095: Crafting Your Investment Thesis with  Single Family Office CIO - Marco Quevedo

00:00 - 03:05 | Christopher Nelson: You're a tech professional. You are an expert at what you do. You are great at making money. But when it comes to managing money, you are chasing FOMO investments. You're pushing all in on big venture capital deals. You're not sure what to do next. Well, what if I told you that you could learn the way to invest like the ultra wealthy? Stick around for this episode. I'm going to show you how. Welcome to Managing Tech Millions. I'm your host, Christopher Nelson, and I am excited to welcome back to the show, my good friend, Marco Quevedo. Marco is a Chief Investment Officer for a single family office that is worth multiple nine figures. He has been a chief investment officer for single family offices for over 10 years. Before that he was in investment banking and before that he was a tech employee like many of us. So we can relate. Marco's great. We're breaking down. We're in a series right now dealing with architecture. So in WealthOps, my program of how do you actually grow, build, and scale your wealth like a CEO of a multi-generational business, the first phase is architecture. And the architect phase is structured after the investment thesis that is developed by these large family offices. So today, Marco is going to break down for us what is an investment thesis. He's going to break down how family offices work, and he uses the investment thesis quarter over quarter, year over year to drive the business that he runs by managing a family's personal wealth of multiple billions of dollars. And I'm going to be trying to tease out the takeaways for you, because then we're going to be following it up with a couple of episodes to show how you can leverage the same technique to manage your wealth. Remember, wealth managed strategically and with discipline is going to outperform that of just throwing darts, because that's really gambling. All right, hope you enjoy this episode. All right, Marco, welcome back to the show, man. Always excited to have good friends, colleagues, and leaders in this space to join us and have deep conversations. So today, one of the things that I see out there with many technology employees who've come into some significant wealth, $3, $5, $10 million is, They go out there and I see them more placing bets and being investment led, like chasing different investments versus actually having a thesis for their portfolio. So I thought it would be relevant to have you on the show as the chief investment officer of a single family office and having done this for multiple years, right? You drive this business that you're in from an investment thesis. So let's sort of kick it off and describe to people at a high level what an investment thesis and why it's so important when you're managing a larger portfolio.

03:07 - 05:28 | Marco Quevedo: Yeah, I think what you're describing is fairly common. You know, from my seat, what really drives a thesis that a family or an individual really works towards is first an internal reflection around what are your goals? I think starting with goal definition is really important because as I'm sure you're well aware, and many of your listeners are well aware, there are a lot of different investment opportunities that are out there. And they all carry different features, if you will. But one of the primary features they carry are different risk profiles, and different reward profiles. And so understanding what your goals are, what are you trying to achieve, is really where I would start. Some people are interested in generating significant capital appreciation. Other people are interested in a current income type of return profile. Other people are more interested in certain tax characteristics or, you know, philanthropic goals. Whatever your kind of goals are, I think is really where you need to start. And then from there, you figure out what types of investments, what types of risk profiles fit my goals. And that's kind of the lens that I would approach it from. So an investment thesis simply is a methodology or a set of strategies that ultimately allow you to achieve the goals that you set for yourself. And it's one thing to be thoughtful around defining your goals. It's another thing to put it on paper, which I think that step by itself is more than most people do. But it's even another level beyond that to remain disciplined to your investment thesis, because as you have capital to deploy, people often start seeing opportunities, their friends, their family, their colleagues, or this or that. Invest with me here, invest with me there, and to remain disciplined against the thesis that you've created for yourself, which behind the scenes support the goals that you've set for yourself. is hard for a lot of people to do. And so I think that's really kind of how broadly speaking, I think we should frame the conversation here. The thesis is really a tool that allows you to achieve the goals that you set for yourself, but it has to start with the goals.

05:28 - 06:25 | Christopher Nelson: I think that's right. So as a family, right, you come into some wealth and you plan out, okay, because I'm sure you set a time horizon, right? And I know this is what myself and my wife do is we look at one, three, five, and forever. That's sort of how our timeline is. And based on that, we're going to have goals that say, okay, we want this much income, right? I've worked hard to replace my paycheck with a level of income. Now we're trying to replace her paycheck in the next five years. And then we also have, um, you know, capital appreciation goals. We also have some philanthropic goals. Those are prioritized. And then what I'm hearing you say is then from each of those, you start then crafting and saying, okay, what then are the investments that would then help us achieve those goals? And that's what really sort of starts getting drafted out into what you would call an investment thesis. Did I get that correct?

06:26 - 07:25 | Marco Quevedo: Yeah. I think that's right. This thesis that we're talking about here for someone that fits the profile that you're describing is a living, breathing document. In the family office world, it's more referred to as an investment policy statement. which is a document that a chief investment officer or an investment team will create after speaking with the family and understanding what their goals are. And the investment policy statement slash thesis is a living, breathing document. You know, as goals change over time, the thesis changes. As you know, families grow and contractors, kids involved in what not goals change and the thesis changes. And so I think it's important to be flexible in what your thesis is. And as you noted, having time horizons attached to certain goals also kind of helps frame. What are the right investments for me, given the goals that I have for myself. And so I think that's a good way to discuss it. Right.

