A strange truth about venture capital:
Most people think the real decision-makers are the investors writing checks into startups. But zoom out one layer and you see the real power brokers—the institutions deciding which investors get money in the first place.
At the center of that world are giant allocators like CalPERS, the largest public pension fund in the United States. And inside CalPERS sits a small group of people tasked with a deceptively hard job: figuring out which emerging investment managers deserve institutional capital.
One of those people is Miguel Silva.
On the Ignite Podcast, Miguel pulled back the curtain on how large allocators actually evaluate venture and private equity firms—and what emerging managers often misunderstand about raising capital.
What follows is the distilled version for anyone who prefers reading to listening.
Inside CalPERS: How Institutional Investors Choose Emerging Managers
Imagine running a pension fund responsible for hundreds of billions of dollars.
Every year, thousands of fund managers show up with a pitch deck promising alpha. They’re raising venture funds, private equity funds, real estate funds—each claiming a differentiated strategy.
But here’s the brutal math.
Only around 1% of managers actually receive allocations.
That filtering process is where Miguel Silva spends most of his time.
At CalPERS, his role focuses on identifying and evaluating emerging managers—firms typically on their first, second, or third institutional fund.
But despite the excitement around new funds, there’s a structural challenge.
Ironically, large institutions are often the hardest investors for emerging managers to secure.
The Emerging Manager Paradox
Here’s the paradox Miguel explained.
When a pension fund manages hundreds of billions, writing a $10M or $20M check doesn’t move the needle.
Yet evaluating a small fund requires the same due diligence process as evaluating a multibillion-dollar firm.
That creates a tension:
Smaller funds often generate better returns
But institutions must deploy capital at massive scale
The result is a system where large LPs want access to emerging managers—but can’t back hundreds of them directly.
To solve this, CalPERS invests through several structures:
Fund-of-funds programs that allocate to multiple emerging managers
Seeding and staking platforms where CalPERS takes an equity stake in new firms
Direct investments into select emerging managers
In recent years, CalPERS has committed over $6 billion to emerging managers, signaling that the category is becoming strategically important.
How Institutional LPs Actually Evaluate Fund Managers
Most GPs assume institutional due diligence revolves entirely around track record.
But Miguel described a much more nuanced framework.
At CalPERS, evaluating a manager typically comes down to five core pillars.
1. Performance
Returns matter—but the deeper question is how those returns were generated.
For emerging managers, this often means unpacking attribution:
Which deals did the partner actually lead?
Were outcomes market-driven or skill-driven?
Were returns audited and repeatable?
Track record is the starting point—not the final answer.
2. Team and Talent
Institutions rarely invest in a single person.
They invest in firms capable of surviving decades.
That means looking for:
Depth beyond the founders
Succession planning
Strong decision-making processes
If the entire strategy hinges on one individual, the risk becomes too concentrated.
3. Strategy and Value Creation
Many managers pitch similar investment strategies.
What matters is whether a strategy is:
Clearly articulated
Differentiated
Repeatable
Scalable
One red flag Miguel sees often is theme-chasing.
A firm might pitch crypto one year and AI the next. Institutions want specialists with durable expertise—not investors hopping between trends.
4. Portfolio Fit
This is the factor many managers underestimate.
Even if a fund is strong, the allocator must ask:
Does this strategy improve the portfolio?
If the pension fund already has several similar managers, the answer may simply be no—at least for now.
Investment decisions are rarely made in isolation.
5. Alignment and Governance
Finally, institutions look closely at incentives and governance.
This includes:
Fee structures
Reporting standards
Transparency
Ethical and labor practices
For public pensions especially, investments must withstand scrutiny from regulators, legislators, and beneficiaries.
In other words: institutional trust takes time to earn.
The Thin-Slice Decision
One fascinating moment in the conversation came when Miguel described something most experienced investors eventually develop: pattern recognition.
After speaking with thousands of managers over more than a decade, he often knows within minutes whether a firm is institutional-ready.
He described it as a kind of intuition.
A “hunch.”
Not magic—just accumulated experience.
It’s the same phenomenon venture capitalists describe when evaluating startups.
After enough reps, the brain begins spotting signals faster than frameworks can explain.
The Most Underrated Skill in Venture
Miguel also made a surprising claim.
The most underrated skill in private markets isn’t sourcing deals.
It isn’t underwriting.
It’s fundraising.
Many talented investors struggle to communicate their strategy, differentiate themselves, or build relationships with LPs.
Fundraising requires a different muscle entirely—storytelling, positioning, and persistence.
And persistence matters.
One GP told Miguel they received thousands of rejections before closing their fund.
That experience, while painful, is more common than people admit (we’ve spoken pretty openly about how hard this is in previous posts and podcasts).
Why Bigger Funds Often Perform Worse
Another contrarian view Miguel shared is about scale.
Most firms celebrate raising ever-larger funds.
But he believes scale can actually compress alpha.
