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Making Billions: The Private Equity Podcast for Fund Managers, Alternative Asset Managers, and Venture Capital Investors
$11B Allocator Reveals 5 Themes Beating the Market Now
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This episode of Making Billions with Ryan Miller and Christopher Zook breaks down 5 market-beating themes: GP stakes, professional sports, the $100T energy transition, space commercialization, and AI plumbing.
How can investors find non-correlated returns when the top 10 stocks dictate the entire market?
Zook, who co-authored "The Holy Grail of Investing" with Tony Robbins, reveals why the current SEC shift allowing 401(k) access to alternatives is launching the "Golden Age of Alts."
[THE HOST]: Ryan Miller is a fund manager, capital strategist, and former CFO turned angel investor in technology and energy. He is the founder of Fund Raise Capital and Aequor Capital Partners, and has mentored over 1,000 fund managers across private equity, private credit, venture capital, real estate, and alternative assets globally.
[THE GUEST]: Christopher Zook is the founder, Chairman, and Chief Investment Officer of CAZ Investments, which he established in 2001. He co-authored, “The Holy Grail of Investing” with Tony Robbins, a New York Times bestseller.
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If you're still pitching deals instead of solving problems, you're already losing the room. Christopher Zook built an $11 billion AUM partnered with Tony Robbins, and did it by being ruthlessly aligned with every dollar he manages calling sub-prime in 2007 GP stakes in 2015 and professional sports before institutions even knew they were allowed in. Right now, he's going to be telling you exactly which five private market themes he's positioning in before the rest of the world figures it out. This is what separates the managers who get funded from those who get ghosted. All this and more coming right now. Here we go.
Christopher, welcome to the show, man!
Thank you for having me, glad to be here.
It's good to have you in the first time that we met, we covered a lot of stuff. Your work with Tony Robbins, with an AUM of $11 billion I mean, one of the largest contributors to GP stakes in the world, you have built an impressive company. So let's dive in. You built CAZ from that blank sheet in 2001 to over $11 billion under management by investing your own capital first in every single deal. So walk me through exactly how that co-investment first model works in practice, and why most allocators aren't doing.
No, I appreciate that, those are very kind words, but I'll tell you, you we have a very simple saying as a firm, that we're freakish about alignment. And when you are thinking about alignment first, the best way to be aligned with somebody is to actually have your own capital invested alongside of them. So literally, from the very beginning, in 2001 when I received the backing from the Cockrell family and several other significant families in Texas, you know, the idea was, let's go figure out what we want to invest in together for our own money. And then we would open up to our network, and our network could choose to come alongside of us or not. It's their choice, but we're going to make the investments anyway. And so it's really a comforting story for most investors when they hear that we're the first investor in, we're the largest investor in what we do, and in many, many cases, we actually don't even charge management fees, we just get paid a percentage of the profits. So they don't make money. We don't get paid. So everybody knows that we're aligned. That doesn't guarantee that's going to work, but it means that we are totally aligned, and we're totally focused on doing whatever is going to be the most successful, wherever in the world that might be. And so every step of the way, we have worked hard to be able to make the best investments we can.
And what we realized really over time, is that if we had a bigger network, we had the ability to write larger checks that would give us access to more opportunities, better ability to diligence and research, and also the ability to negotiate better economics, because when you write a billion dollar check, you don't pay the same fees as everybody else when they write a smaller check. So it really works out well, and it's a little corny, but you know, the power of the network is the network, and so the bigger the network gets, the more the flywheel turns. And it's really just been a lot of fun for 25 years, we've gotten, you know, the opportunity to do some of the most interesting things, you know, on the planet. And that's true today as well. And we just, you know, we enjoy what we do, and that makes it obviously great for everybody.
Yeah, that is phenomenal. Now, the first time that we met, you told me an amazing story, and I'm wondering if you could tell it was about the deal that created alignment with the Cockrell family when you started. Some of your economics because people look at you today and they'll say, wow, amazing, must be nice. And usually answer is, yeah, it is, but you don't know what I had to go through to get here. And this is the part I think most people, because we have a lot of emerging fund managers that listen to the show and investment bankers, you've built something amazing. But I'm wondering if you can maybe peel back the curtain, go down memory lane a little bit, and just talk about what was that deal to because the Cockrell family, well known, very, very prominent family, well respected, and you cut a deal with them. How did, what was, though, those basic terms to close a deal when you were somewhat, I don't want to say unproven, because that's not true, but you were newer than you are now, and to prove yourself to the Cockrell family, you had to create an alignment, and they set the terms walk me through a little bit of that early setup that you had to go through to get to where you are now.
No, it's really, I think, a good lesson for anyone that wants to be an entrepreneur, that sometimes you know you have to actually give something in order to be able to get something. And so I was very fortunate from the ages of 21 to 31 I've been very successful and worked my tail off, and I was making a lot of money. But I was looking to do something that was very differentiated, and I was willing to take risk in order to be able to build a business that now is CAZ. And so I was willing to take literally, an 85% cut in pay. It was a little hard to explain to my wife that, by the way, honey, we're gonna take an 85% cut in pay. But not only that, I'm not gonna be allowed to get bonuses of any kind, literally ever. And it wasn't until 20 years later that that changed. So literally, for my first 20 years in this business, I got one base salary that was 85% less than I was making, you know, literally, in 2001 and I got no bonuses.
But what I did I have, is equity, and I was able to prove over time that, you know, we were able to do pretty well. And so that equity, obviously, is where I got most of my cash flow. But I had to be willing to take that risk, and I had to be willing to be aligned with them, because, going back to the "freakish about alignment". If we're going to ever get backed by someone who's going to trust us with their capital, we're happy to show them that we're willing to take risk. And by taking risk, it wasn't just, hey, I'm going to get a high paying job, and if it doesn't work out, that's okay, I'll go somewhere else. Sorry, you lost your money. That wouldn't work. Most people wouldn't back that arrangement. So what we did is we said, okay, there's going to be more equity for Christopher, but he's going to have to put it in with sweat, and he's going to have to put it in with proven results.
And if someone is willing to bet on themselves and to say, I can make this happen, then obviously the rewards are worth a lot more if you're willing to take that risk. And I got to tell you, there's so many people that don't do something like this simply because of the fact that they're not willing to take that, you know, that risk, and they're not willing to bet on themselves. And that's okay, trust me, there's not everybody that wants to go through what you have to go through when you make those kinds of decisions. But in my my case, it was always my dream and my passion to do it, and so therefore the Cockrells gave me that opportunity, and I will be forever grateful to them and the rest of our shareholders that came in right from the beginning and took a chance on a 31 year old young man.
All right, man, I love that story. If it's all right, I'll probably share it with other people, like, you got to check this guy out and like, he's incredible now, but it he really had to pay the price and prove himself, to prove when I say prove himself, I mean results. And so people at the level, and a lot of your shareholders in the early days, and even now, it never changes. They say, well, if you don't have the track record to, what I would want, then I need something else. I need to know that we are aligned, that I don't just cut a check, throw it down a black hole and don't ask questions. That doesn't work for me. I need to know that you're my guy. So imagine now folks who are listening betting, saying, I will bet on myself for the next 20 years. That's commitment. And so at that level being able to say, hey, I can do this for the next 20 years. I will bet on myself, then the major sponsors come in and say, I believe you, and that's what happened. And now, because of that move, future current you is now fortunate from past you of taking that bet on yourself and achieving it. Now you've got partners with, partnership with Tony Robbins, you're writing books, you're on Fox and CNBC and all these wonderful things. We're certainly honored to have you here. And all of that comes by just saying, I'll bet on myself. Would you agree?
No, I would agree entirely. And it's something to where, whether somebody is allocating capital or working on relationships that lead to something, as far as development of business partnerships, those kinds of things. What they want to see, more than anything else, is commitment and passion that somebody is really going to do what it takes, the grit, the grind, whatever is going to be necessary to be successful. That is something that someone can talk to, but you can feel it. When somebody sits in front of us and they, you know, they go through the motions and they say the same things that everybody else says. It's like, yeah, yawn, whatever, I've heard it all before. But you can tell when that special someone is, like, really passionate about what they do, they love what they do, and they're willing to say, look, I'm going to have short term pain, potentially for long term gain, or more than anything else, just give me the opportunity to prove myself, and then ultimately, we'll deliver results. Those are the kinds of people that really is fun to back because they're really good at what they do, usually, because they had that passion.
Awesome. Well, what a blessing it's been for you, brother. I appreciate that now. CAZ, yeah, CAZ reviews, over 1500 opportunities a year, roughly, and act on a handful. What specific process do you guys use to identify macro themes early enough to build that structural advantage around it?
