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How I Invest · 4 min · Dec 12, 2025
Co-invest structures can reduce private-market fee drag
SITFO builds commercial partnerships that provide research and other support in exchange for commitments and access.
The episode’s best minutes
Full analysis- 2:01Passive benchmarks can concentrate risk as small caps changePro pick 5 min
- 15:55Smaller venture funds have a more achievable path to high returnsPro pick 4 min
- 23:00Co-invest structures can reduce private-market fee drag4 min
- 3 more moments in the full episode
“we're able to structure co invest accounts that are, with minimal expenses.”
Takeaways
- Partnerships can give a small team access to research and data.
- Co-invest accounts can avoid management fees and carry.
- Lower fee drag can lift net returns when gross upside is capped.
About this segment
SITFO builds commercial partnerships that provide research and other support in exchange for commitments and access. Low-cost co-invest accounts can improve net returns in strategies with limited upside.
Peter Madsen is CIO of the Utah School & Institutional Trust Funds Office (SITFO).
Transformed Utah’s $2 billion school trust portfolio into a sophisticated allocator across diverse investment strategies.
David Weisburd, Host
From “How Sovereign Wealth Funds Create Alpha w/Peter Madsen”, Dec 12, 2025. Watch the full episode
Thanks. We'll look at and fix what's off.
Transcript
From the transcript How I Invest publishes with the episode.
- 23:06
So working with consultants is having been one, think it's okay for me to say, and we still work with consultants. We appreciate the value they bring. They're an extension of staff. They have a lot more resources than we do, but they need to, their business model is such that they need to serve the, I don't know if you'd call it the largest common denominator, but it is kind of a, a business of solving for a lot of clients.
- 23:27
And if you're, if you have a custom approach or a niche approach or a niche interest, that's a one off for them. It's, you know, it takes away from, from their bottom line. And when you're working in a more collaborative model where, you know, consultants would collaborate on the sense that, you know, you're sharing ideas and you're asking for services or getting certain, you know, some stuff off the shelf provided.
- 23:49
But if you enter into more of a commercial relationship where, for example, you're, you know, we're anchoring some evergreen funds and with some advisory type firms, and we're receiving in exchange either revenue share, discounted fees, or advisory services, or database access, or other software, one or more of those in each case. And now we have this commercial kind of relationship where we, you know, we are in business together, so to speak, and when we want access to XYZ researcher database, if it's, if it's, if that work is done, by them, then we, you know, can roll that off the shelf and we don't need to roll up our sleeves and do as much due diligence or underwriting because those very capable people with a lot more resources than we have, and in some cases, a lot more experience have done that underwriting.
- 24:43
So that frees us up on what you might call more conventional type exposures, and then we also have, the ability to bring, either bring to them what you might call like satellite or niche type fund or strategy, and they're, you know, they're obligated to work with you in some capacity depending on the nature of your of your collaboration, commercial collaboration, and we or we just have that extra bandwidth to work on that ourselves and on those kind of satellite exposures, if you will.
- 25:11
And in addition to that, we're able to, in certain areas where we think the upside is more limited, like private, we call it private income, call it private debt, private real assets, which includes real estate infrastructure, all kinds of natural resources, maybe some other things, you'd be really hard pressed to get like a two X net or three X net from those strategies right there. Odds are really good that if that, your downside is really well protected, but your upside is pretty capped.
- 25:39
I think that's like the diversifying benefit. There's partially that those types of strategies bring, but in order to really drive returns there, we looked at the structuring and, you know, fees on committed or how long it takes to deploy, or both. And we've, as part of our collaboration, we're able to structure co invest accounts that are, with minimal expenses. So we're, you know, we're not paying management fees, we're not paying carry, we're not, you know, when the cap, we're not committing capital, paying fees on committed capital.
- 26:09
And so that kind of call it like structure alpha, if you will, from the nature of those relationships and how those deals are packaged, we have that uplift of being, you know, we're going to pretty easily get median gross returns, if not better, but then we're adding back all of those fees, that fee drag over time. And that allows us again, more bandwidth for putting private markets money to work or hedge fund exposure to work where we can really focus on making sure we're picking the right strategy or the right manager that might be a little more difficult to require a little more heavy lifting.
- 26:43
Professor Steve Kaplan, who was on the podcast a few months ago, they he came up with this