that. I know the listeners do. I think since you're so candidly, Andy, open with giving advice, I want to ask you a couple questions just that maybe you can share some insights from your perspective. Specialization is something that LPs talk a lot about. I think clearly a corollary to that is having a niche strategy like you do. What advice would you give to emerging managers that are really focused on capitalizing on a niche strategy? What did you learn that you could share with other emerging managers?

So I need to be careful in how I phrase this, because it can be easily misconstrued. But LPs will oftentimes give you advice, oftentimes that advice means well, but is somewhat misunderstood for the time and place. So what was an example of that? I think that many LPs would say that almost from the get go, you need to be able to demonstrate a high quality back office, that you need to build in processes, that you need to have the right part service providers and partners. And I'm like, yes, that's all well and good. I can appreciate that and I understand where that advice comes from. However, there is, therein lies a paradox in so far that as an emerging manager you have a limited amount of working capital. That working capital is going to one, your GP commit and two, as well funding the burn rate as it pertains to some of the deals that you are doing in terms of building out your team.

And so if you build out that back office, it might result in you reducing your runway as it pertains to being able to do this longer. And part of what you're ultimately trying to achieve is resiliency. It weakens you in that regard. So if you don't get a deal done in your first two years, all of a sudden, I know a bunch of emerging managers who have just given up on their dream. And I think that advice has been very challenging and resulted in some giving up in that regard. And so the advice that I always give many of my peers in this space is yes, that advice is well and good. Yes, there is a place for that advice very specifically, but the advice that I would give you is, your job is to deliver on the value prop that you set out to achieve.

That is you're going to deliver the LPs with phenomenal returns. And so they are going to be focused very much on the deal, not so much on your operations and how you ultimately operate the business. Get a deal done versus being focused on building out everything else, might that be your fund admin. If you can get a deal done, you've killed the first risk that most GPs have. That is can you do a deal away from your old firm? And so that's where you should expand all the effort as it pertains to getting something done versus building something that will only be appreciated in three, five, seven years from someone who likely isn't a first adopter to begin with. Just to frame it, our fund one, I fell ass backwards into it just to be clear.

My old partners at Lone Star said, "Go get a deal done." I got a deal, I signed it up on exclusivity. I went back to them thinking that I was going to do deal by deal and they said, "Great, here's the amount that we'll commit to you. By the way, go meet our friends who might have interest in doing this too." I went to their friends, they said, "We really like you, we like the asset class, but we don't want to do a single deal because there's just idiosyncratic risk of a single deal. We might try to do a fund." And I was scratching my head and I was like, "What? Now I need to go backwards." And I went back to the partners and I was like, "Your friends don't want to do a deal, they want to do a fund." They're like, "That's even better. What are you complaining about?" And I was like, "Oh, okay."

So that's how we fell back into our fund one. People liked the deal, they were willing to give us deal capital, but more importantly, they really wanted to give us fund capital. And so for all the emerging managers out there, take every piece of advice of a grain of salt. Ultimately, you own your own outcomes. So that's at least where I would leave it.

That's great, Andy. Well, really super helpful insights. Thank you so much for joining us on the podcast today. I know you have a few other things that you should be getting to. So really, really appreciate your time and I hope our listeners join us for the next episode of Fund Flow.

Thank you for the time, guys.

Thank you for joining us on this episode of Fund Flow. To learn more about today's discussion, please email host Jon Finger at jfinger@mcguirewoods.com. We look forward to hearing from you. This series was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this series, you acknowledge that McGuireWoods makes no warranty guarantee or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.