So we are, and always have been, very thematic. So overly simplified, we identify the theme, we look for the best risk reward way to take advantage of the theme, and then we're going to partner with whoever's the best in the world at doing that, whatever that may be. It could be, you know, somebody that we do a strategic partnership with, or that we're investing in them and their business, whatever it might be, we're looking for domain expertise. So the theme itself is the where it really all starts. And, you know, we actually did something on LinkedIn not too long ago from our themes event that we do every year in Houston. And it was our Investment Committee, and it was literally the entire segment was origins of a theme. So if somebody follows us on LinkedIn, go check that out. You know, it's a full, you know, 45 minutes, if I remember correctly, of how we originated a theme. But today, what I'll do is, I'll give you the genesis of most of them.
Most of them are themes that kind of hit you square in the face, and you go, that's a no brainer. So the tech bubble in 1999 was a no brainer for anybody who was willing to admit that that was not sustainable. You know, when you look at the tech you know, the sub-prime bubble in 2006-2007 everybody knew for the most part that the housing bubble was going to burst. Nobody was sure why. But ultimately, very few took advantage of it. Or the distressed pricing in banks and financials and credit and real estate in 2009, 10, 11, 12. There was just so much opportunity there that the Shale Revolution in the world of energy, the world things of like cord-cutting that we're seeing today. Or the growth of space as a new investment frontier. Or defense, which has obviously become very high profile here recently. But these themes, they last for a long time.
And you know, if someone is willing to just take a look around and do what we talk about all the time, which is, you know, don't look at the trees, stay focused on the forest. And look at the forest, see where the world is going, then it's really pretty obvious what themes are available to take advantage of them, to take advantage of, but it's really hard for many people to figure out how to profit from it, or they're letting their emotions get in the way, and they ultimately just can't, you know, get involved in something because they're afraid of what might happen or not happen, because they don't have conviction. So first you have to identify the theme, then you have to have really strong conviction around that and then you got to test it. And you got to constantly be testing it, something that, you know, with short Subprime, if somebody did not have strong conviction. And I mean, total convinced that the bubble was going to burst and we were going to make a lot of money, and we partnered Subprime, with John Paulson to short Subprime. There's no way in the world that somebody could have stayed in that trade if they did not have massive conviction. And the movie, The Big Short, does an excellent job. There's the one scene when Christian Bale is the actor is literally like in the fetal position on his desk, just with the phone ringing off the hook, because everybody's telling him he's completely gone off the deep end. Well, he was really right, but it was really hard to stay with it. And so for most people, they don't have the conviction, so they can't stick with it. But that's how we come up with a theme, and then we identify the best risk reward.
Brilliant. You know, the saliency bias comes in a lot when you see these things, because it's yes, being, it's hard to create alpha when you're just doing what everyone else is doing. So you not only this is a bit of a rant for the contrarians out there but not only, you sometimes have to go against the grain. And I know you guys did that The Big Short you talk about, but you guys did that as well for the Subprime is my understanding. Keep me honest, but yeah, and so the saliency bias that really comes in is where people just trust what's obvious. Now, it's sure, if you want to generate alpha and create exceptional returns. Sometimes you got to go against the norm, but you also need to be right. So you don't want to just be a rebel without a cause, you also need to be right. And something that I learned from you, and this is so simple, but it underscores the importance of this, like, there's a lot of complexity in this industry, but it's not everything, and it comes from good judgment and being clear, and this is where it came for you. Is you, taught me, you said, don't ever think the error that can happen in this, this framework, this mental framework as well, is that someone else has thought about it. Sometimes deals come in that are so clean, so simple. This is your words, not mine, so clean, so simple, that you can make an error, just saying this, someone else's has to do it and and one thing you taught me is some of the best investments you've done, some of them have been no brainers. Is that right?
That's right. Well, I mean, sometimes, you know, people over complicate things, and I agree with what you said. Don't be a rebel without a cause. You know, you want to be a contrarian, no problem, but you need to have an idea, at least a hypothesis, of what the catalyst is going to be that's going to cause the world to be wrong at such time as they have mispriced an asset. Either overvalued or undervalued. You know, there's all the value traps that are out there to where, you know, things just are cheap, and they're cheap for a reason. Then there's other times that you look at it and you go, are you kidding me, of course, that is a logical thing to do. I mean, a great example. Again, a little contrarian, but there's not a single person that probably thought the Gamestop was really worth what it was trading at during the entire Reddit board hype. I mean, here's going to get a little wonky here for you, but there literally was a day that we put on a trade in GameStop, and we had to be willing to take risk to do this. But after the stock had just doubled and doubled and doubled and tripled, we went out there and we sold a straddle, and again, I'll explain for the audience that doesn't do options, but we sold a call, and we sold a put and round numbers, the stock was at around 200 bucks a share. And literally, we sold the $50 put and the $250 call. Literally, we got $75 in premium. So the stock would have to go below zero for us to actually lose money on that situation, which obviously can't happen, or it would have to go above, in that particular case, $325 a share. Now, could that have happened? Absolutely it could have, because everything was just thrown out the window as far as sanity goes. But we felt like that was an incredible risk reward. That was a no brainer. There was almost no way to lose money on that unless the irrational behavior became so extreme, and it can't happen. The market can stay irrational longer than you can stay liquid. But so we sized it correctly, and we knew what our risk level was going to be, and if it hit a certain price, we would have had to have stopped out. And we're not going to sit there and just, you know, tilt against the wind. But that was a no brainer.
Or when we went out and we bought certain assets, I remember one of the very first investments I made back in 1991 was Bank of New York. Bank of New York at the time, is trading at 40% of book value and 8% dividend yield and six times earnings, right? Why, because everybody was convinced all the banks were going to go out of business. Well, some certainly did, but that was a no brainer. Or looking at the shale revolution that happened in the world of oil and gas, there was unquestionably a new paradigm of how we were getting resources out of the ground. Somebody literally had to just totally disagree with science in order to say, well, that's not a good investment. Now, how you go about doing it? There's a lot more, obviously, science and art that goes into it, but it was definitively an opportunity that you just don't get that often. And what happens to so many people is when they see that just no brainer, they think, so I'm missing something, and so I just I can't do it.
No, have conviction. Plant your flag. Say I'm going to do this because it's the right thing to do, and don't let people talk you out of it, because that's the other thing that you'll learn, is that there's very few great investors that invest by committee. Most of the time it's death by committee. So you have to have conviction, and you have to be willing to say the facts are on my side, and I'm going to be there in the right size and with the right flexibility in order to take advantage of it and then be, trust what your work has shown you, and have the conviction to stay with it.
I love that. Thank you. And you know what, I think we were joking when, when I learned this, I said, you know, that's actually good advice. It's good marriage advice as well. So some of the best investments are no brainer. So for those who are still out there, if you're listening to the show, looking for the one, you can listen to Christopher and say, you know what, don't, don't. Be too quick to write it off. Some of the best investments, I know, mine certainly was. It's a no brainer. You're like, I got it. I gotta, I gotta get, get with the program here. This is, this is sounded really nice. So thank you for the advice.
It's true though. I mean, I'll say, though, if you're hiring people as well, if you're sitting there going, well, I think, you know, I think they're gonna work. I think they're okay, you know, pass. If it's an investment, you go, I think it'll work out. I think it'll be okay, pass. If you have to say, I think this marriage could be okay, but maybe it won't, but that's all right, you don't want to get in that marriage. So you have to have conviction that there's many times you meet that special someone and you go, this is exactly who I should be with, trust that move forward, do it without fear, and obviously have a great relationship.
I love that. Thank you. Your wisdom hits many, many fronts at the same time. This is good, true sign of a master. So you said, and I mentioned this, that you're one of the largest allocators in GP stakes in the world. And you said that GP stakes offer less than 20% down, just as a metaphor, but offers less than 20% downside and over 300% upside. So tell me break down exactly how that asymmetry works for a fund manager who's looking at it for the first time.
So when you own a piece of a private asset management firm, and I'll make sure that we define a GP stake is owning a stake of a general partner, a private asset manager who manages funds, right, overly simplistic explanation. But the way that they make money is actually very unique and different. So you have management fee income, most people are familiar with the two and 20. So you have the 2% management fee, and then you get the 20% of the profits, carried interest or incentive fees, performance fees, whatever you term you want to use. And then you have the balance sheet of the, you know, the of the firm itself that invests in their own funds, the GP commit, if you will. And then, of course, what's the business worth or the enterprise value? What very few people fully appreciate, is those management fees are contractual. So no matter what, if somebody does a great job investing the money or a lousy job investing the money or doesn't even invest the money, they're still getting paid their management fee. So in not every single case, but in most cases, even if a firm never raises another dollar, they never make another dollar of profits for their investors, and they literally, gradually just phase out of business, we're still going to get back 80% or so of our money. Now, sometimes it can be less, sometimes it can be more. There's some investments we've made to, where, literally, we could not lose money just from the contractually allocated management fees.