As funds grow, managers face several challenges:
Fewer opportunities large enough to deploy capital
Increased competition for deals
Pressure to deploy money quickly
The sweet spot, he suggested, often sits somewhere between $1B and $2B for many strategies.
Large enough to matter—but not so large that the strategy breaks.
Why Emerging Managers Still Matter
Despite the challenges, Miguel remains optimistic about the emerging manager ecosystem.
In fact, he believes the next decade may reward smaller, more focused firms.
Why?
Because return dispersion tends to be highest in the lower and middle markets.
That’s where:
New strategies emerge
Managers remain close to their deals
Alpha hasn’t been fully competed away
Institutional investors are increasingly recognizing this dynamic.
Which is why programs supporting emerging managers are expanding.
The Simple Advice for New GPs
Toward the end of the conversation, Miguel offered one practical piece of advice for new fund managers.
Don’t try to pitch every institutional investor.
Instead:
Identify who should say “no” quickly.
Large pension funds might not be the right fit for a first-time $150M fund.
Family offices, endowments, and smaller institutions may be much better early partners.
Focus beats volume.
Especially early in fundraising.
The Bigger Picture
Step back and a larger pattern emerges.
Venture capital is often portrayed as a world of bold founders and visionary investors.
But behind the scenes, there’s another layer quietly shaping the ecosystem.
Institutional allocators.
They decide which firms receive the capital needed to exist.
And through those decisions, they indirectly shape which startups—and which innovations—get funded.
So while founders pitch venture capitalists… venture capitalists are pitching someone else.
And sometimes, that someone else is a pension fund in Sacramento trying to allocate billions responsibly for teachers and public workers.
Not quite the Hollywood version of venture capital.
But arguably the place where the real game begins.
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Chapters:
00:01 — Introduction: Meet Miguel Silva (CalPERS Investment Manager)
01:00 — Miguel’s Origin Story: From Real Estate to Institutional Investing
04:45 — Joining CalPERS After the Financial Crisis
06:50 — The Biggest Misconception About Large Institutional Allocators
09:10 — Why Size Makes It Hard for Institutions to Back Small Funds
10:35 — What “Emerging Manager” Means at CalPERS
13:00 — What Makes a Manager Institutional-Ready
15:20 — Seeding & Staking: Building New Investment Firms
18:20 — Strategic Asset Allocation vs Total Portfolio Approach
20:05 — How CalPERS Invests in Emerging Managers
22:15 — The Shift Toward Emerging Managers
25:00 — Institutional Standards vs Early-Stage Scrappiness
26:25 — The 5-Part Framework for Evaluating Fund Managers
30:15 — Signals of a Durable Investment Firm
33:05 — Specialization vs Theme-Chasing in Venture
36:00 — Seeding Platforms and Building Venture Firms
38:10 — How Emerging Managers Earn Institutional Trust
40:45 — Common Fundraising Mistakes GPs Make
42:15 — Structural Changes in Private Markets
44:09 — Transition to Rapid-Fire Questions
Transcript
Brian Bell (00:01:01):
Hey everyone, welcome back to the Ignite Podcast. Today, we’re thrilled to have Miguel Silva on the mic. He is an investment manager at CalPERS on the investments team, where he helps lead one of the most important jobs in institutional investing, identifying backing emerging and diverse managers across private markets. Mike has spent over a decade at CalPERS and more than 20 years in investing overall, spending real estate, wealth management, and now building programs that help shape the next generation of private market firms. Today, we’ll dig into how allocators actually underwrite talent, what it takes to scale an emerging manager, and how the institutional playbook is evolving. Thanks for coming on, Miguel.
Miguel Silva (00:01:33):
Well, thank you for having me, Brian. The audience may not know this, but we’re both in the Sacramento region, so we’re kind of like neighbors. We could have done this in person.
Brian Bell (00:01:37):
That would have been nice. I don’t have the recording equipment and cameras all set up for that anyway, but... to get your origin story.
Miguel Silva (00:01:44):
Sure. Let’s see. So I’m originally from San Diego, Portuguese descent. Both my parents immigrated in the early 70s and matriculated in San Diego, went to college at UC Davis nearby, here near Sacramento. And I Originally thought about going to law school, got involved in public affairs, did some legislative work, worked for the Department of Insurance actually as a press information officer and decided to get into investments. Started in commercial real estate here in Sacramento, a local broker. Randy Goetz hired me. At that time, it was a three-year plan to start your career. I worked for Randy for a year and I thought I learned enough and delected to go out on my own as a broker with Marcus and Millichap. And certainly, that was a difficult task.
Brian Bell (00:02:39):
That’ll build character. I worked at Marcus and Militap in New York for a hot minute when I washed out of Wall Street when I was like in my quarter life crisis, mid to late 20s mode, like trying to figure out what I want to do with my life. And I remember it’s just like 200 phone calls a day, basically. It’s a tough gig, right?
Miguel Silva (00:02:54):
It’s a tough one, yeah. Because you’re, you know, you’re first, you’re trying to get your first deal, so you’re trying to convince folks to, you know, have them list their multi-million dollar property with someone.