07:25 - 08:35 | Christopher Nelson: Because it sounds like you sit down and you draft this investment policy and you start putting together, you know, okay, here's, here's where we're going to start allocating some capital. Obviously you're, you're starting from somewhere. I'm sure you probably walk into a scenario where you're taking over a family office. You're recrafting, reshaping a policy document, assessing where you are, plan it forward, and then going back to the living breathing thing and what I've. What's sort of the marriage or when I think about myself as somebody who's running my own solo family office, if you will, too small to be single, right? I also think of it as there's a business plan aspect to it too, where I'm trying to break down, okay, if this is what I'm trying to achieve for this year, then I have to look at quarterly Okay, where am I, you know, and what are the steps that I need to take sort of quarter over quarter, it as far as what I need to execute, and then also measuring against where I am as well. Is that something that you're executing on a daily basis in the family office?

08:36 - 10:06 | Marco Quevedo: Absolutely. I think what you're describing is generally, you know, portfolio monitoring. So it's one thing to have a thesis and then execute against it and make investments. But it's equally as important to monitor those investments and make sure that they're performing in the way that you expected them to, and helping you achieve the goals that you had ultimately initially set for yourself. And if they're not, find ways to try to adjust the mix of investments in your portfolio that better achieves your goals. Now, depending on the types of investments that someone is making, it may or may not be so easy to adjust quickly if an investment is not meeting the goals that you set for your portfolio. And so that's an important consideration also when thinking about what is my investment thesis? Things like liquidity. Is it a third party manager that's managing this strategy? Do I know them? Can I get access to my capital easily? Are there prepayment penalties of some sort? Lockup restrictions and other features that certain investments have. It's important to understand where you're placing your capital and what the restrictions are around that. Because in a scenario where an investment is not meeting your goals, and you want to take some sort of action, it may or may not be so easy to do that, depending on the investments that you've made to help you achieve the goals that you set for yourself.

10:06 - 10:45 | Christopher Nelson: So with that in mind, taking a step back, when you're looking at a portfolio in its entirety, and you're thinking about an investment thesis slash policy, do you start looking holistically and saying, because I'm trying to think about a non-complicated way to ask this, because I know you can go deep. I'm not looking to go deep. I'm looking to start and say, do you actually start with broadly, you know, Hey, we want to look at this much liquidity. We want to look at, uh, you know, these broader allocations first, before you start creating sort of mini portfolios, walk us through a little bit of what that looks like.

10:48 - 13:41 | Marco Quevedo: I think that's true. You know, thinking about liquidity is important. And again, it comes back to your goals. If my goal is to buy a vacation home in two years, having access to liquidity to be able to do that is an important part of how you're planning to be able to invest that portfolio. If you have some capital set aside to fund your lifestyle, and you don't have any big needs for capital in near term, then liquidity might not be as relevant of a consideration for you and that might dictate the types of investments that someone is comfortable with or not. So I think liquidity is an important factor and then portfolio construction as a whole is an important factor as well. I want to allocate so much to public equities, so much to private investments, so much to real estate and building a you know, pie graph in your head of the different asset classes you could allocate capital to is one of the first things that many people do. And then within each of those buckets, you have an opportunity set that's representative of your sort of pie or slice that you're dealing with within your allocation. And you evaluate the opportunities within that specific slice, and how well or not well they meet the goals that you're trying to set for yourself. So Diversifying across different time horizons, different liquidity profiles, different asset classes, geographies, and really I think another lens that people should focus on is where is your particular set of expertise and comfort. important to be able to feel comfortable in the investments that you're making and be able to feel like you understand the risks around what the investments that you're making are. So sticking with lanes that are familiar to you and you're comfortable with is important because when you're looking at new opportunities, most of the time people try to show you all the good things about an opportunity, how you're going to make a bunch of money and why but they don't do as good a job by design telling you how you might not make money or where the skeletons are buried and that kind of thing. And if it's in an industry or a business that you're already familiar with, you kind of know what questions to ask along the way to kind of help you uncover whether things are as they seem or not. And so I think that's an important thing to keep in mind as someone is thinking about designing an investment strategy or thesis and what types of investments or opportunities make sense for them. It's not just I'm gonna put 30% here 30% there and 40% there it's you know let me think about where my expertise is where my comfort level is in other ways that I can add alpha or value to help affect the outcome in a positive way for me along the way as opposed to just being along for the ride.

13:41 - 14:39 | Christopher Nelson: Right. And I know this is where I think some technology employees who do have discipline in the venture area, who have expertise in the venture area, I know for some of them, they have done very well because they're able to go into some of these companies at Alpha where it aligns with some of their expertise. I know some go-to-market guys who can help accelerate go-to-market activities, and then they're able to participate in that. So I think that's huge. So what are then some of the questions you ask? So if you're going from, you know, hey, we're looking at the portfolio, we've now aligned with our goals. And now we're trying to sort of ask some questions to say, OK, for these goals right here, how do we allocate, you know, this section of the pie? Help us understand, like, what is some of that? What are some of the criteria or decisions, questions that you would ask to start leading people from the goal to what are the investments?