Then obviously the carry the performance fees. Those are very hard to predict. They could be a lot, or they could be little, or they could be nothing. So you're not going to know for sure what those are going to be, but you're going to underwrite in the best you can. But if you do a good job selecting a very strong manager who delivers good performance, you have very little downside. You have the ability to make 2, 3, 4 times your money over the course of a five to seven year period of time, depending on their growth rate and how well they invest. That's very unique. And I've been on the record forever saying that, you know, owning a private asset management business is really the second best business model in the world, behind enterprise software. Why not say that anymore because everybody knows how enterprise software is under fire right now because of AI. Owning a private asset management firm is, in my opinion, and I think most would agree with me, is the best business model. Because you have those contractually obligated management fees. And for every person out there watching this, if I told you exactly what your revenue is going to be for the next five years, contractually, I bet you could run it profitably, and probably very profitably. So the average margin is between 50-65% just from the management fees, before you add on the carried interest and the balance sheet profits. And obviously, if they grow, you're going to have a growth in your enterprise value. Everybody wins from that. So GP stakes is a very unique space. We got involved in it was very young. The asset class has grown by about tenfold since we got involved about 12 years ago. And it's still actually not that big, but it's certainly much bigger than it was before. And because we were first movers, and we've obviously been, you know, successful with it. We've been able to grow our position and become the largest in the world.
I love that man that, that's phenomenal. GP stakes is an exciting part of high finance, for sure. So, you know, one of the things that I love about you in one of the monikers, I don't know if you like this one, but I certainly do is you're known as the fastest no in the West. I love that. So what, what's the, what's the actual framework that you use to go from theme conviction to writing the check? And where do most allocators slow down and lose a deal?
Well, so for us, we are the fastest no in the West, because nobody likes a slow maybe, right in every situation, make a decision, move on. If you want to be thoughtful about it, that's fine. Explain the process. Don't keep people in the loop and don't ghost people. It's just not the way we want to be treated. We don't treat others that way either. So the process is actually fairly straightforward. You mentioned 1500 investments a year. Last year was actually over 2000 it just really kind of depends on what's going on in the world. But typical 1500 about 500 of them are like, they never even get out of triage,, because they're a PowerPoint in a garage, or they're not real. They're somebody with a great idea, or they're just, you know, they're hoping to get somebody to give them some money, and they're not, you know, actually a viable manager or investment opportunity.
Then another 500 of them are probably pretty good, but they don't fit any of our core themes. If it doesn't fit a theme of ours, we're just going to pass because we don't really have a home for it, and it's not something that we're really tracking, not something that we're really an expert on. So we're not going to be a tourist. We're just going to move on. The other 500 we have to do work. We got to break it down, and our team literally will analyze 40-50 names every single month in order to be able to identify what is real, what has legs, as we call it, and where the risk reward is very favorable. We do not like negative asymmetry, as much as we like positive asymmetry in GP stakes, we despise negative asymmetry. Where somebody can make good money most of the time, but if it goes wrong, they're going to lose all their money. Right, we just we pass on those things all the time. We want to get paid for risk, we don't mind risk, but we absolutely want to get paid for that risk.
So when we go through the process to the last part of your question, the vast majority of people don't get a yes from us because they don't really have an edge. They come in with the same presentation as everybody else, and they say, by the way, we're great and we're great people. We're great looking, we went to great schools, we went to great pedigree, and we have great track record, and we have great investors. We're great, we're great, we're great, give us some money. And that just doesn't do it for us. They may be great, but we want to know what makes them different. It's one of the reasons why we like sector specialists so much. Somebody didn't have to be a sector specialist to get our money, but if they are a sector specialist, they automatically kind of start with an advantage, because we believe that for the most part, sector specialists have an information advantage. Because they're not wondering where to go, what to do, this is what they do and the advantage for us is that we can invest anywhere in the world and anything at any time.
So we can identify the very best domain expert in any domain, which gives us the flexibility. We refer to ourselves like we're Switzerland, we're neutral. We can go anywhere at any time, but we never have to make an investment. So the other advantage of it being our money first, is that if it's not good enough for my money, we're just going to pass. If it's not good enough for our partners money, we're going to pass. So therefore we can literally do nothing, or we can be very active, if the market gives us great opportunities. But most managers that come through the door, they just never convince us that they really have a repeatable and a persistent edge. They just maybe have gotten lucky in the past a couple of times. We look for persistency, that's the most important thing to us, is that they can do it over and over and over and over again.
I love that. I'm filled with a lot of quips. So one of them is persistency opens the door. Consistency keeps it open. And so when you're persistent and consistent, I think those are definitely the ones. And so just to say that we're great. We went to great schools, and everything's great. You're like, hey, I'm sure you are not, not for us. We need an edge. So I love that. So people raising capital or talking to you and really doing that, the one thing that I'd love to just your opinion on. And this is a subtle nuance, but it's also not subtle when it shows up, when people pitch you, and people at CAZ and so, so the question is really shifting people's mindset. So people, meaning those who would pitch you a deal, is you don't want to be perceived as a deal jockey, you want to be perceived as a solution architect. And the difference is, which way do you face? So if I came to you and said, I'm great, my team's great. Our schools we went to are great and our you know, this deal is great, please give me some money. You're like, sure, it is, whatever.
But then a Solution Architect is saying, I come to you and imagine this, and I say, Christopher, I noticed you did a deal here, and you're moving in this direction. Actually have something really interesting that I think is going to really help you accomplish what you guys are doing, and so which is still getting to the deal, but understanding what people like CAZ or anyone else that people want to talk to allocators. Is to say, I'm not just here to pitch a deal, because they hear deals all the time. But if somebody brings a solution to something you need solved, maybe you're saying, you know, maybe we're over, under exposed in a certain area and we like it, or we don't. And you come along and say, I can help you with that, with this deal, or maybe our risk profile is too high or too low in a certain area, and you say, that's great. I have a solution for that. Let me help you with that. And so shifting to that, does that, how does that affect, or do you even see people like that walk me through a little bit of when people show up to you and they provide solutions, rather than just trying to hawk a deal and ask for money. How does that work? In the mind of the institutional investor that you guys are.
So there's so many people that come through and have their agenda, and they never even stopped to ask what our agenda is, and is so obvious that they're just so self absorbed with their own you know, this is what they want, and then doesn't really matter what anybody else wants, it's just what they want. And can you help them or not? If you can't, that's fine. We'll just move on to the next one. And that's just not the way that business should be done. It doesn't mean somebody can't be successful with that, but it's just certainly not the right way, in my opinion, to do business. It should be much more of, okay, here's the challenge that you're trying to solve for. Here's a way in which we can solve for that, and we do a really good job at it, and here's why, and here's how. So this goes to the advantage of us being thematic, is if somebody comes into our offices, if they get past triage, and they're coming through, and they come in and just talk about the micro level of what they do, and that's all they talk about. They have a real risk of actually missing out on our capital, because they never tie the two together.
It's funny, because actually, on that LinkedIn thing I was talking about, we tell the story about why it took two years for us to decide to invest in professional sports, because I was the skeptic, and I just didn't see how it fit with our theme of cord-cutting. And it wasn't until the teams that we were working with, the firms that we were working with, were able to connect the dots for me. Of, oh, absolutely, this fits the theme in a very significant way for you. And so put those two together. It's a no brainer, back to that term, to invest in this space if you're going to want to benefit from cord-cutting, it would have saved everybody two years and like, eight meetings. So coming in and just saying, you know, here's what we've got, without considering what the other side needs and how we can be a solution provider that is very short sighted and usually not very successful.
Exactly. I've seen it, and I'm sure you have too. Is to say, look, make sure you understand who you're talking to. I actually did a show not too long ago. Is to say the best way to build trust is know who you're talking to, whether it's a family office, a pension fund, what do they care about? Like, do we even need to teach it, sometimes we do. That's okay. So everybody's learning. We're all on the same path to some are further along than others, so no shame here if you're still figuring it out. But I want people to hear it straight from your mouth. Is to say, hey, you might have a greater chance of getting some capital if you help me to solve the things that I need solved. If you just come in and ask for a deal, you might, but your probability goes down and I always say in finance, we do statistics, we follow probability is not absolutes. It's not engineering. There's a great place for that, but in this place, we follow probabilities, and so if you want to enhance the probability of getting that, please listen to Christopher and just say, hey, help us solve something. Know who you're talking to know what we care about, or at least get a sense you're not an insider, but at least read our website, you can still understand what is required if you want allocation. Make sure that that allocation is a fit for us, figure out how it's a fit for us, and ultimately leads to the no brainer.