Brian Bell (00:03:05):
Yeah, here’s some 20-something kid. Hey, you want to list this, like, $15 million property with me? Like, get out of here, kid.
Miguel Silva (00:03:11):
Yeah, it took six months. For me... And that’s pretty typical.
Brian Bell (00:03:16):
Yeah.
Miguel Silva (00:03:17):
To get your first deal. But I thought I only had about two or three more months left in me. So it was definitely a hard course. But I had a very successful career. Obviously, after that listing, it sold record prices and everything. The market just started heating up. I was there for about eight years and I transacted about $150 million with the transactions. And I quickly realized that I was on the wrong side of the phone. So I actually began some entrepreneurial efforts in raising some capital myself. A couple million dollars put together two groups, both of which I was a managing member alongside partners for a commercial retail strip center in Davis. I knew that area very well. And a medical office building here in Sacramento. And of course, I purchased those properties in 2006 and 2007. So you can imagine 80% of properties purchased in the two to three year span. I went back to the bank. But I’m very proud to say that my two investments did not. Yeah, we were able to, it took a while, you know, we had to hold them for several years. I’d say longer than several years. I think one was eight and the other one was 10 years. But we ultimately, you know, we cash flowed, made a profit. And I’m very proud of that work. But, you know, what came out of that was I couldn’t ride out the market. You know, after the financial crisis, I just realized it was going to take four or five years for that commercial real estate market to pick up. I didn’t have that. And so this opportunity came up at CalPERS. I had a very good friend of mine who worked at CalPERS in the investment office and he encouraged me to apply. And there were a couple of jobs open and there was a opportunity for an emerging manager position. They were looking for someone who had some legislative experience, had some public affairs experience. and had experience in public and private markets. And I checked the box on all of those. And I was very lucky. I think this was, you know, almost this opportunity was godsend. You know, it kind of rescued me because, you know, 40 years old, trying to start something new, not necessarily the best time to do it either coming out of the financial crisis. So I’ve been here for 13 years.
Brian Bell (00:05:45):
Wow. Amazing. You know, and I, uh, when I moved from New York, I lived in Japan and we went to Hawaii to stop and I got into commercial real estate there as well. It was the fall of 2008. So I was right, you know, right as the markets were crashing. And so my first year and it was a retail real estate, technically resort retail real estate. So I like mainly restaurant retail space around the islands at resorts. And yeah, it was brutal that first year.
Miguel Silva (00:06:11):
Yeah.
Brian Bell (00:06:11):
Great timing.
Miguel Silva (00:06:11):
Yeah.
Brian Bell (00:06:12):
I’ve, I’ve, I’ve timed myself so well throughout my career. I mean, I graduated college in 2003, a really bad time to graduate commercial, like wall street was actually good timing. I was a mortgage backed securities in the, in the like 2006 and seven heyday, but then the commercial real estate bad, really bad time.
Miguel Silva (00:06:28):
I mean, I’m a Gen X, so I think we’ve...
Brian Bell (00:06:33):
Yeah, I’m 1980, so almost the same.
Miguel Silva (00:06:34):
Xenial, I guess, is how I’m defined.
Brian Bell (00:06:36):
So back to CalPERS, what is the biggest misconception GPs have about what large allocators like you guys do all day?
Miguel Silva (00:06:43):
I think that most of the managers that I don’t think they understand that are limited resources, you know, certainly we have a very large investment office at CalPERS, likely the largest.
Miguel Silva (00:01:44):
Sure. Let’s see. So I’m originally from San Diego, Portuguese descent. Both my parents immigrated in the early 70s and matriculated in San Diego, went to college at UC Davis nearby, here near Sacramento. And I Originally thought about going to law school, got involved in public affairs, did some legislative work, worked for the Department of Insurance actually as a press information officer and decided to get into investments. Started in commercial real estate here in Sacramento, a local broker. Randy Goetz hired me. At that time, it was a three-year plan to start your career. I worked for Randy for a year and I thought I learned enough and delected to go out on my own as a broker with Marcus and Millichap. And certainly, that was a difficult task.
Brian Bell (00:02:39):
That’ll build character. I worked at Marcus and Militap in New York for a hot minute when I washed out of Wall Street when I was like in my quarter life crisis, mid to late 20s mode, like trying to figure out what I want to do with my life. And I remember it’s just like 200 phone calls a day, basically. It’s a tough gig, right?
Miguel Silva (00:02:54):
It’s a tough one, yeah. Because you’re, you know, you’re first, you’re trying to get your first deal, so you’re trying to convince folks to, you know, have them list their multi-million dollar property with someone.
Brian Bell (00:03:05):
Yeah, here’s some 20-something kid. Hey, you want to list this, like, $15 million property with me? Like, get out of here, kid.
Miguel Silva (00:03:11):
Yeah, it took six months. For me... And that’s pretty typical.
Brian Bell (00:03:16):
Yeah.