14:41 - 17:01 | Marco Quevedo: Yeah. So let's just take a specific example. I think that might be the best kind of pace forward. Let's say someone has a goal of replacing their paycheck with income from their investment portfolio. That's their primary goal. And so that person would be seeking opportunities that generate some sort of current income to replace their paycheck that they get every month or two weeks or whatever their situation is. And so thinking about things like, this opportunity is projected to return an 8% or 10% kind of annualized cash on cash return on my investment. What are the things or ways that could go wrong? I like to think about things that could go wrong first, before I think about things that could go better or right. You know, I'm about thinking about risk and the areas that I really need to understand. And so I think that focusing there first, you know, how can I not achieve these results? What needs to happen or go wrong in order for this to be a bad investment for me and really making sure I can quantify that risk and assign some sort of probability to that outcome happening. And if I can't find a reason to not make an investment, then I start to think, okay, maybe there actually is something here because all the holes I thought I could poke in this Either I wasn't able to do or I was find a way to get comfortable mitigating those risks in my own mind. And so I think once you kind of get on that path, it's easier to start to understand whether something makes sense for you or not. If you're able to. first start from the perspective of why shouldn't I do this? What are the things that I might not see right in front of me or that could go wrong? Let me ask my friend who's an expert in this space or speak to the sponsor about some of these questions I have and try to figure out why I shouldn't do this? And if you can't find a reason not to do it, then maybe at that point, you can start thinking about reasons that you should do it and you should proceed ahead. So I think that's kind of how I generally approach some of these opportunities that we take a look at is thinking about it from the what could go wrong first standpoint and then going to what could go right.

17:01 - 18:52 | Christopher Nelson: And let me ask you a question because I also think. Because I think what you answer there is incredibly insightful and very important for people. I think there's also a little bit of a pre-step too, especially in this scenario. And this is something that I had to learn the hard way too, is when I started getting into this space, I was seeing, well, number one is I had a target. I said, okay, I want to look for things that are eight to 10% cash on cash return. Because then I was able to backwards calculate and say, okay, what's my paycheck? If I'm also getting tax efficiency because I'm doing real estate depreciation, I can actually make 30% less. And so then I had my target, but then there were some things that I learned the hard way, which is, you know, a value add deal where the sponsor is incented to exit the property in an accelerated timeframe. Like if they can accelerate, if they can get out in three years versus holding it for the five years, that is also, counter, our incentives aren't aligned because I'm looking for something that's more of a long-term hold. So I do think that when people are looking for, okay, what fits in my box, if you're looking at a, I really want to replace my paycheck, you want to really look at what's the risk for the amount of cash on cash return. So I know today I would much rather take a 7% cash on cash, lower risk, longer term hold than a 10% higher risk. And then they're exiting the property in like, let's say three to five years. So that's where I feel like there is a little bit of, how are you choosing the right investment before you actually go into your funnel of, okay, let me see, what are the reasons why I wouldn't make this investment?

18:54 - 20:23 | Marco Quevedo: Yep. And that's consistent with what we spoke about earlier, you know, as someone who's investing with a sponsor, that sponsor is generally the one who has control over the investment and the major decisions around that investment, refinancing decisions in the case of real estate or exit decisions, you know, so having someone who has a history of doing what they said they were going to do is important because in the scenario you mentioned, If you're getting your capital back sooner than you had initially hoped for, the challenge then becomes, I need to find another way to invest this capital. And the environment two or three or four years down the road from when you initially made your investment might be completely different. and achieving an 8% cash on cash return then might come with a completely different risk profile than it was when you had made the investment earlier on. And that's just not something that most limited partners or people that invest with sponsors have really any sort of control over, but that's part of the calculation that you make when you decide to invest with a sponsor. Generally, there are some positives, right? That sponsor has expertise in this area that maybe you don't. They have relationships with lenders and brokers and can get off market opportunities that you might not have access to and things like that. So you kind of have to weigh the things that the sponsor provides for you and the benefits against some of the risks like maybe I get my money back sooner than I wanted because I don't control that decision.

20:23 - 20:51 | Christopher Nelson: So, you know, one of the things that you talked about is in your framework of okay, um, Why do I not want to make this investment? Right. What are, what are some of the key things, right? You look at the sponsor, you look at sort of the underwriting, but what are some of the things that, you know, you, what's your mental checklist that you go through as you're sort of, I think of it as a funnel, right? It gets, it gets narrower, right. As you're throwing out more and more opportunities, it gets refined.

20:53 - 25:03 | Marco Quevedo: There's a long checklist. I think it generally is, you know, not the same for all investments, but the people that are part of the investment, whether that's other LPs that are investing alongside you and certainly the sponsor, if there's a sponsor in the, in the transaction and their track records, I think is very important because ultimately, like we just talked about, you're mostly dependent on that person for the outcome of your investment. So their track record and their ability, I think are very important. Things like tax considerations, I think, are very important. So those things are, I guess the things I'm listing are things that are more individual and specific to that particular investment. But then going back to the first part of our conversation, thinking about how this current opportunity I'm looking at fits within my existing portfolio? Do I already have a lot of real estate risk? Do I already have a lot of investments in a particular geography and this one is in that same geography? Have I already achieved my goal of the replacement of my paycheck and now I have some flexibility maybe to do some other things? So it's not just about, let me think about this particular investment and the merits of that investment or the risks of that investment, which is certainly a part of it. But it's important to think about it holistically as well in the context of your portfolio and your overall exposure. And so the list, the checklist is, you know, I think, broadly speaking, focusing on the merits of the particular investment and the risks associated with them, liquidity, time horizon, risk profile, regulatory risk, you know, a macro risk, interest rates, whatever the things are that might affect kind of that particular investment, but then also thinking about it from the perspective of the rest of my risk exposure and the rest of my portfolio. Am I over allocated to this area already? And maybe this deal ahead of me is really attractive, but I'm already over allocated. Do I want to proceed with this investment or not? That also goes back to this question of remaining disciplined to your strategy. If you've designed the right thesis and plan to help support your goals, and you're confident around that, you should use that as the driving force behind what decisions you're making or not, even if something might look appealing or attractive, but it doesn't quite fit within the goals that you set for yourself or the plan around that. And maybe there's a reason to be flexible on your plan and your goals to allow for, you know, something that doesn't quite fit within it. But that's the decision that each individual person makes. And that's a muscle that I think people build over time, as they get more exposure to different deals and different outcomes. And you kind of you get different reps around these things, you figure out, are my decisions good? Can I be flexible in my plan, because I've generally made good decisions, and it's worked out for me, you kind of just start to figure that out over time. So I think experience and getting reps in is a really important part of this also. And you have to expect that not every investment is going to go as expected, you're going to have some in your portfolio that don't work out for one reason or another. And I think it's important to do the post-mortem afterwards. What can I learn from this experience? What did I think was going to happen that ultimately didn't happen or happen differently and why? And then being able to apply that knowledge and those learnings to future decisions that you make. I think it is a step that most people don't do. They make their investment, it either works or it doesn't, but they don't take the time to reflect and think about why did this work? Where were my assumptions correct and where were they wrong? And what can I learn from this experience to apply to future decisions that I make to have a better outcome the next time? And continuously try to reduce the amount of times that you're wrong and maximize the amount of times that you're right.