Well, I'm in a simple example that most people don't ever think about. So, you know, I was appointed to the state of Texas Pension Review Board, and I chair the Investment Committee there, and we're the watchdog group for the legislature, so we oversee all 100 plans in the state of Texas. So when you think about the vast majority of people that are running institutional portfolios like that, they are compensated based off of not messing up. Okay, they keep their job because they don't mess up. So coming into a pension and talking about this amazing return that happens to have lots and lots of risk associated with it is usually a non-starter. Now, there's exceptions, obviously, but for the most part, the number one goal of the person that you're talking to is to not get fired. So if that's true, putting them in a position to go to their board and say, I'm going to do something completely unique and different that they've never heard about that's really complex, the odds are good that's not going to go well for you as the person convincing them to go do that, they're probably going to pass on that opportunity. Just the same. If someone is, you know, a particular type of fund that's looking to allocate to venture or to health care or whatever. If somebody is just like, you know, this is just like the other 50 things that you looked at, we're just better than them. Okay, they're looking for differentiation. They're looking for less correlation. They're looking for something that's diversifying for them, whatever it is, know that, you know, ask the questions, get to know what their prior, you know, their priorities are. And by the way, that's a gift that very few people in our industry have, is the ability to build rapport and build relationships and ask questions, as opposed to just come in, actually, one of our partners, I'll borrow his phrase. He says, don't just show up and throw up, right? You can't just show up and just start spewing information, right? Show up, ask the question, understand the psychology and what somebody is after. Then help them achieve that. You know, I mean, business is really just as very simple motto, find a need, fill a need, get paid. That's all. It is. All types of business, the investment business is no different.
Yeah, I love that. Thank you, so I'm gonna borrow that, that thing that was really good. You know, it really comes down to and you highlight something that I feel very strongly about, and just a reframe, but no less true for folks who are starting out. So we, I always say, look, high finance is more about trust and transactions, and so we find deals to monetize trust. So we use finance to monetize the trust that we've earned. And too often, where people make mistakes is they'll skip past the trust, they'll go right to the transaction, they'll blast they'll buy a list for whatever, they sell for 1000 bucks or whatever, and they'll just blast it there. I literally got an email with someone telling me how impressed they were with my real estate portfolio. I was like, do I got a portfolio that I don't know about, regrettably, I don't have one. And so just this carbon copy thing, and so implementing that is to say, know who you're talking to. I think that's what you talk about and really work on building that trust. Because if you skip past the trust and go for the transaction, you're probably gonna get neither. But if you are able to get the trust and like we said, know who you're talking to, know what they care about, understand how your solution fits into their portfolio. Now you're actually able to build trust with your deal, and if you do a great job, you might be able to monetize that trust and we both close the deal. Would you, would you agree with that?
No, I would agree entirely. And it's something to where, when life happens and things get challenging, which they will. That's just the markets and just life in general. The relationships hold that together. And if somebody is just transactional and that's all they're focused on, then you know those relationships are not going to stay with you when times get tough. Or they're not going to re up for you in your next fund, or they're not going to give you patience, or they're just going to be a pain in the neck because they don't trust you, and so they wonder what might be happening behind the scenes that they should be trying to uncover. So build the trust, build the relationship, and then ultimately the business together as a shared friendship or trust in one another. It's also much more rewarding that way as well.
It's a lot of fun when everyone, that goes right back to the alignment, right, so trust also is a forcing function for alignment. I love that. Now you mentioned, Christopher, that when we first spoke, that your internal model is, if we can live with the worst case, the upside can take care of itself. So how do you stress test a private market investment when there's really no liquid pricing in real time.
In some cases, you have to assume that zero is a real possibility. If you're looking at venture and you don't think that it can go to zero, you're just naive. It's just possible for anything in the world of venture, no matter how exciting the story is. And we're okay with that, as long as we know that's the worst case scenario, then we're going to size it properly. And if we don't feel comfortable with that, we're going to pass, But in most cases, you can identify what the real worst case scenario is, because of either the business model or because the debt levels or because of the type of asset is, what would your liquidation value be? What would the intellectual property be? What would be your cash flow profile? What could you sell the receivables for? There's so many different ways to do it, but we will spend on the investment team 80-90% of our time trying to figure out what could go wrong, how we could be wrong, how somebody could do us wrong. I could translate that differently if I wasn't on a recorded line. But how could somebody do us wrong and then ultimately be in a position to be sure that in all those situations, we at least have a hypothesis of what the pain would be, and then probability adjust that outcome. And if we say, Look, if everything just goes totally wrong, the theme goes wrong, the execution goes wrong, and the business goes wrong, or whatever the asset is, and we're gonna lose half of our money. Okay, can we live with that? Well, if the answer is yes, then the upside will definitely take care of itself. And then we'll see if the upside is justifying, on a probability adjusted basis, that 50% downside.
But most people, they just fall in love with the story. They just fall in love with, oh, this is going to be the next 5x, 10x this will be the next fake SpaceX. I mean, oh my gosh, there's so many stories about people going out and doing silly things because they just want to be in the next SpaceX, well, they do happen, but you have to assume also there's a risk there, so size it properly. And from that point, it's very liberating. And candidly, it's something that very few people ever get to because if you really go, You know what, I'm very confident that we can't lose more than half our money here, and I'm really confident that we can make 2, 3, 4, 5 times our money. It's liberating, because then, as things are evolving, because nothing goes linear, straight up, as things are evolving, you have conviction, which allows you not to be anxious about this gyration of this quarterly number, or that gyration or that quarterly number. That's where the conviction comes from. And it's this statistic I'm more proud of than any other. Over 25 years, in all realized and unrealized private investments we've made as a firm, we've made money on 95% of those investments, and some people have made more money, no question. But I'll put that batting average up against anybody, because it's the focus on the downside and being able to live with that that is liberating to enable us to take risks that's smart, as opposed to just guessing.
Brilliant. You know, you remind me early days that I remember telling you this story when I when I was young and in grad school, Facebook, or, excuse me, in my undergrad, Facebook, IPO came out, and everyone was like, oh my gosh, because we were part of the generation where you had to have an email address from a university to use Facebook. So we were part of that. So we had followed it from the whole time, and we were actually the ICP, we could say. But everybody was like, it just needs to go to whatever $9-10 and it's bananas or whatever the number was. And all anyone ever thought about was upside right as amateurs. And then when I graduated, and hopefully I learned a few things, and took my licks like anyone else, my wife asked me, you said, did you learn anything from getting a master's versus a bachelor's degree in finance? I said, Well, you certainly go a lot deeper in the fundamentals, for sure. But I would say, if I could summarize it in one term, the thing that in finance, that they really teach you is risk mastery, that you cover exactly what you talk about. And this is why I use the term mastery. It's not the degree. It's mastery is you really need to appreciate the value of downside risk first. That's the filter. And this is the thing and feel free to correct me if you think I'm off base here, Christopher. But this is the thing that I hope people listening understand, is maybe you came up and you were pitching doctors and people with some discretionary income, and you raise a few deals, you flipped a few houses, or whatever it is you did. But then when you get to pitching institutions, this changes quite a bit, and they're no longer looking for upside. These are professional asset managers, like you said, they don't want to get fired. And so, so the big thing that they look for is now you change to say, if I'm going to raise, I need to have this dialed in. As somebody who, who also goes to that maybe they're raising for their fund is to say, if I'm talking to these institutional folks, they're risk managers first. Would you agree with that?
100% and it is something that is so frustrating. When people come in and they talk about how great they are and how great they are, and they're going to make all this money for us, and they never talk about what could go wrong, and we have to ask the question. So if they have to ask the question of you when you're marketing to them, of okay, how could this go wrong? It means the story's not been told the correct way, because every person that's intellectually honest knows that there's an upside and a downside. And so to ignore the downside implies that you don't want to talk about it, maybe you want to hide it a little bit. So be forthright about it. Here's what could go wrong. Here's how we address that, here's how we mitigate those risks. We know that we have to make sure we execute here very well in order for those things not to happen. But fortunately, we have a great plan, et cetera, et cetera, et cetera. Or that's how we go about making sure that we protect ourselves and we mitigate by doing these things. And here are some examples of where it started to go wrong and we were able to fix it. Again it depends on the sector and the industry and the type of investment. But have a really good answer for it before they asked the question to where at the end of the conversation, you know, the people look at each other and go, well, I don't have any questions, because they answered most of what we would want to ask. Which goes back to your point earlier, of knowing your audience. If you don't know what they're going to ask you in operational due diligence, or what they're going to ask you in investment due diligence, then you need to do a lot of homework.
Now, I want to be really clear about this, because I could see some people making mistakes. It doesn't mean you have to cover every single thing all at once and show up and throw up and just literally talk forever. They don't want to hear that either. But if you have a very tight and concise story of this is what we do, this is how we do it. These are the risks of what we do. This is how we overcome those risks. This is how we end up making profits. This is how we harvest and this is ultimately how it's going to be successful for you, that is a story that's much easier. Especially if they have already told you what their needs are, and you're helping them solve what it is that they told you that they said that they need. That obviously, is where the story becomes kind of a, just a no brainer for them to say, sure, good. We're in, tell us how much awesome.
I love that, though. So that's, that's pure mastery, right there. So, you know, I've noticed that CAZ is one of the largest institutional allocators to professional sports globally. What a feat. What is the actual return mechanism and how does cord-cutting make sports, sports ownership more valuable, not less?