Miguel Silva (00:03:17):
To get your first deal. But I thought I only had about two or three more months left in me. So it was definitely a hard course. But I had a very successful career. Obviously, after that listing, it sold record prices and everything. The market just started heating up. I was there for about eight years and I transacted about $150 million with the transactions. And I quickly realized that I was on the wrong side of the phone. So I actually began some entrepreneurial efforts in raising some capital myself. A couple million dollars put together two groups, both of which I was a managing member alongside partners for a commercial retail strip center in Davis. I knew that area very well. And a medical office building here in Sacramento. And of course, I purchased those properties in 2006 and 2007. So you can imagine 80% of properties purchased in the two to three year span. I went back to the bank. But I’m very proud to say that my two investments did not. Yeah, we were able to, it took a while, you know, we had to hold them for several years. I’d say longer than several years. I think one was eight and the other one was 10 years. But we ultimately, you know, we cash flowed, made a profit. And I’m very proud of that work. But, you know, what came out of that was I couldn’t ride out the market. You know, after the financial crisis, I just realized it was going to take four or five years for that commercial real estate market to pick up. I didn’t have that. And so this opportunity came up at CalPERS. I had a very good friend of mine who worked at CalPERS in the investment office and he encouraged me to apply. And there were a couple of jobs open and there was a opportunity for an emerging manager position. They were looking for someone who had some legislative experience, had some public affairs experience. and had experience in public and private markets. And I checked the box on all of those. And I was very lucky. I think this was, you know, almost this opportunity was godsend. You know, it kind of rescued me because, you know, 40 years old, trying to start something new, not necessarily the best time to do it either coming out of the financial crisis. So I’ve been here for 13 years.
Brian Bell (00:05:45):
Wow. Amazing. You know, and I, uh, when I moved from New York, I lived in Japan and we went to Hawaii to stop and I got into commercial real estate there as well. It was the fall of 2008. So I was right, you know, right as the markets were crashing. And so my first year and it was a retail real estate, technically resort retail real estate. So I like mainly restaurant retail space around the islands at resorts. And yeah, it was brutal that first year.
Miguel Silva (00:06:11):
Yeah.
Brian Bell (00:06:11):
Great timing.
Miguel Silva (00:06:11):
Yeah.
Brian Bell (00:06:12):
I’ve, I’ve, I’ve timed myself so well throughout my career. I mean, I graduated college in 2003, a really bad time to graduate commercial, like wall street was actually good timing. I was a mortgage backed securities in the, in the like 2006 and seven heyday, but then the commercial real estate bad, really bad time.
Miguel Silva (00:06:28):
I mean, I’m a Gen X, so I think we’ve...
Brian Bell (00:06:33):
Yeah, I’m 1980, so almost the same.
Miguel Silva (00:06:34):
Xenial, I guess, is how I’m defined.
Brian Bell (00:06:36):
So back to CalPERS, what is the biggest misconception GPs have about what large allocators like you guys do all day?
Miguel Silva (00:06:43):
I think that most of the managers that I don’t think they understand that are limited resources, you know, certainly we have a very large investment office at CalPERS, likely the largest.
Brian Bell (00:14:03):
When is an emerging manager ready for a program like that versus they’re kind of too early?
Miguel Silva (00:14:07):
It’s a good question. In those types of programs, I’m seeing, at least from a fund size, certainly in between, let’s just call it 150 million and 750 million. These are non-venture, right?
Brian Bell (00:14:18):
Okay.
Miguel Silva (00:14:19):
Non-venture, 150 million to 750 million are generally around what I’d say is the sweet spot. But, you know, clearly an articulated strategy, a strong team, you know, again, I’m seeing a lot of spin outs coming out. So, you know, employees coming out of really successful firms or funds trying to execute a strategy. They might be coming out of a larger firm that has become an asset gatherer and is no longer deploying the same strategy. So they might spin out and redo that same old strategy that worked. So I see that a lot. That would probably be the best way to describe it.
Brian Bell (00:15:04):
So of the, what is your current mandate at the, let’s call it the, you got 570 billion of assets, right? What percentage is going to VC and PE? And of that, what percentage is going to like call it emerging managers in VC, which is most of our listeners in our podcast.
Miguel Silva (00:15:20):
Well, I would say, you know, so we have been on the SAA, the Strategic Asset Allocation Model, and now we’ve recently moved to the TPA, the Total Portfolio Approach. This happened in—
Brian Bell (00:15:32):
I know my listeners do not know what those acronyms are. Maybe you can explain what each of those are and why they move.
Miguel Silva (00:15:38):
Well, the strategic asset allocation is really, you know, think of it allocations are going to each of the asset classes.
Brian Bell (00:15:44):
Yeah, there’s some some percentage and it’s strategic based on your cash flow needs and your liquidity time horizons and things like that.
Miguel Silva (00:15:53):
Correct. Where we’ve moved to a total portfolio approach where it’s really working across all of the asset classes and determining where the best investment is and the best use of the dollar.
Brian Bell (00:16:05):
Interesting. Trying to maximize returns more or less.