25:03 - 25:58 | Christopher Nelson: Well, and this is, this is one of the things that I advocate for, especially for, you know, I know high net worth technology employees, there is the opportunity to become your own wealth manager. But as you stated, like anything else, it is a skill, you have to build reps, and the more that you can create your own log, and I literally went through this you know, for 2024 is to write down all my lessons learned where I start with, what did I think was gonna happen? What actually happened? You know, what changed in trying to really get to those details? Because I also think that there's a value in being able to pass that on. If I'm able to share that transparently with my kids, here's some of the investments you may have been aware of, or now as they're getting older, they can be aware of, you know, let them see that type of thing. You know, there's a hope that they can actually benefit off of some of my bad reps, right?

26:01 - 26:17 | Marco Quevedo: Absolutely. I think that makes complete sense. And in my experience, I'm happy to hear that you do that. I think you're in the minority of people that take the time to do that. And I think those that do in the long run generally have better outcomes than- Well, because I think many people,

26:18 - 27:06 | Christopher Nelson: You know and I know you and I both sports fans right so we could throw in a little sports analogy but they they they're always trying to play one side of the ball right there it's you know I mean it's like one of those you know high power basketball teams that's all offense no defense. they can lose more than people think because you have to have the defensive side. And I think in investing, there's so much focus on, oh, hey, I got this, you know, 10 bagger over here where the strength of somebody's portfolio is really how did they not lose money, right? That's the strength is really that strong, firm defense to be able to support a lot of and keep all of those wins and whether that's capital appreciation or income inside the portfolio.

27:08 - 28:25 | Marco Quevedo: Yeah, I totally agree. You could have a lot of really great positive outcomes in your portfolio. But if your risk profile and the investments that you're making aren't structured the right way, you're over allocated. It's a higher risk than you thought. It really only takes one or two bad decisions potentially to wipe out all of the success that you've had in the, you know, before that. And so that's why I think it's so important when you have the opportunity to learn. from an investment that didn't go well, but you survived it. It wasn't a total wipeout. It wasn't a big part of your portfolio or whatever the case was to have the discipline to go back and say, what was I wrong about here? What did I not see? What assumptions did I make that I was wrong about? Or was it that something happened, I couldn't have predicted, you know, like, am I the one to blame here? Because I didn't see something? Or was it just unavoidable? Because, you know, the sponsor got hit by a truck. And I just couldn't have done anything about that. You know, so I think it's important to try to figure that out and build the muscle to do that. And then take notes or file it away in your brain or do whatever you have to do to be able to not forget those lessons and continue to apply them in the long run as you build your portfolio.

28:25 - 29:34 | Christopher Nelson: 100% man. That's so good. In fact, I was thinking there could even be an episode because I was thinking about this the other day as I know as I had a couple years ago, I had a venture capital investment that, you know, didn't work out. But all of a sudden, I get this, you know, statement back. And I can't remember the exact name of the form. But as I was sharing it with my you know, tax strategists that are like, okay, great, this is a capital loss, like, okay, you know, and as a technology employee, I just had a ton of equity compensation was overexposed in the stock, okay, now I can take some out. And now that wipes out the capital gains, like there is, I think that when you do have enough assets, there are way, like there's, there actually, you get the opportunity for a draw, right? All of a sudden it turns into soccer where it's not just a win or a loss. You actually have a draw where, okay, this wasn't what I thought it was, but I actually now can add this, you know, negative asset on my balance sheet and I can wipe out some of these taxes. And over time I can try and mitigate that, that loss. So it's not as big of an L. I think that's an important thing that people understand.

29:36 - 30:42 | Marco Quevedo: I totally agree. And that comes from feeling the pain of a loss and taking the time to reflect, well, how can I maybe turn this into a positive and if you, you either I think you're one of two people, right? You either have a network of people around you who have gone before that you can lean on and ask questions like, hey, I had this loss in my portfolio. Is there any way for me to take advantage of that or things I can do to not just have a complete wipeout, but maybe write it off against my taxes or do something else to leverage that loss into a benefit. So you have your network that you can lean on. And I encourage people to do that. Or you don't have that network and now it falls on you to be disciplined enough and have the desire to want to figure that out on your own. And the good news is that there's so many resources available for people with the internet. chat GPT, and everything else too, I think, with not that much effort, be able to answer some of those questions on their own, if they don't have a network of people, advisors, or whatever it happens to be that they can rely on for that sort of thing.