So the cord-cutting theme is what we saw and again, there's not a single person that's listening to this that doesn't hadn't figured this one out, right? I don't have anybody that will debate me that people are, you know, I. Nobody's gonna come in and say, okay, by the way, everybody's gonna go back to broadcasting cable, they're gonna leave all their streaming service, it's just not going to happen. So the theme was obvious. How to take advantage of the theme, there was a lot of different ways you could do it. Go out, buy out, go out and buy Netflix stock, or you could go out and buy some other, you know, studios. But if you really get to it, those people still need something to distribute and somebody to pay for. So advertisers have a huge problem today, nobody will watch their commercials unless they're watching something that's live.
So here's a fun statistic. In 2005, 15 of the most watched 100 programs that were live, 15 out of 100 were sports. In 2005 in 2025, 95 of the top 100 watched programs that were live were sports. The reason simple, everybody's like, I watch on Amazon Prime, I'm going to watch it on Netflix, I'm going to go watch it on Hulu, whatever it is. I'm not watching any commercials. I don't want to do that. So if you're an advertiser, how do you reach your audience? You either micro target through social media, or you have to market through live events. That gives massive pricing power to those that own that content, in this case, professional sports teams. College as well but professional dominates it by far. And one easy thing for people to look at is, you think about a Super Bowl commercial. It's always been expensive to do, now it's crazy expensive to do a 30 second or a 60 second Super Bowl ad. Because there's so many people watching at that time, the advertiser can make their entire year if they have a great commercial that everybody talks about and it goes viral. It is game changing for their business, so they're willing to do that.
Another easy example, Amazon. Most people would say, okay, what's the most common Amazon sign up day? People would say, Black Friday or Cyber Monday. And those are big days, but the reality is, it's every single Thursday night in the fall, because if the only way to watch your favorite NFL team is on Amazon Prime, and you have to be a prime member, you're going to join Amazon Prime. You may cancel it after a couple of days, or you may decide, you know what, I want his free shipping? You know other benefits that I can get, I'll pay for it. I'll keep it. Well, that's why Amazon Prime paid a very large sum of money for the rights to broadcast on Thursday nights in the fall. And I could go sport by sport by sport, but in every one of those cases, the revenues from the media rights have escalated dramatically because of cord-cutting. And that's only one piece of the economic model for a professional sports team, but that's the one that is most directly connected with a theme that is cord-cutting.
I love that. And so national media rights, that's that's a big one, and that's what you said. That's the biggest, one of the biggest drivers of revenue. What else are some of the drivers in this sector? This is a theme that you guys obviously believe in. How else do these things provide profits to you and your shareholders?
It's amazing how people don't think about it this way, but the vast majority of revenue for the Big Four North American leagues in particular is recurring. So in some ways it's like GP stakes, because you don't necessarily have contractual management fees, but your media rights are 10 years long.
Yeah.
You know, eight to 10 years long for the contracts that the NBA just signed, or the NFL has until, I believe it's 2033. So you've got these long term media contracts. You also have at the local level, you have your local contracts, such as your local media, your stadium naming rights. Those are not one year deals. You know exactly how much you're going to make for 5 or 7 or 10 years. You also have your suite sales, your seat licenses, your season tickets. That are there. Some of them have to be renewed each year, but most of them are multi year contracts. So you end up with about 80-90% of your revenue. As an owner of that team, you have a little visibility of 80-0% of your revenue, it's recurring. And so then you do have the other forms of revenue, such as hot dogs and beer and regular ticket sales, and you have the other activities. You rent out your stadium for concerts, or you have other things you can do with the assets. You may own, the real estate around your Stadium, which has become a very, very big deal. You also may have a platform, or maybe you have a minor league team that shares your stadium with you. And now you have all the live events, as in Sacramento as an example. We have the Kings, and we also have, you know, the River Cats, and that's literally you have a monopoly on live content, and any concerts or anything else are basically going to be, have to be in your facility.
So there's lots of different ways to monetize sports, but again, most people don't ever stop to think about it. You have these things called fans, which is short for fanatics. Right, they are rabid about your team and any sports fan will tell you that for sure. You then have this thing called a monopoly. Nobody's allowed to compete with you in your geographically protected location. Now, in Europe, it's a different animal, but it's also can be very profitable as well, but in the Big Four North America, and this is a public number, so I can share it. In the NFL, literally, every single team and most people certainly don't know this, whether you are first place or last place, your share of the league is exactly the same. You own your 1/32, period. every year. Therefore you're gonna get a distribution equal to 1/32 of the distributions to the teams. This past year, it was $420 million before you played your first game. So it's very easy to see why people want to own these assets and then there's some other benefits that owners get. If it's a taxable investor, it's not tax advice, but there's preference tax treatment that owners of professional sports teams can get through amortization and other things. So talk to your advisor if you're going to invest. But it's something to where there's so many other benefits that most people are fully unaware of. And candidly the reason is, up until 2019, people could not own a sports team or a piece of a sports team unless they were the control owner or an individual who was a friend of theirs and walked on two legs. It wasn't until 2019 that institutional investors were given the ability to be able to own professional sports in North America. It started with Major League Baseball, then basketball, hockey, Major League Soccer. Now, obviously you're talking about the NFL. It's now available to special investors who fit very specific criteria have the ability to own not just one team, but actually pieces of multiple teams. We now own stakes in over 30 different professional sports franchises around the world, and it's a great business model.
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I love that well, that's really good. I so being in Edmonton, Alberta, Canada, I was in Dallas, Texas, and that's the most Canadian thing I've ever done. So I went to a meeting, and there was about nine guys around there that collectively controlled well over a trillion dollars. And we went to the famous Alberta and Steakhouse and had a great conversation. And literally that the night before the Edmonton Oilers had beat the Dallas Stars, and I said, and I apologize for winning. I said, oh so sorry for beating your team. That's okay, most Canadian thing I did, but I love about what how sports bring us together. I know that's outside of the economics that we're talking about, but you remind me, as a fellow Texan, how important that is, just culturally, and what a cool asset to own, where you have fanatics and you got hot dogs and you got stadiums. And what an exciting thing, what a fun asset to own, man. I, that, you must be pinching yourself some days.
Well, it is, it is a fun asset to own and the interesting thing is, is, I'm actually not that big of a sports fan. I played football in college, and I, you know, I coached high school football for four years, so I love the game, but I don't actually watch much in the way of sports. I mean, people ask me all the time, are you rooting for your team in, you know, in the playoffs? I'm like, which team, I have no idea which of our teams are in the playoffs at any given point in time. And the answer is, usually we have somebody which is fun. But what's fascinating about it is it is that fanatics, I mean, actually one of the one of the litmus tests that were partners with Fenway Sports Group, and when they're looking to acquire a new team in another league, or they're considering, you know, where what their fan engagement is, one of the key metrics is? Hang on to this, this is going to sound weird, but how many people are contacting you to see if they can get permission to sprinkle their ashes on your field? Because they are so passionate on what they do and they're, you know, multi-generational. They're like, look, when I'm gone, I want to have my ashes sprinkled on Fenway, then, you know, you got a fan, right?
But the other thing that's changing so much because of that attractiveness of the fandom, if you will, is with the world of digital. Everything is changing to where now, again, advertisers can reach their audience in a different way. When you're watching, you know, some hockey game you absolutely are going to see advertisements on the ice. Well, it's not actually advertisements on the ice. It's a digital image that is on the ice. And lo and behold, it's probably what you looked up on social media the day before, or you did a search on google the day before, because it's targeted specifically to you. So think about what the advertiser is going to pay for that advertising, as opposed to just a broad based ad that may or may not hit your interests. Further, there's a day coming very soon, like it's not far away, because of high def in the and the digitalization of this content, to where I'll be able to sit with my grandson and literally be able to put his head, his face and his name on the quarterback, and he will be able to watch himself play quarterback for the Texas Tech Red Raiders. I guarantee you I'm going to pay 10 bucks to be able to let him have that experience. Well, think about that. That's lots and lots of fathers, mothers, grandparents that are going to pay 10 bucks, and that's going to go to the team, it's going to go to the league, and obviously the operator of the app. So there's so many new ways to generate revenue that didn't exist even just a few years ago.
What an exciting field to be in, man, that is really, really cool. Now, I've noticed that you executed what may be the largest LP led GP stake secondary ever, over $500 million in NAV. So walk me through how that trade was structured and what it signals about liquidity in private markets.
So the world of GP stakes is a little bit unique in that almost every asset investor fund, if you will, is going to be perpetual. Because if you're a fund manager out there and somebody says, hey, I want to buy 12% of your business. But by the way, in five years, I have to be able to sell it, and you're not allowed to me who I can sell it to. You're going to tell them, no, thank you very little. I am not going to literally not know who's going to be in my boardroom with me. So the only way to structure a transaction like this is perpetual. That means that while the returns have been very, very good and gotten lots of cash flow, because they're cash flow paying vehicles, there's going to be a place where certain investors run out of time. So in this particular situation, the fund that owned this half a billion dollars of a particular GP stakes fund, they literally were out of time. They'd gone through their fund life and all of their extensions, and so they had to be done by the end of the year.