Miguel Silva (00:16:08):
Correct. Risk-adjusted returns. But in terms of private equity and venture, the first 10 years that I was at CalPERS, the mantra was we were overweight in venture. So we were not investing in venture. Anton Orlich, the Managing Investment Director for Private Equity, that was one of the changes, the significant changes that he made a few years ago was to get CalPERS reinvested into venture. I think that they established Target, of getting to $6 billion, I believe. But that would be over a long period of time. But I wouldn’t know, I wouldn’t be able to share with you what the asset class’s allocation to venture is or what their plan is moving forward in terms of it. But I do know that the asset class is certainly investing in venture. That includes emerging and non-emerging. But we don’t have, at least at the moment, I would say an emerging manager fund of fund for venture.
Brian Bell (00:17:06):
What do you mean by that?
Miguel Silva (00:17:07):
So CalPERS invests with emerging managers in three different ways. One is the Intermediated Fund to Fund. So CalPERS will find a partner in the past in private equity. I’ll give you the example was GCM. The GCM Grosvenor team made our domestic emerging manager funds one, two, and three. Those were 150, 250, and $550 million allocations to those funds. So GCM would then find emerging managers for each of those funds on our behalf. That’s a separately managed account and they would invest on our behalf.
Miguel Silva (00:17:42):
And then the second way we invest with emerging managers is also through intermediated, but it would also be seeding and staking. So very different from just making straight commitments and co-investments. Seeding and staking, now we’re taking, we’re seeding these managers and we’re taking a stake in these managers. So generally, you know, those are, you know, in the domestic emerging manager funds, those were 20, let’s just call it $20 to $50 million commitments, $20 to $40 million commitments. Whereas in the seeding and staking, you certainly have to give up, you have to make a larger allocation or a larger commitment to get that stake. So those are between, let’s just call it 50 and $150 million commitments.
Brian Bell (00:18:29):
Pretty large.
Miguel Silva (00:18:30):
Pretty large. And then the third way is without an intermediary. So the asset class makes a direct investment with the emerging manager without an intermediary.
Miguel Silva (00:18:41):
Since Anton Orlich has arrived in the last two and a half years, CalPERS has invested over $6 billion with emerging managers. And prior to that, prior to Anton’s arrival, I’m not sure what the number was, but it was certainly under $500 million in the previous five years. So Anton and the private equity team, I should say, have really made a significant impact. They see opportunity and outperformance in that middle market. I believe that part of Anton’s strategy, I would say, just from observing from where I’m at, is he’s shifted away from some of the larger funds and moved to the middle market, where certainly there’s a larger dispersion of returns there, but a greater opportunity for outperformance.
Brian Bell (00:19:40):
Yeah, I think there’s lots of data on this from Cambridge and Carta and AngelList around, especially in VC, not private equity as much, I would suppose, but that returns are kind of inversely correlated, but so is dispersion, like you said. So as you get smaller, you get better returns, but you also get a higher standard deviation around the expected return.
Brian Bell (00:20:01):
But I think if you’re running a fund of funds model and you’re investing in dozens of smaller managers, you collapse the standard deviation around the expected return of that kind of segment of the asset class. For a large institutional player like CalPERS or some of the larger public pension plans, a fund of funds can often be viewed in a negative context because they’re just taking an extra one in 10 on top of everything.
Miguel Silva (00:20:26):
Correct. There’s an additional layer of fees or what’s often referred to as a double layer of fees. And that leads into the performance. But I would say that our domestic emerging manager funds two and three, the 250 and the 550 million dollar allocations outperformed the private equity policy benchmark and the private equity asset class itself, net of fees. So it was a good example because certainly there’s pushback on these strategies, you know, and usually the pushback has always been, you know, they’re riskier, less liquid, difficult to, you know, the manager selection. Part of this is very difficult. I mean, there’s, as you know, you know, there’s a multitude of opportunities out there and you have to select the best ones.
Miguel Silva (00:21:23):
So, you know, really proud of the private equity team and the work that they’ve accomplished and particularly with emerging managers. Now, my role, I certainly work with the private equity team. I co-manage and co-monitor the TPG Next, the GCM Elevate, and the GCM Domestic Emerging Manager Funds 1, 2, and 3. And I provide them with referrals, you can call it, of managers that they might be interested in having a conversation with. But the private equity team is in charge of managing. They certainly are the primary reason for the success in selecting the emerging managers that they’ve worked with for the last three and a half years.
Brian Bell (00:22:00):
Yeah. Impressive. So how do you guys balance the tension between institutional quality and early stage scrappiness when you’re underwriting a first or second time GP? Maybe they’re even on their third fund.
Miguel Silva (00:22:09):
We do diligence the managers the same way. So in that sense, you know, you don’t—
Brian Bell (00:22:15):
Let’s talk about the diligence process. Like what does that look like at CalPERS?
Miguel Silva (00:22:19):
I would, you know, I’d break it down into the five, into five basic categories, you know, historical performance, sometimes emerging managers, it’s difficult to determine where their performance comes from. So you have to do, you know, again—
Brian Bell (00:22:33):
Got to dig in.