30:42 - 31:26 | Christopher Nelson: Yes. And I think, I mean, this is what got me through, allowed me to really start turning my portfolio into a business was really the network and continuing to grow that, getting insights, information, you know, from people like you. Thanks, bro. Yeah. I appreciate that. So one of the questions I have is like, what, how do you decide between like, when you're thinking about, you know, getting back, you have the thesis, you're placing the investments. What are some of the decisions that you have between, you know, we're going to actually directly own this asset and manage it ourselves versus we're going to go through some type of a general partnership or we're actually going to invest in a fund. Yeah.

31:26 - 34:54 | Marco Quevedo: I think, so there's several thoughts. One of them is your area of expertise. So by way of example, at the family office, I work for a type of deal that we'd be looking at is the acquisition of a business that's like a lower middle market private equity target. So to be more specific, let's just say it's a distributor of some sort. And so do we have expertise in the distribution business? If the answer to that is no, then we might try to find a partner who does have that expertise. And maybe we're the ones who are providing the capital to make this acquisition, but the partner is someone who has the operating experience, the industry experience to be able to run that business and be able to really make it grow and execute our thesis. And that person may or may not show up with capital to the table to invest in the deal. But they might, in exchange for their capital, if they don't have any, earn some sort of economics, whether it's a promoter, some sort of, you know, equity or whatever the structure ends up being to align incentives, which, as you noted earlier, I think is really important, and be able to have a positive outcome for everybody. So that's one decision point, do we have expertise in this area or not? Can we impact the outcome beyond just our capital. We have a network of people in this space or we have experience here before, whatever it happens to be, beyond just the check that we can write, I think is one. Two, I think, are there fees attached to the deal? You know, if there's a sponsor involved, what is the fee structure? Does it incentivize them to achieve the outcome that I want? Is the fee structure they're looking for in the market or not? Can I find a way to reduce the fees in some way? Fees are everywhere. They're very common. And that's just a part of our industry. Some sponsors are worth it, and some aren't. And I think it's important to think about your return on a net of fees basis. And so understanding what the fees are, how they're triggered, and when and what those fees do to my overall return profile on a kind of a net of fees basis is an important thing too. That's another element of looking at deals and how you think about making a direct investment in an operating company, for example, versus maybe investing in a fund of some sort that invests in that industry. Of course, it goes without saying that investing in a fund, most of the time you're getting broader exposure, you know, you make a commitment to a fund, and that investment that you make gets exposure to 10 or 20 or 30 different investments within that fund, versus investing in more a single direct opportunity, you're getting single company exposure. And that is a different level of risk profile. And so it goes back to what are your goals? What are you looking to achieve? And how am I going to do that? And where's my comfort level? So I think it's important to tie all of the things we're talking about together. But the North Star for anybody who's trying to make these decisions are what are the goals I'm trying to achieve and kind of always keeping that in the back of your mind as you're making decisions around whether I should be doing something or not and how I should be going back.

34:56 - 36:18 | Christopher Nelson: especially I think for the smaller, for the solo operator, right, is really trying to also understand area of expertise. And then, you know, what is going to be my time commitment to this particular endeavor as well. I've definitely seen people that over rotate and start building out portfolios of single family homes. And then once they get to a single family home, 10 or 12, and they're trying to do all the property management themselves, they can unintentionally tip over. So I think part of this, you know is really as you're looking at your portfolio and this goes back to I think the goals you want to make sure you have a goal for your portfolio of you know how are different things going to be staffed and who's going to do different level of of work because you also don't want to be so focused on you know because I also think this has to do with uh you know, understanding different types of investments too. I think some people have a belief that I have to have total control over everything, where the reality is, there are a lot of great fund operators out there that have been around for years that, you know, you can deploy again, a nice allocation size inside of a smaller portfolio of your own that can give phenomenal returns. Um, but you need to understand who those are. And again, it's, it's looking at it holistically.

36:20 - 37:39 | Marco Quevedo: And part of that, you know, thesis that you would be describing in this person's case is, do I want to go lay on the beach in Mexico and let my portfolio work for me? Or do I want to have an active role because I do have an expertise and I think I can get a better outcome for myself leveraging my own experience. Different people want different things. And if your goal is to go lay on the beach in Mexico, while your portfolio grows, that strategy or that goal, much more lends itself towards you investing in funds and sponsors who are really more responsible for their day to day work and oversight of that investment. And you receive your monthly or quarterly, you know, update or whatever it happens to be. And you really don't have that much involvement or control over it. And you're paying them a fee to be able to do that on your behalf. And if they're good, and maybe they're worth it to allow you to go lay in Mexico, if that's what you wanted to do, versus if you're buying an operating company, ultimately, that buck stops with you. And whether you're involved on a day-to-day basis or you have a CEO or a management team that's executing for you, ultimately it falls on you. And that is a level of responsibility that some people might relish and really want. And other people might not, again, depending on what your goals are.

37:40 - 37:50 | Christopher Nelson: So now we've, we've stood up, we have our investment thesis where we're managing our portfolio. What are, when you think about annually, how do you make sure that you're on course?

