Managers Cheaper Than Direct Investing
Arjun Sethi, co-founder of Tribe Capital, on investor allocation strategies and democratizing access to capital
This is really a claim about scale and labor, not just fees. A large LP can skip fund managers in theory, but doing that well means building an internal team to source deals, win allocations, run diligence, manage follow ons, and monitor dozens of private positions over many years. A manager spreads that fixed work across many LPs, and often gets better access because founders and companies already know them.
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The interview frames the core divide clearly. Small investors may go direct for a few themes or companies, but pensions and other very large allocators usually hire specialists because private investing requires constant coverage of sectors, stages, and relationships, not occasional stock picking.
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In private markets, the hidden cost is not just management fees. It is the cost of assembling proprietary information, getting on company cap tables, negotiating transfers, and underwriting companies with limited disclosure. That is why Arjun Sethi describes off cycle secondaries as a market driven by fragmented information and relationships.
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The broader market structure points the same way. Secondary platforms like CartaX, EquityZen, and brokered marketplaces reduce friction, but they do not remove the need for someone to filter opportunities, price risk, and build issuer access. More liquidity can widen participation, while still preserving a role for managers who package access and judgment.
As private markets get more liquid, the job of the manager shifts from pure gatekeeper to cost efficient aggregator of access, diligence, and portfolio construction. Direct investing will expand at the edges, especially for thematic buyers and wealthy individuals, but the institutions moving the most capital will keep relying on managers who can turn a messy, relationship driven market into a repeatable allocation program.