Miguel Silva (00:22:35):
Got to dig in, you know—
Brian Bell (00:22:38):
Are these cap-adjusted markups with safe markups? Are they priced? Does that matter? You know, like, is this audited? Is it non-audited? I imagine because you guys are a public pension fund, everything has to be audited if you invest.
Miguel Silva (00:22:49):
Yeah, no, certainly. I mean, everything has to be audited. And it’s a difficult thing. But we want to, you know, we have to make the extra calls, figure out the performance. Secondly, you have to determine whether the strategy is scalable and repeatable. Because if it’s not, if they’re going to stay small, right? Or if they can’t invest in a manager that’s going to, they’re at a hundred million dollar fund and they’re just going to stay there forever. And you’re like, well, you know, we want to, yeah, we want to write a 10 or $20 million check now, but in your next fund, we want to write a bigger check. And the next one after that, we want to write a bigger check. So you kind of want, you want to see managers growing from a hundred million to a billion even or more.
Brian Bell (00:23:34):
But yeah, absolutely.
Miguel Silva (00:23:34):
So we want to see managers being able to grow and be able to accept a sizable check. But we’re, you know, so performance is one, portfolio fit is another, I would say.
Brian Bell (00:23:40):
Right, because sometimes you’re looking at a manager and you’re like, I like your performance. I like you. I see that you’re going to scale. But we are overweight in this particular segment of the VCPE private market. We’re just over allocated on your strategy. Like we already have a cybersecurity fund or whatever it is.
Miguel Silva (00:23:59):
So that’s really important. Governance and alignment is also very important.
Brian Bell (00:24:01):
Let’s stick into that. What is governance and alignment?
Miguel Silva (00:24:04):
Well, I think, you know, we’re a public pension plan, right? We certainly have stakeholders that we have to answer to, whether that’s the legislature or our beneficiaries, so that there are there are, you know, certainly managers, you know, can’t be breaking the law when it comes to labor. And labor is an important, I would say, an important topic for CalPERS and other public pension plans. So private equity managers have to, there’s, you know, there’s a responsible contracting policy that managers have to adhere to. And we want to make sure that workers are protected, right? So that these profits, you know, aren’t putting workers at risk.
Brian Bell (00:24:44):
Yeah, you’re not making things worse for the state and society writ large. What else? What’s the other bucket that we’re missing?
Miguel Silva (00:24:51):
So we’ve got performance, portfolio fit, and then strategy. I think some sort of deep sector experience with demonstrated success, a clearly articulated investment strategy that’s going to be adhered to, and that thesis needs to be repeatable and scalable. I think that’s an important part. So those are really... In terms of alignment, we want to make sure the teams have good depth in them, that there’s succession planning in place, those sorts of things.
Brian Bell (00:25:22):
Yeah, that’s great. What are some of the top signals that you guys look for to predict whether a GP can build a durable firm, not just another fund?
Miguel Silva (00:25:31):
Yeah. So what are some of the signals that you look for in a firm, a GP you’re evaluating, whether or not they can actually build a durable firm?
Miguel Silva (00:25:38):
Yeah. If we go back to the other question, I feel like I could have done, I could have answered that other question. It was basically, what are you looking for? The five buckets. Doing the due diligence on a manager. So we’ll start over on that. Do you mind?
Brian Bell (00:25:50):
Yeah, let’s do it.
Miguel Silva (00:25:51):
So I’d say performance, you know, again, how returns are generated and what their performance is relative to appropriate benchmarks. Team and talent. You know, we want to make sure that there’s succession planning in place and that there’s no key person risk and the decision making dynamics and depth goes beyond the founders. The third bucket would be strategy and value creation. So again, clearly articulated, differentiated and repeatable and scalable strategy. The fourth would be asset allocation and portfolio fit. You know, no managers like evaluated in isolation. So we want to assess how the strategy fits within the CalPERS broader portfolio and the private equity portfolio. And then the last would be alignment of interest, governance and transparency, fee structures, governance rights, reporting quality and overall transparency. We want to make sure that it’s a durable investment firm.
Brian Bell (00:26:48):
Right. Yeah. So and that kind of feeds into the next question, which were what are some of the signals to predict whether you can build a durable firm versus just a one hit fund and you just kind of cover the five buckets. Are there any kind of automatic no’s that come to mind across those five buckets when you look?
Miguel Silva (00:27:03):
Like, oh, I’ve seen this one before. This is pretty much an easy no.
Miguel Silva (00:27:06):
Well, I think you see a lot of the same types of strategies out there in the marketplace. I don’t want to say that there’s any automatic no’s, but I certainly, having conversations, I would say that I probably have had the most conversations with managers than anyone at CalPERS. Now, when I say that, I’m saying 15 to 30 minute conversations, right?
Brian Bell (00:27:29):
Yeah.
Miguel Silva (00:27:30):
Like over and over again, week after week, day after day for 13 years.
Brian Bell (00:27:32):
That’s a lot of conversations.