37:53 - 41:52 | Marco Quevedo: So, I think, as we noted earlier, monitoring your portfolio is a very important part of. your investing journey. It's not like it's not just letting me make the investments. That's the sexy part. That's the fun part. Everyone's always wanted to make the next investment, you know, and be able to go tell other bodies, hey, I made this cool investment in X, Y, or Z thing, right? It's not as sexy, not as fun to monitor that investment and figure out if it is achieving my goals or not. And so there's several ways you could do that. I think in the family office world, you'll find a combination. Some people still do things in Excel, they have a portfolio spreadsheet, they track performance, they have their marks, or what different investments are worth, they track their returns, and that's how they do it. There's also software that you can get access to that does it for you. And it's great software, but it's not cheap and maybe not appropriate for, you know, the five or $10 million investor, because it could cost $50 or $100,000 a month for some of these, you know, software packages. So I think finding the right balance of something that works for you to be able to allow you to track your portfolio and some investments that you make are very easy to track. If your investment portfolio primarily consists of public equities, you go on Yahoo Finance or Google, you look up the price of something and you can very easily see how it's doing. Other investments that you can make are not so easy to see. I made this investment in this multifamily property. Is it worth a million or two or three? Well, there's not a liquid price I can go look up every day. So as you're thinking about tracking your portfolio, certain people have different ways of doing so. A lot of people keep their investments marked at cost. They don't mark it up, you know, based on information that's not perfect. Other people are much more comfortable finding a mark. They'll go, you know, in the case of a multifamily property, go float it by a broker, ask their opinion of what it's worth, and then, you know, take that information and use it to mark their, you know, their investment in their own tracking, even though that's one person's opinion. Maybe they take three people's opinions and take an average. Everyone kind of has their own comfort level. But I think staying in front of your investments, whether it's one that you own and control yourself, checking in with your CEO, your management team, or whatever the case is, or it's through a sponsor or a fund manager, getting regularly quarterly updates, participating in the AGMs or you know, staying on top of it, it is sort of like having a job in a certain sense, keeping up with your portfolio. And as your portfolio gets larger, the maintenance of it and the keeping up part of it becomes that much more cumbersome as well. So I think that's another thing to consider as someone's building their portfolio is do I put 1% in 100 different things. And now I'm very well diversified, but I have 100 things I need to keep up with. Or do I do 10% in 10 different things, which means I'm more concentrated, potentially, which could maybe mean some different, you know, return outcomes, maybe a little more concentration, you get a little bit more juice. And it also means I only have 10 things to follow instead of 100. Right. So I think, you know, if you have a full time job, and you have a lot of time to monitor your investments, constantly thinking about concentrating them a little bit so that you don't have 20 or 50 or 100 different ones that require your attention is something that you should consider as well. So I think in summary, it comes down to each individual's comfort level, but whether it's in Excel or some other software tool, I think it's important to be able to have the ability to track and follow your investments on a regular basis and have access to the people who are ultimately controlling the outcome of your investment in the case of a sponsor or fund related type of investment.

41:52 - 43:35 | Christopher Nelson: Yeah, no, that's great wisdom, Marco. And I think that out in the market today, I think for solo investors, especially if you have sort of a portfolio that's made up of smaller portfolios. So for myself, I know all of my public equities, right? I have them all in a single brokerage so that I can then do all the tracking from there. And then I can pull it in. Now they have consolidation tools that you can pull in that are at a very, you know, $90 a month type price point where you can also then list all of your private equity investment, connect that with the bank accounts, track distributions. Then you can go in and monthly put in your, your own, um, you know, uh, what you're hearing from the sponsor, if you want to adjust valuation and so forth, you can go make those adjustments yourself. So I'm very optimistic that they're creating a nice set of tools for the solo family office. And, you know, the other thing though, that I think you touched base on, right. Is, is when you think about how you're allocating. This goes back to, you know, how much work do you want to do in your portfolio to manage it? And then also how much work do you want to do to monitor it? Because there is, there's a give and take on both. And then, you know, so I do think allocation size is so important. And this is where you can also look at, you know, different types of funds because sometimes you can actually have a larger allocation size, but you're getting the diversification for the fund. So this is where, you know, this is the fun part. I think of investing too, if there's a lot of ways to, you know, to, to mix the salad and get different, get different things in there. Yeah.

43:36 - 44:46 | Marco Quevedo: Yeah. Yeah. It's hard for someone to be an expert in everything. Right? And it is good discipline to have diversity in your portfolio. So, you know, building off of what you were saying, if I have expertise in real estate, I might be comfortable making individual decisions around different multifamily properties or industrial or hotels or whatever it happens to be because that's my world. But I want venture exposure also. I'm not so good at analyzing pre-seed or early stage businesses in those markets. So I'll allocate that decision to a fund manager. I'll pay them a fee to do so, but they're experts in the space and they'll have 20 or 30 investments within their fund. So I'm getting diversification that way. So I can, from a portfolio construction standpoint, feel like I'm getting exposure to venture in this example, without necessarily needing to feel like I have an expertise in that space. And I can get exposure to multifamily or real estate. And I do have an expertise in that space. And I'm comfortable managing that part of my portfolio on my own and not feeling like I have to pay a fee to a third party to do that for me.

44:46 - 45:16 | Christopher Nelson: And so when you think about, you know, you know, and I see now the vision, right? And I'm executing some very similar strategies myself where, okay, here's what I own. Here's what I have different managers doing. What is then your cadence for checking in with your, let's say your direct investments, things that you own or closer to versus things that you are you know, leveraging operators on, you know, sort of monthly and quarterly. What is, what does that checking cadence look like for you?