Therefore, they ran a banking process that said they couldn't just show it to everybody, because the firm that obviously, whoever bought this stake, was going to be the largest limited partner of the fund of which it was about. That firm obviously is not going to just sell it to anybody. They're not going to want anybody to be their largest investor. And obviously the GP has to approve whoever the buyer is going to be. So there was really only five buyers in the world that were allowed by the sponsor to even bid, and we were the only buyer that could write a check for the whole thing in one fell swoop. Well, that means that obviously we had an edge and we've been told that we were not the highest price. We were told we were not close to the highest price. But we provided certainty of closing, certainty of financing, of funding, and ultimately the ability to get the sponsor to approve us. It was a win, win, win for everybody, and they got a fair price.
But to the second half of your question, it does show that when there's very attractive assets, and I mean, these were really, really good assets. There is liquidity for those assets if they come available for sale, as long as somebody is not being forced to do it too fast, and as long as the assets have, you know, have durability. That people can say, okay, I can underwrite this, and I can feel confident as to what my return is going to be over time. And obviously I can't give the details of the exact structure, but it was very favorable to us, very fair to the seller. And ultimately, we have a very good relationship strategically now with the sponsor, whose fund it was.
Brilliant. Now in a world where almost everything correlates in a drawdown, what is the specific allocation logic you guys use to build a portfolio that holds its ground when public markets break?
We chose the title of the book that I wrote with Tony Robbins very carefully, and it's a tip of the hat to Ray Dalio and we used his term, The Holy Grail of Investing. Which is eight to 15 less correlated or uncorrelated. Return streams have less correlation, so therefore they should have less risk and give you more opportunity for return, which for every investment professional we know, is just Modern Portfolio Theory, it's just Markowitz. It's just been repackaged in a way that the average person can understand. But we use that literally, that's the way we've always managed the portfolio, because we all want in our portfolio when one thing is zigging, something else to be zagging. That's what provides a much smoother ride or as what we say is get off the roller coaster and get onto an escalator. That's the way we try to explain it to people.
The reality is, it's harder than it ever has been to do that and this is just a statistic that even the professionals will be surprised by. We have a slide that we show that has basically eight of the normal asset classes that you would expect, large cap, middle market. Large cap, mid cap, small cap, international emerging markets, market neutral real estate, public ad, you know, REITs, MLPs, bonds, corporates, treasuries, etc. And if you go back to literally, if I remember correctly, it was 2007, 2003 excuse me, 2003. Those assets, the cross correlation of them was 0.16, right, 0.16. Very little correlation. So you could build a very diversified portfolio with some negative correlations, like stocks to bonds, and you add things that were zigging and zagging. Well, fast forward to 2025 that exact same mix in the exact same allocations was a 0.69 correlation. So 16-69 but to your point, during periods of stress, it was over 0.79 correlation. So just when you need the correlation the most, it leaves you.
So the challenge for people is if they just want to be in the public markets, because of the way that half the companies that were public are no longer public, because the correlation is now so high between stocks and bonds. Now that you have so much indexing that removes a lot of the less correlation and creates more correlation. The only real way to get proper diversification is with private assets in the mix. Now nobody should go out and put all your money into private assets, not what I'm saying, but if you can literally just take 40% of your portfolio and put it into private assets in a good mixture, diversified properly. It can cut your volatility down by 40% to 50%. And your returns historically have been higher, your drawdowns have been lower, your Sharpe ratios are higher. It's exactly what everybody wants on the scattergram to move the effect. Frontier, up and to the left. That's what private markets can do. That's what we do. That's what we focus on. Good example, professional sports, a literally negative correlation to the S&P 500. 0. - 0.1 last time I looked at it. GP stakes, 0.07 correlation to the S&P 500. Energy, 0.23 to the S&P 500, that is, and by the way, to each other, negative correlation. Those are the ways that you can add properly to the diversification of your portfolio these kinds of asset classes, and get the benefit of modern portfolio theory and The Holy Grail investing concept.
I love it. I can't wait to dive into your book. This is going to be amazing. You know, what most people assume is the Robbins partnership is a distribution play. Nothing wrong with it, but what has that relationship actually changed about how you think about deal access, investor behavior, or even capital formation?
It's interesting, I did a talk, literally a week or so ago to a big family office conference with some of the most wealthy families in the entire nation, some from around the world. And they asked me to tell the story of CAZ, because effectively, we are an interesting case study in what GP seeding and GP staking is all about. Obviously, the Cockrell family and the others, they seeded me when I started. And they got to benefit from the growth of our firm, and they got to help me grow because they gave us credibility. I wasn't just a 31 year old, you know, with a business card. I was a 31 year old with the backing of the Cockrell family, that carries a lot of cachet in a city like Houston in the state of Texas.
Just the same we have, you know, all four of the senior partners from In-Cap were shareholders of the firm. You travel anywhere in the oil and gas world, and you say those guys were really, really smart, run the largest oil and gas firm in the world. Private equity firm, they believe in CAZ, sounds like maybe you should too. That credibility transfer is enormous. Well, that obviously allowed us to grow dramatically. But when we got to know Tony, and he became an investor with us. He really thought there was a way that he could help us accelerate the growth of our business. So in 2021 we did the partnership with him, we sold a GP stake in the firm. Nobody took any money out. It was 100% growth capital to allow us to hire faster, to be able to expand our footprint, to be able to make one plus one equal more than two. And obviously he does have a very big platform and a huge transfer of trust.
You know, I'm on record of saying, other than my faith and my wife, nobody's had more of an impact on my life than Tony Robbins. I have followed his work since I was 21 years old. So now to be his partner is pretty amazing, but the reality that all of us have to understand is that the transfer of trust for somebody who's been as impactful on people as Tony has? They obviously look at it and say, I still want to understand what I'm investing in, but if it's good enough for Tony's money, it's probably something I should consider. And then obviously that transfer of trust leads to our professionalism, the access that we have, the things that most people can't get, and the alignment that we bring to the table. And it makes it very easy for people to choose to be part of our network, but it's so much more than just somebody's going to write a check and then they're just going to be on the cap table.
In order for GP staking to work, there needs to be a value add. What is the strategic value that somebody is going to bring to the table? That's what we always look for and you know, this is one of the things that's a very common question, and the right question to ask is, why would somebody sell a stake of such a great business? And the answer is, if they're looking to go to the beach and just take the money off the table, we're not interested. If they're looking to grow their business, and we're going to help them grow faster than make it grow on their own. That's growth capital. We love providing growth capital to already wildly profitable businesses that already have sustainability, that already have great relationships and their investors, and we can help them grow even faster, everybody wins from that. And that's exactly what happened with CAZ.
That is brilliant. And what you underscore is a little bit of something else. And want to highlight this for our fans, is that when you have that type of pedigree, we'll say. But when you get people involved in your fund, so sure, yep, go raise money, yep, that's the world we live in. We all get that. But the important thing, and I say the three most valuable assets in all successful fund managers possession, is a reputation, their relationships and their results. And so when you have those firing on all cylinders, then money and deals come to you. But really what that does is it breaks it down, listening to you and filtering it through, through my own experience. Is that allows you, then, when you have those kind of investors or advisors or shareholders or however they're involved at the upper echelons of any fund. What that really does help, among many other things, but one of the things that it does help is it provides trust. You have the stamp of approval of the Cockrell family, In-Cap, of course, I was in oil and gas. That's where I cut my teeth, I know I'm getting and the Robbins organization. It's not just, obviously, it's Tony, but there's a lot it's not just Tony, right, and so when you have that, that further strengthens your offering in the market. Not because you're just a deal jockey, you guys aren't. But we're highlighting a lot of these principles that showcase to say, hey, depending on how you stack the team. You stack your advisors, even the investors in your deal, slowly a narrative comes around, and that narrative better be one that people can trust with their capital and with their own reputation. Would you agree?
I could not say it better because of the fact that you know, the fastest thing on your list that you can lose is your reputation, right, takes that fast for somebody to lose reputation. Relationships takes time to build and obviously your performance is going to take time. Your results is going to take time to perform as well. But when you have, you know, really, really, really good partners, any strong reputation in the marketplace by doing the right thing, even when it's not in your best interest, then people know that. And I also know very well if somebody is not that, and it's a small street. And it's a strong, very small world, and what used to be six degrees of separation is now probably two. It's so easy to find out whatever somebody wants to know about someone or connect to someone who knows that person. And so the benefit of having that reputation and those relationships that oftentimes will lead to the results. One of the things that I really try to focus on with our team so much is that, always doing what's in the best interest of the partners. It's our number one principle. It's our number one promise as a firm, is we'll always put the interest of the partners first. If we do that and we're freakish about alignment, good things are going to happen and we're going to be able to generate results.