Miguel Silva (00:27:34):
Correct. Probably talk to, I don’t know, anywhere between a thousand and two thousand managers.
Brian Bell (00:27:40):
Yeah, at least.
Miguel Silva (00:27:41):
At least. So I would say I’ve, you know, I can thin slice it and understand when a manager’s not quite, I wouldn’t say not institutional quality, but maybe not at the CalPERS level. So that would probably be, you know, I don’t know how I can come to, I don’t know how I come to that quick thin slice determination.
Brian Bell (00:28:00):
This is like, it’s exactly the same problem I have when people are like, how do you pick a startup? It’s like describing like, cause I’ll meet, I don’t know, I probably meet a thousand founders a year. So I’m like five, six thousand founders in. I invested in 300 of them. Plus there’s all the no’s of like, you know, reviewing a deck and not meeting people at all. And then people will say, hey, how do you make a decision to invest? Well, it’s like probably a hundred different things. And, you know, it’s like the movie Beautiful Mind. He’s like, there’s a hundred different things floating around here and I’m kind of connecting all the dots and it’s hard to communicate that hunch.
Miguel Silva (00:28:36):
Yeah. You try to build a framework around it, but yeah. Hunch is a really good way to describe it. You just get a certain hunch for a manager or their strategy. It just sounds, for whatever reason, it resonates. And that, you know, that’s just with me. And then I have to send that over to whether it’s one of our partners or it’s the asset class for them to take a deeper look. But that’s part of my role is to, you could call it screening and then passing it on.
Brian Bell (00:29:01):
Yeah. How do you think about specialization versus generalists in private markets right now, especially as information gets cheaper and capital gets more abundant?
Miguel Silva (00:29:05):
You know, I would say it has to be deep, not cosmetic, rooted in access, not branding. I think the best managers are specialists, you know, strong logic, not just branding. Tourists going from theme to theme, whether it’s AI or blockchain or Bitcoin. I think that’s why I see that a lot of theme to theme to theme, or at least I have.
Brian Bell (00:29:28):
Well, last time you pitched me, you were a crypto fund. Now you’re an AI fund. This is why I didn’t do an AI fund, because I led AI at Amazon. I built a bunch of AI. Oh, really? There was this pull for my LPs to make Team Ignite an AI-focused firm. AI is a ton of what we do, of course, because of my background. But I kind of knew as an investor, I wanted to kind of focus just broadly at the precedence seed. Because I felt like if I widened my aperture to almost anything except what I don’t know, which is like biotech, that I could have better returns in that asset class, in that stage. And if I would have an AI-focused fund I’d be setting myself it’s like having an internet focus fund in the 90s you know you know what am i going to do in 10 years you know i’m a mobile focus fund now you know i’m a cloud focus fund now yeah so that was kind of my my thinking around it.
Miguel Silva (00:30:15):
It’s pretty you know the this ai revolution you know being able to be part of it is really interesting and yeah what happens next and what happens next could be tomorrow you know like it’s fast so quick it’s very difficult to anticipate.
Brian Bell (00:30:30):
Well, and we’re kind of living through the singularity, if you believe that kind of techno-optimist hype. But it’s kind of hard to predict as we take AGI and kind of deploy it around our economy and our organizations, like what work looks like after that. When AGI is 150, 175 IQ, and you can kind of talk to it like a human being and say, hey, can you go do this? And it’s going to be a weird sci-fi kind of world like Star Trek in the next like five or 10 years, you know?
Miguel Silva (00:31:00):
I’m just glad that I’m, I’m here to, to, to experience it and see it.
Brian Bell (00:31:04):
Yeah. Yeah. Me too. It’s like the best time to be alive. Yep. Back to elevate GCM elevate and TPG next. What’s the difference between evaluating managers for those, you know, two buckets versus a direct commitment.
Miguel Silva (00:31:17):
I would say, you know, that, you know, the GCM team is certainly, and the TPG Next team, they’re evaluating these managers on subsequent success, right? They have to put capital aside for the next fund. They have to look at these managers are certainly trying to pick the very best managers. But I would say, you know, we’re underwriting the firm’s ability to absorb support, feedback, the willingness to partner, not just raise capital, long-term economics and alignment. I’d say, you know, direct commitments are more binary platforms. The Next and GCM Elevate platforms are more about building capability over a long period of time with the expectation that, you know, the manager today looks very different in five years.
Brian Bell (00:32:01):
Yeah, they’re building an enduring venture capital or private equity firm.
Miguel Silva (00:32:04):
Correct. And what’s interesting on the seeding and staking versus the fund to funds with just commitments and co-investments is the seeding and staking, we are partnering with these managers at the earliest part of the earliest stage of the firm lifecycle. So it’s very much like venture, right? So we’re taking a chance on these managers, even the returns are a bit delayed because these managers, some of these managers are just at the earliest stages of building their firms. So we’re hopeful that the manager looks very different in five years in a positive way.
