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A friend of mine came into a meeting one morning looking a tad worse for wear and tear after a night out frequenting some Houston bars. Someone asked him how he was feeling. His response: “Clearly I was overserved.”

I thought about that line – which I have enthusiastically stolen – while reading an email I got this morning from a multi-billion dollar asset manager promoting their new special purpose vehicle (SPV) to buy shares in SpaceX, shares which this asset manager will receive at the end of July as part of the SpaceX Series N funding round.

Yes, Series N. The letter N being the 14th letter of the English alphabet, and thus presumably the 14th private funding round for SpaceX.

To be clear, I’m not a client of this asset manager. I don’t know anyone at this asset manager. I have never had any relationship – personal or professional – with this asset manager. It’s an unsolicited blast email to some bcc list of “Dear Friends”.

The unsolicited blast email came with a few “Space X Confidential and Proprietary” powerpoint slides, chock full of chart crimes like this, where the specific $5 billion addressable market has more graphical surface area than the hand-waving $900 billion addressable market:

And no, if you send me an unsolicited blast email asking me – a complete stranger – for money, I don’t care if you mark your deck “Confidential”. That’s true whether you’re a Nigerian email scammer or a multi-billion dollar asset manager, because the difference isn’t as great as you apparently think it is.

But I’m not here to talk about SpaceX. I don’t know anything about SpaceX other than that – apparently – they publish misleading graphics in their pitch decks. Certainly SpaceX would not be unique in that regard.

No, I’m here to talk about the terms this asset manager is asking for investing in their SPV.

For an existing client of this asset manager, which I am not, it’s a 1% annual management fee and a 10% carried interest for the asset manager.

For a new client of this asset manager, which I would be if I were so inclined and were a “qualified purchaser” (I’m not and not), it’s a 1.5% annual management fee and a 15% carried interest for the asset manager.

To be clear, this asset manager isn’t “managing” anything. I would be paying them 1.5% of my investment every year for access to this initial purchase of SpaceX shares. I would be giving my money to this multi-billion dollar asset manager, and they would in turn give most of the money to SpaceX to get shares in this Series N stock sale for the SPV. But the asset manager will keep a healthy chunk of my money in this SPV as cash to pay for “fund expenses” and (probably) their “management fee”, and my capital account will be debited as if it were cash every year for these expenses and fees.

But wait, there’s more …

No Limited Partner will be permitted to withdraw capital from the Fund without the General Partner’s consent, which may be granted or withheld in its sole discretion and which is generally not expected to be permitted. … As such, prospective investors should not invest unless they are prepared to retain their LP interest until the Fund liquidates, which investors should expect will not occur for a very significant period of time.


That’s from the micro-font disclosures page. And yes, it means exactly what you think it means. Your investment is locked up … forever. And the asset manager will collect fees on your investment … forever.

There is no exit here unless SpaceX decides to do an IPO, and when Elon can do an (apparently) infinite number of private stock transactions at whatever valuation Elon’s heart desires, why would SpaceX ever do that?

Now you might do that anyway if employees and early investors clamor loudly enough for the liquidity that an IPO can give them, but this multi-billion dollar asset manager is showing a clever solution for that pressure: get all the liquidity you need by offloading your stock to the rubes AND collect an annual fee for your “generosity” AND get a 15% share of any profits if a miracle occurs and there is an IPO a decade from now.

Whee! Isn’t investing fun!

Who are the rubes? With a minimum investment of only $250,000 to participate in this SPV, it’s clear to me that this offering is being targeted at small “family offices”, the greater fool in the current Wall Street ecosystem.

Yes, this investment opportunity is limited to qualified purchasers, which means that you must have $5 million in investment assets to participate. The asset manager is doing this because having only QPs as investors will exempt the SPV from registering with the SEC under the Investment Company Act of 1940, which is a Big Deal for the asset manager.

Once upon a time, being a QP – i.e., having $5 million in investment assets – was a decent indicator that you were an “institutional investor”, a Big Boy who could take care of himself. Today, every Tom, Dick and Harry “family office” has $5 million in investment assets. It’s a total that’s well below the minimum that many blue chip investment advisors require before they will take you on as a client.

Everyone is all in a tizzy about day traders and Robinhood and Dave Portnoy. “Ooooh, they’re going to have such a hangover when the bubble pops. Ooooh, they don’t understand how investing works.”

Pffft. They’ll be fine.

The investors facing a hangover are small family offices, plied with endless offerings of fee-heavy SPVs and SPACs by multi-billion dollar asset managers. They’re the ones overserved by Wall Street today.


  1. I think we need a running feature on the most ridiculous TAM slides sent to us.

  2. Avatar for bhunt bhunt says:


  3. Overservability awareness counselors might be the new strategic initiatives consultants?

  4. It all depends on how much someone will pay me to set up their spam filter to blacklist any email address that sends the word “SPAC”.

  5. That’s too funny! I just bought IPOC/U today. Consider me overserved!! Hah

  6. Avatar for CMG CMG says:

    I’d follow that Twitter account.

  7. In the world of the Raccoons, every single advisor to our underfunded pension systems is pushing their clients into MOAR of that! Is it because it is forecast to magically earn 10%+ annual returns when every other bulwark of the traditional 60/40 can’t measure up? Or because those fees are still available when every other part of the 60/40 is now available nearly bereft of cost? Or because it has amazing Sharpe ratios, similar to the AAA rated garbage Michael Burry was short in 2008 that Goldman kept telling him was still worth par? YES. Save some dry powder for the illiquid allocations those boards lose the stomach to fund when the headlines show the assets worth fractions of cost and there is no bid.

  8. My favorite three words from the footnote in that slide are “adjusted for extrapolations”. Say what?!

  9. I think that train wreck is a big part - maybe the biggest part - of what’s driving the transformation of markets into utilities.

  10. LOL. I missed that. “Pro forma for bullshit”

Continue the discussion at the Epsilon Theory Forum

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