But then it does become this flywheel to where people want to do business with people that are very reputable and that they have good relationships with, and then ultimately, that generate good results. And you can't be shortsighted about that, because it takes time to build those relationships. It takes time to cultivate the reputation. But you also have to be prepared for particularly for people that are starting out. You know, I know this was a real tough thing for me when I was contemplating starting the firm. Is that I really was like, I want to own 100% and, you know, I had to learn that 100% of a small pie is not as good as a smaller piece of a much bigger pie. And so being willing to have the right people, either externally or on our team, that are invested and truly aligned to be able to make us successful. That obviously is something that should lead to everybody win. And it's something I say all the time, where there's good alignment, there's usually good decisions. When there's bad alignment, there's frequently not good decisions made. So do that with alignment of equity. Do that with alignment of partners, and do that with alignment of your own capital, invested alongside the people that you're asking for money.
Well said, brother, I love that. You know, I'd love to get your take, so there has been a shift in the SEC that I think changes everything, especially a long standing mandate around accredited investors. And so with that accredited investor standard effectively gone, how does a fund manager responsibly deploy that access without flooding clients into deals that they that probably should have stayed institutional.
Very carefully, is the short answer to the question, but it is a game changer for the industry. It's the game changer for the investors themselves. Tony and I have been lobbying, we talked about this in the book. We've been lobbying Congress for a number of years, and we had it pretty far along. And actually was in the Senate Finance Committee to be able to allow people to take a test to become an accredited investor. And that way, even if somebody didn't make a lot of money, but they were very knowledgeable, they would be able to invest? Well, that bill has still not passed, but the SEC last year, in June, literally with a stroke of a pen, said, we're not going to make people take a test. They're going to be able to invest in certain types of funds that are registered. Anyone in the world can do that. So before, literally, for 24 years, the only way people could invest with CAZ is if they were a qualified purchaser, with only a very few exceptions over 25 years. Literally everybody had to be at that very high end of net worth in order to invest with us and with the stroke of a pen, and because of the fact that we had built a fund that was registered when we launched the book, now every single investor, regardless of net worth, regardless of income, has the ability to invest with CAZ in everything that we do in the private markets and own pieces of sports teams and GP stakes and a SpaceX of the world, all of those things they now can do that every single day that didn't exist until June of last year. But to your question, you have to be very mindful of the mismatch that can happen. Because, you know, as much as SpaceX is a phenomenal company, you can't sell it tomorrow. You can't just go, you know, drop a ticket and sell SpaceX. Now, in that kind of a name, you probably got a pretty deep market, but the vast majority of things don't fit in that category.
So if you're going to provide liquidity, and obviously, this has come front and center in the world of private credit in the last several weeks. The amount of pain that was caused by people not understanding or not having to explain to them properly, that 5% a quarter means, 5% a quarter at the fund level. And if the gate goes up, it means people may not get all of what they want to take out at that point in time. So fortunately, the industry literally as of just recently, kind of put its foot down and said, Look, 5% means 5% we're not going to go above it. And ultimately, if you want out, that's fine. You can get back in line next quarter and the next quarter, and eventually you will get all your money out.
But what I hope that every investment advisor and every fund manager who watches this tell people the truth. Which is, you should be able to get 100% of your money out of this every single quarter. But if there is a run for the exits at the same time, it is not in the best interest of the rest of the investors in the fund to go out and have to be forced to sell assets. So 5% will be the gate. Let people know that they can make a decision for themselves. But if anybody thinks that you can buy a piece of the Houston Astros and sell it tomorrow, that's not the way the world works. So you're going to have to be willing to accept that this has less liquidity. It has a path to liquidity, but it's less liquidity than anything that you're going to do on the New York Stock Exchange or the NASDAQ. That's okay, because hopefully your returns will be much higher with less correlation to everything else that you have in your portfolio.
But so for the advisor, manage liquidity the right way. And the funny thing is, and a lot of people outside the industry don't get this, most of the funds that are right now having to gate, they have plenty of level of liquidity. It's not like they've mismanaged anything. They just happen to be getting redemption requests from people who didn't understand are afraid of headlines, and so they're just all exiting at the same time.
So manage expectations properly, under promise over deliver, and then ultimately, do what you say you're going to do. Invest the money the right way, regardless of emotion, remember I said earlier about death by committee. Don't let a committee of 10,000 people dictate how you're going to manage your fund. Manage your fund to do your best job you can and again, it comes back to alignment. You know, in our fund, we're like a third of the entire fund, so the number one goal that we have is deliver great results for our money, and everybody is in our fund. And as a result of that, it gives us the ability to not be short sighted, and have to give in to the pressure that might come from people are making short term, emotional decisions.
Absolutely brilliant. Yeah, and that, I think we're seeing a lot of good things here. I think we're about to, if we're not already there, we're about to enter the golden age of alternative investments. I really think that. I think the market is very efficient, at least in America. So if we want to talk about efficient market hypothesis, and you feel free to disagree if you think so. But I think based in the very fundamental sense, the Efficient Market Hypothesis basically says all available information is already priced in. Okay, well, if that's true, how are we going to generate alpha? Well, the answer is not there, or at least my answer is not there. What I think, just from an opinion standpoint, what I think is, and you're starting to see it, so we're going to see this. So the SEC thing that we're talking about right now, I think it's a softening that's going to keep happening in other areas. And we've got another one that we've observed.
So under the current administration, they're trying to help people in their retirement to get those returns. And on average, alternative assets tend to outperform, at least certain sectors, like private equity tend to outperform. Okay, cool, that's great. How do we get people in there? Well, number one, we got to soften those rules. Soften those rules to allow more people in there. But number two, what's very, very interesting is, I call it Trump one, or his first presidency, they opened the door for alternative assets to be included into 401 K's. And then next presidency came out and they said, we don't like that, so they stopped it. And then Trump came back and said, I love that and not only am I going to put back what I did, we're going to kick those doors wide open. And so I don't know, I'm being a little dramatic, but, but what he was able to do, and now you're starting to see these cascades, right, you talk about seeing themes, and of a lot of these things, is now alternative investors like yourself and many others, as long as you qualify, you go through the process. Now it's available to include those over performing, those Alpha generating assets from great operators are now also able to tap into the last time I checked, it was like $12 or $13 trillion is sitting in 401 K's, and the current administration said we're cool with it. It's obviously a pretty lengthy process to qualify. We're not saying Open Season for anybody throwing a deal at this thing, but if you're good and you can prove it, you might be able to get access to the $12 1/2 trillion.
So what does this mean, let me land the plane. What this means is, I think we're starting to see a lot more of those, the containerized public markets capital that was a lot, that it's going to start to open up. And it's either a supply, well, there's always supply, but now it's a demand side. We're saying we need greater yield, but we don't want to go into risk some assets just pay better. Right, it's not because we're like, sure you can, on a probability side, you can throw a hail mary and pray and hope it lands. But that's not how professional investing works and so softening of the rules, I think, is starting to happen. And just like the snowflake that creates the avalanche, but instead of snow, it's capital. So for alternative asset managers, now we're starting to see the golden era where now administration's starting to say. We need to help people have retirements that can not be so concerning with inflation. We need these great asset managers like CAZ and all the, and Dalio and all these other people. We need to help to get them connected to people who need it most. That is what gets me excited. That is what I would get to see, is CAZ is now in his perfect position to enter as one of the leaders in the golden era of alternative asset management. So I couldn't be more excited for you and everyone else listening to the show. Anything else you can add to that?
Well, the story that you just told is exactly the story of why we like the growth of private assets. Because of the fact that we want to own the firms that are going to go manage the 0 trillion, $12 trillion, $13 trillion, because last time I checked, that's a lot of fees. And we want to own those firms because that's what they're going to be able to manage under the new rules and it is going to take a while for this completely to filter through. But there's no reason in the world, and this is why I get really fired up about this. There's no reason in the world why somebody who happened to inherit a bunch of money, who doesn't know anything about finance can invest in the very best alternative assets. But yet, the person who's a very hard working, knowledgeable person, but doesn't make that much money. They don't get to benefit from that, that is just plain wrong. And so for the ability for people to now be able to benefit from that in their 401 K plan. And to own so much of the worldwide economy, 93% of all of the companies in the United States that do more than $100 million in revenue, which is, you know, good sized company, 93% of them are private, they're not public. So somebody is missing out on all of those companies if they're only able to invest in, you know, the public stock market.
On top of that, what you have is this dramatic underweighting of alternatives across the board. So the average institutional investor, and it depends on which survey you look at, has about 20% of their portfolio to 30% of their portfolio in alternative assets, depending on definition. The average high net worth investor has three, the average investor, not high net worth investor. The average investor has less than one. So the ability for that to change over time, it's not going to go from 1-5-10 in two years, but it's going to continue to shift. And we want to have that tailwind at our back, to be able to invest in the growth of private assets, and to be able to provide the opportunity for investors to invest in so much else that's less correlated to this very highly concentrated Public Market.
Other statistic, 46% of the S&P 500 right now is made up of 10 stocks. That's it. 490 stocks make up the other 54%. So you're not really that diversified when you own the S&P 500. It's really the S&P 10 plus 490 that make up the other half. That shouldn't be the way that investors are forced to invest. Let's give them the freedom to be able to make the decisions that they want with their capital, with good guidance. With good vehicles that are truly institutional quality, that can allow them to grow their wealth over time in a way that they've never been able to do before. So very excited about it.