Brian Bell (00:32:43):
Yeah. So emerging managers are often told just to get your first institutional anchor. No big deal, right? But getting that first one’s brutal. What do you think emerging managers should do differently to earn trust faster with institutional LPs?
Miguel Silva (00:32:55):
I think you have to be very honest about the gaps. I try to ask, what lessons have you learned? I try to really ask the question where they can share some of the struggles just to hear their response. You have to show some sort of learning velocity and say, yes, we made the mistake here, but here’s what we’ve done. These are the steps we’ve taken to correct this. And let me give you a case study on how we’ve learned from this and profited from it. So you have to demonstrate some sort of alignment before asking for capital. Institutional LPs are underwriting character under pressure. We want to know how managers react during difficult times. The managers who get anchors early are usually the ones who don’t pretend to be bigger than they are.
Brian Bell (00:33:48):
That’s the interesting phrase, bigger than they are, pretending to be bigger than they are. It’s something I struggle with as a solo GP, right? Is scaling, I struggle like, okay, I definitely don’t want to bring on a partner. That’s just like out of the question. I don’t want to have to explain myself to another GP decisions I make, but I definitely do need to bring on principals, right? I need to bring on some principal level people to do the deal screening, portfolio management, and all the operations, the CFO stuff. How do you guys think about solo managers like myself versus teams? Do you guys back solo GPs?
Miguel Silva (00:34:15):
I mean, I think in the emerging manager space, we do. You know, just because, particularly in the smaller, when we’re making the smaller allocations, so part of the domestic emerging manager funds, you know, there were some solo GPs in there. But, you know, generally as it relates to, you know, making larger allocations, you know, 50 million plus there needs to—
Brian Bell (00:34:38):
You’re going to want a team in place.
Miguel Silva (00:34:40):
Correct.
Brian Bell (00:34:41):
Yeah. Yeah. 50 million on a $500 million fund. That’s not going to be a solo GP anymore. Right. That’s, that’s, there’s going to be a firm there.
Miguel Silva (00:34:49):
Correct. With partners and yeah.
Brian Bell (00:34:51):
Partners in different asset classes and in the fund and yeah.
Miguel Silva (00:34:54):
But, you know, you know, there are, you know, for particularly in VC, you see fund to funds that are making, you know, five to ten million dollar investments. Those are happening at this level all the time. And at the moment, we don’t have a fund to fund structure or a fund to fund program for VCs and private equity. But, you know, we’re advocating for one and I’m hopeful we’ll get someone in the future.
Brian Bell (00:35:17):
Yeah so what’s changing now i mean the obviously the emerging manager market got harder in recent years with fundraising what’s structurally changing and what’s cyclical noise from your perspective.
Miguel Silva (00:35:25):
Well structurally i’d say capital is concentrating obviously you know we did we did a look back and you know larger funds and platforms and established managers are absorbing more allocation attention. So that makes it more difficult for first-time managers. There’s also higher expectations around governance, reporting, operational readiness. And you know those aren’t going away, at least for institutions like CalPERS. Cyclically, risk appetite tightens and loosens. Right now there’s slower exits so the denominator effect is suppressing new commitments. But that should ease. And I would say the structural shift toward fewer, more deliberate relationships is probably going to be the model.
Miguel Silva (00:42:20):
You know, we want you to be scalable. Yeah. You know, I think, you know, between a billion and 2 billion makes a lot of sense, but you know, if you get too, too big.
Brian Bell (00:42:29):
Yeah. Yeah. The whole venture capital is like 200 billion a year. Right. So you can’t get, you know, much bigger, like maybe than Andreessen or something like that.
Brian Bell (00:42:38):
What do you think is a private market skill most undervalued today between like sourcing, underwriting, portfolio support, fundraising?
Miguel Silva (00:42:44):
I think fundraising is very underrated.
Brian Bell (00:42:47):
Yeah, it’s hard.
Miguel Silva (00:42:49):
I think that I meet a lot of talented managers. You clearly have strong skill sets across the board. But the fundraising is always the weakest component that I see when I’m meeting with when I’m when I say meeting like I’m meeting managers for the first time whether it’s at a conference or not I see that skill set needing to be bolstered a bit.
Brian Bell (00:43:10):
Last question. So looking out long term five or ten years what are you excited about and we talked about AI and stuff but.
Miguel Silva (00:43:14):
I’m excited for the emerging manager just the let’s just call it the industry or the marketplace. I think that we’re there’s been these headwinds against emerging managers for so long. I think that the opportunity is with emerging managers, right? Particularly in the lower and middle markets, there’s an opportunity for outperformance. And I think that institutions, large and small, are recognizing that opportunity. And that’s in private equity, venture, private debt, real estate. I think that lower middle market and middle market is offering opportunities, good exits, so I’m really excited for the emerging managers, the emerging manager space and what’s next in the next 10 years.
Brian Bell (00:43:58):
Awesome. Well, Miguel, thanks so much for coming on. I learned a ton. I really appreciate it.
Miguel Silva (00:44:02):
Hey, thank you so much, Brian. Appreciate it.