45:16 - 48:11 | Marco Quevedo: I think in general, we're more of a quarterly check-in type of a firm that's really where we're comfortable. I think we're closer to certain sponsors or investments in our portfolio than others. That's just the reality. And so maybe for certain investments, we're in touch with them on a more frequent basis and quarterly. But generally speaking, most of our portfolio has some sort of quarterly update. Some are better and more robust than others. And some are just a one page, once a quarter PDF of a capital account statement. And so where. needed, we're not shy about reaching out to sponsors and other people in our portfolio about, hey, can we schedule a 30 minute call to do a broader update on this topic? Or, you know, we got the capital account statement last quarter, but we didn't have a check in. And so this time, we would like to have a check in with you. So we're not shy about reaching out to people and trying to get updates on things where we think relevant and we're also not shy about we don't view the relationship as one of I write the check and then I try to pull information out of you from then until the exit. If we feel we can be helpful along the way, we'll proactively reach out to a sponsor or a fund manager and say, hey, we came across this direct investment opportunity. We didn't think it was for us because we didn't have expertise in this space, but we think it could be an interesting fit for your fund. Take a look and maybe we can co-invest alongside you if it's something that you feel really good about and we can leverage your expertise in this space to answer some questions that we had. And so we try to make it more of a, how can we be helpful along the way kind of relationship and not just, you know, we wrote you a check and now you have to perform. So we try to keep it a little bit more two way street than just a one way street. So we're not shy about checking in, but generally I think. you know, once a quarter is the right cadence most of the time, think longer than that. And things can change without you knowing about it. And I wouldn't, I don't like being surprised. And more frequent than that, you know, sponsors and managers and whatnot are busy. And a lot of the time, they don't like getting on the phone with someone who might not be their largest investor. And they kind of view it as more of an annoyance or a nuance than anything. So I think really, that's an important question that you might ask a new sponsor that you're working with. Is it cool if I reach out to you once a quarter to get an update or once a month if that's your comfort level? And try to establish that as the ground rule that you plan to follow so that when you do that, they're not surprised by it. And if they have a problem with it, hopefully they mention that to you up front and then you can make a decision around, well, does this work for me or not? That's good.

48:12 - 48:33 | Christopher Nelson: When we're thinking about going back to the portfolio thesis, right? So now you're managing it, you're monitoring it. When, what are scenarios where you may say, okay, we actually now need to go back and reboot, you know, especially when you're thinking about market volatility changes, like what are things that would drive you to go and make a comprehensive change to your thesis?

48:35 - 51:40 | Marco Quevedo: Yeah. I mean, I think some of those things are more macro driven, you know, interest rates are changing, or there's a pandemic or, you know, something that you might not necessarily be able to control, but that affects your portfolio in some way. And you have an opinion about how it could affect your portfolio. So you kind of think about things like that, more macro driven type of considerations. And other times they're more personal in nature. Hey, you know, the family that I'm working with, someone had a new baby. And so now there's, you know, considerations of a new person in the family. Their time horizon is different than everybody else's. There's estate planning considerations maybe we need to make, or there was a death in the family. And now, you know, the person or person who's inheriting the capital has a different risk profile than the initial person did, for example. So that would require a shift in focus or strategy or whatever it happens to be. So I think those are some things that you kind of can look towards around drivers for reasons that you might need to change. But I think as a matter of practice, it's good discipline to review your thesis or your investment policy at least on an annual basis and say, this is, you know, what I was doing before a year has gone by. Are my goals still the same? Maybe they're not, you know, maybe I have enough money to replace my paycheck and then some, and I'd rather allocate some of that extra capital towards more risk oriented capital appreciation type opportunities. versus, you know, extra cash coming every month because I just don't have a need for it. So I think, you know, your situation changes. And so while you spend a lot of time developing your investment thesis and understanding what your goals are, it's good discipline to review that every year. And I wouldn't expect someone to need to do a wholesale change in their thesis every year, maybe, but that's generally not, I think, something someone should expect. Maybe it's every five years you make meaningful changes to your thesis, given what's happened over the last five years. So you think about things that happen in the world that aren't directly related to you and how they might affect your portfolio. And then you reflect on things that are happening closer to you, that maybe you do have a bit more control over and how they affect your investment portfolio, and then you make adjustments accordingly. And the good news about being sort of a solo, smaller family office is there's a lot of flexibility around your decision making process, and you have the ability to make quick decisions if the circumstances require it. So being able to take advantage of your flexibility is a way that as a small investor, you can have an edge over the rest of the market. It's tough to find where your edge is. Areas that allow you to generate alpha to beat the market and flexibility is one that's a little more intangible, harder to grasp, but it is absolutely an advantage and one that people should not be afraid to take advantage of if they're in.

51:41 - 53:19 | Christopher Nelson: Marco, dropping wisdom, man. I know we just dug right into it, but I got so much out of this and I think it's so important, right? I think you covered the basics on, it starts with goals, goals then drive you to your thesis of what investments are going to help me meet those goals. And then we walk through, you know, this, this, you know, nice section I think of the program where you really sort of walk through, how do you actually then take that thesis in the, the ideas of what you want to achieve and start thinking about the investments to fill that. to fill that portfolio to actually help you get to execution. We touched on a few things like allocation size and other things, but ultimately talking about how you manage the portfolio, checking in quarter over quarter. And then this thesis, and you said at the beginning, and it's so true, living, breathing, document, right? This thing is not meant to be written once you put it on the shelf, you write it down. And you manage it like a business plan year over year. And then you go make some updates to it, republish it, and stick to it again. And the one thing that I think And the one thing that I think is just gold from this conversation that, you know, just, again, I find it very validating is just the fact that like, write down all your lessons learned and I am committed, like I'm doing it electronically. So it truly is something that I can share with my family, pass on, share with other people, because ultimately it is in a network. It is in this, this idea sharing and information sharing that we all are able to get better.