Very exciting. Well said, Christopher, I love that. You know this, this is something cool, and I was excited to learn this about you. But CAZ called the Subprime in 2007 so you talked about The Big Short, you are also part of that, not directly, with, I don't know, not suggesting that, but we're saying you were part of that thesis of, you saw that coming. So you call that in 2007, banks post crisis in 2010, GP stakes in 2015, and, of course, sports. So what signals in the market today are you guys watching that fund managers in that are listening around the world, in 190 countries, what should they be building in a position right now. Just from your opinion, not financial advice. What kind of things are you guys looking at?
The main core themes for us right now revolve around, really, five areas we've already talked about. Some of them, you know, the growth of private assets. That's GP stakes, cord-cutting, that leads us to professional sports, energy, which we were talking about for the last couple of years. You know, I'm in Houston, Texas, been around the energy business all of my life, and in my 35 year career, I've never seen a better risk/reward than we have see right now in energy of all types. All different kinds, traditional fossil fuels to nuclear to any type of energy, we just are not going to have enough to meet all the demand that's coming in the future. And we were saying this for years and making a lot of money in it for for the last several years, without the fact that we now have the Strait of Hormuz closed and the conflicts that we see in the Middle East. So we are very much all in on energy, and we think that is a total seismic change over the next decade that we're just going to have to keep building more and more capacity to be able to meet the insatiable demand. Not just from Ai, which everybody's talking about, that's true. But it's also just as you have people around the world go from lower class to middle class, middle class to upper class. The one thing that's a definitive is all of them are going to use more energy, in lots of different ways. So we need all of the above to meet that demand, otherwise prices are going to spike dramatically. So we want to own those assets and provide that energy to the world.
The other one that we were talking about long before it became a very important topic here over the last month, is space and defense. Space is the new investment frontier, for sure. You know, in World War Two, we learned, if you do not control the skies over your battlefield, you will lose. Now what it is is you need to control the skies over your Battlefield, but also the space over the sky over your Battlefield, otherwise you will lose. And so SpaceX has changed everything, and the ability to commercialize space is dramatic.
Then we have defense, all of which is front and center because of what's happening in the Middle East right now, the way in which weaponry is built is totally different. The needs of militaries around the world are totally different, and because of AI and machine learning and robotics and automation. We're able to do some things that are so much more efficient, able to protect people, able to do so at a much lower cost, and to be able to provide things that keep people, in many cases, completely out of harm's way. That obviously, is something that we're a big fan of.
And then last but definitely not least, is the whole world of disruptive technology that can go anywhere you can think it can go, but so much of the world is changing. We were early investors and open AI ChatGPT, we're very early investors and some of the biggest names that are out there in the world of AI, but where we're really focused on is the picks and the shovels, if you will, the plumbing that allows everything to work. And I don't mean data centers by that. I mean things that allow data centers, which, by the way, is energy, to be able to function. But then all of the other things, from electrical contracting to wiring to the other pieces that you have to have in order for this to continue to prosper. Those are the areas that we're focused on. We're still a big believer in healthcare, healthcare for an aging demographic. We're still a big believer in different things from a consumer standpoint, but those are our major themes, where we're spending most of our time these days.
I love that. Thank you. You know we you and I, when we first met, spoke about data centers and I gave, I was telling about a talk that I gave is to say, yeah, we need them. Sure, we need them. Like autonomous driving, I mean, there's a lot that's coming online and now with AI and all those things. The reason why, if it feet, if you're somewhat in that industry, or close to it, it might feel like, where are they? We need them, why don't we have them? The answer is, I think energy, energy is the biggest. We're talking about five mile island, or three mile, or whatever it is, in America, they're turning that on. There's a lot of these old places are turning on because the need for power is so prominent.
And you brought up a great point, which I love, and I'd love to bring that forward, is to say, but here's the thing, we need all energy. And if you're a macro economic nerd like myself, you would know that any third world country, there's two things that are predictable. It's not the only two, but the two strongest trends, one, educating women. Pretty cool. Educating women is one of the strongest trends on getting a country out of a Third World status. And number two, access to abundant energy. Educate, educate women because then they take care of their kids. And this starts to trickle on a cultural and societal standpoint, but also access to energy. I was fortunate enough, I'm not soliciting an investment, was fortunate enough to invest in a company that brought solar power to third world villages. Governments are not going to bring a high powered line, spend $200 million to bring this thing. They don't have the talent in these third world countries to a fishing village of 200 people, they're not going to do it and so these people are without power. One of the best stories, there were so many, there's one about, I believe it was in Haiti. And with that new power, this village bought floodlights. What did it do? It brought in all the bugs and they were frog farmers. And so it brought in all the bugs, the frogs got fatter, they got richer. The other one was bringing they built masks during covid. So the village bought all sewing machines because they had all of this power. And so turning on power is one of those things. So data for us in the G7, data in a lot of those tech trends. And a more complimenting, I know this a little bit different, but then also, more importantly, it just it cannot underscore the importance of how good to GDP growth it is to have access to all types of energy, anything else you can add to that.
No you've got to have, in our view, all types of energy. What matters to us, it needs to be as responsibly sourced as possible. It needs to be as sustainable as possible. It needs to be as predictable as possible. It most importantly, must be there when you need it. It cannot be intermittent power, or you need to have them balanced against each other, but it needs to also be cost effective. Because human beings cannot flourish without energy. It's really, really straightforward. You can't do much of anything in a country in the world without energy. And so if you can be the supplier of that, and by the way, there's a lot of people that exited the world of energy for reasons that are personal to them, they have the right to do that, I'm a huge supporter of freedom. But if capital leaves an asset class for reasons that are non economic, then what it does, it creates a gap. It means you're going to produce less of it and so those that do provide the capital are going to get outsized returns when they are willing to provide that capital.
So you talked about turning on these nuclear facilities, but that's one of the reasons we're such a big believer in small modular reactors, because you can take an entire data center village and basically power it with something that's basically like a box car size, still a long way away. But technology is the solution to this, you need energy to create the technology, which will be the solution to create more energy. So all of it revolves around the same thing. You must have molecules that you can translate into power, that is going to power society to be able to flourish. And we are just really proud of the fact that we're one of the larger investors in the world of energy, to be able to provide that. Not just here in the United States, but around the world. It's a really, really big, big thing for us and fortunately, because we are in Houston, we know most of the major players out there, and it is something that is so inexpensive. I mean, we just invested in something very recently, very high quality asset, very proven. This is not wildcatting in any way, shape or form. We pay 2.7 times cash flow, 2.7 times cash flow. You got a lot of things have to go wrong before you can lose money when you buy it at 2.7 times cash flow. And it was a very predictable business, but they're just not the capital for it, and that has been true. Now prices have skyrocketed, okay, oil will subside from $100 a barrel or wherever it is right now, it'll come down, but that's not what we're investing in. We're investing in a long term supply, demand and balance that's going to be with us for a long time, if not forever. Until such time as you have the ability to replace energy without any cost associated with it, which we're not anywhere close to that, and we won't be for decades, if ever, but that's what we want to invest in. Unfortunately, we have the relationships. The power of the network is indeed the network there, and obviously it's one of our major themes. And we're really, really good at it, too, and we love being involved.
Yeah, that is incredible. You know this, this has been, I am going to be thinking about this conversation for months. You are absolutely brilliant and just an extraordinary human being. I can see why Tony Robbins himself wanted to partner with you, man, you are absolutely outstanding. So before we wrap everything up, and I hate to let you go, but we got dinner. We got to send you home to your family, but you've been very generous. Is there anything else ways that people can reach out if they want to learn more about CAZ Investments, or you or your book, anything at all, final thoughts.
So first of all, thank you very much. It's been, it's been an honor to be here. It's been a lot of fun. I love lively conversations like this, but cazinvestments.com is the main website that's easiest place. Follow us on LinkedIn, we put out a lot of content that's purely educational. It's no commercials. It's purely, how can we add value to people in a lot of different ways? And then ultimately, the book is something that very proud of, it took us a long time to write it. We've received great reviews from not only people that don't know much about private assets but investment professionals, because we get to have really deep conversations with some of the smartest investors that walk the planet today. So obviously we'd be honored if someone would, you know, would read the book. But you know, this has been fun, and I really appreciate you having me on.
Awesome. Thank you, Christopher. So just to summarize everything that we talked about, seek for non-correlation. This matters a lot. It really has helped. It's not the one and only thing, but seek for non-correlation tends to help. The other thing is start with themes and solve problems with allocators. And finally, if you're a fund manager, an allocator, or anyone who has any ambition, look at the 3Rs in high finance. High finance is about trust more than it is about transactions, and when you build your reputation, your relationships and your results, you too will be well on your way in your pursuit of Making Billions.
Wow, what a show, I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.
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