53:21 - 54:36 | Marco Quevedo: And don't sell yourself short. You know, it's important to be honest with yourself. Really try to internalize mistakes and things that didn't go wrong and be honest with yourself about why they didn't go your way. Did I make a bad decision? And use it as a learning opportunity to do better next time. I think continuous improvement, the desire to be flexible in your thinking, to be able to be honest with yourself about your decisions and your decision making process are the things and the reasons that in the medium to long term, which I think is the right horizon when you're thinking about your investment portfolio, will allow you to be more successful versus less. And so not a lot of people have the emotional intelligence, the self-discipline to be able to reflect in that way. And I think that ultimately is what separates people who are successful in managing and building their own portfolio over time versus those that aren't is it's not just let me invest and then see what happens. It lets me invest, see what happens. How can I learn from what happened and then apply it in like a recursive loop to the next one. so that my outcome the next time is better than the one before and so on and so forth.

54:36 - 55:14 | Christopher Nelson: Right, because ultimately investing is a skill. Investing is a skill and it's just like at bats, man. It's like, and you said it before, you need to get your repetitions. Then you gotta watch the tape. You gotta learn from what you did because then that's gonna help you get better. And ultimately what we're all trying to do is we're trying to just take risk out of the portfolio. We're trying to make sure that we're playing good defense. We're trying to see where we can add alpha, move this forward and balance it, you know, to support our lifestyle so that ultimately it's working as hard as we are. Our money is working as hard as we are. That to me is, is the core of, of investing and wealth management.

55:16 - 55:41 | Marco Quevedo: Agreed. And let's not be naive. It is a skill, but there is an element of luck involved as well a lot of the time, but I believe that you make your own luck. And the more you put yourself in the best possible position, the more the combination of your skill and the luck factor will push you towards success. And so I think that's just, you know, that's how investing is. I think that's a good way to kind of.

55:41 - 56:04 | Christopher Nelson: Yeah. And I think about luck as where preparation meets opportunity. Right. It's like you're in there because the reality is, if I know you, like you, you've got a stack of opportunities, investment opportunities on your desk. You're throwing 90% of them in the trash can, and then you're sitting there and your luck is like, oh my gosh, this thing crossed my desk. I now know how to analyze this thing. Let's go.

56:04 - 57:45 | Marco Quevedo: I think also oftentimes people who are looking at opportunities also, I think this is another important skill is to be able to say no. and to say no quickly and not feel bad about it. When someone is showing you an opportunity, they appreciate feedback quickly, whether it's positive feedback. And yes, I'm interested in learning more about this. I'm interested in learning and moving forward. But equally valuable to them is this one's not for me. Thanks, but no thanks, because that allows them to then move on to the next investor who it might be a better fit for. So I think working with people in a respectful way where you can not be afraid to say no and do so in a way where you're respectful of other people's time will make them that much more likely to reach out to you the next time even if the first one wasn't necessarily a fit because they know that you respected their time They're happy to have you take a look. And even if it's not for you, you know, uh, to be able to pass. So people often ask me, well, this one wasn't for you. What are you looking for? Or, you know, what kind, what I want to filter for you. Tell me what you want so that I can filter for you. And I tell people, I don't want you to be the filter for me. I would rather you share with me more than less. And my commitment to you will be to not be shy about saying this one's not for me. and not wasting your time so that you can go on to the next one. That way we can see more opportunities and not maybe miss one that we would have liked to see because someone else was trying to filter for me and save my inbox. I would rather see more than less and be committed to not being afraid to say, thanks, but no thanks, this one's not for me.

57:46 - 57:56 | Christopher Nelson: Wow. Well, at some point we got to put a bow on it, man. Cause I could keep going all day. I love this stuff. I love these conversations. I just want to thank you so much for coming back on. I think people are going to get tremendous value from this.

57:59 - 58:07 | Marco Quevedo: Thanks for having me. I appreciate it. Always a pleasure. I appreciate the invitation and am happy to come back again in the future. If it's helpful for your audience. Take care.

58:08 - 59:25 | Christopher Nelson: I don't know about you, but I am literally buzzing off of that conversation with Marco. I am, I'm flying high. I love these things. Like it was another opportunity for me to learn and get a level set that an investment thesis is a strategic document. that drives family offices worth billions of dollars. And the reality is, it is the same framework that they use. You heard Marco break it down. We can use it too. Whether you have $1 million, $30 million or anywhere in the middle, you can leverage the same strategy to create a design for your portfolio. So you're clear on what are the investments that you want in it. So I'm curious, what did you think? Were you as jazzed as I am? If you're on YouTube, go hit below, put some comments in there. If you subscribed to Substack at managingtechmillions.com, hit reply on one of those emails. There's also some comment functions open there. I would love to hear from you on this. And don't forget next week, we're going straight into the architect phase of Wealth Ops. I'm breaking it down, the four key steps that you need to do to build out your architecture diagram. It's time for you to stop consuming and start contributing to your wealth management business. Because remember, manage your millions, define your legacy. I'll see you next week.