A Day in the Life of a Capital Allocator

In today’s show, I welcome Bobby Sharma, co-founder of Connected Capital Fund, an exclusive membership organization of capital allocators - people who pool investor capital to negotiate preferential terms with sponsors. Bobby is also the manager of Better Capital Fund, his private money lending fund. Although Connected Capital Fund is just a year old, the organization has already allocated capital to vetted sponsors across markets including Dallas, San Francisco, and Lincoln, Nebraska, raising and investing $11 million in its first year of operation. Case Study Bobby explains that the Connected Capital Fund team has reviewed fifty deals but invested in only six so far, illustrating their highly selective due diligence process, mitigating risks that individual investors might overlook while providing them with enhanced returns. As an example, Bobby shares a case study involving a deal with a self-storage operator. The sponsor initially offered investors a 70/30 split with a 6% preferred return. However, Connected Capital secured a 90/10 split and increased the preferred return to 8%. These favorable terms were then passed on to Connected Capital Fund members, who promoted them to their networks of investors. Depending on the deal, allocators may either retain the entire delta between the original and negotiated terms or share the benefits with their investors. Allocator Co-Investment Bobby also discusses the practice of backfilling deals. In this process, after a minimum investment is agreed upon with a sponsor, Bobby acts as the first investor, providing the full amount required to meet the threshold. He then raises additional capital from other investors, 'backfilling' his initial capital contribution. In 95% of cases, he leaves a portion of his own capital in the deal to maintain alignment with investors though, on rare occasions, if demand is particularly strong, he may relinquish his position entirely, leaving no co-investment in the deal. Bobby was the first fund manager client of Avestor, a platform designed for capital allocators (whose co-founder, Badri Malynur - who was the first guest in this podcast series). He is highly knowledgeable about the capital allocator industry being an allocator himself as well as leading Connected Capital Fund, an organization of allocators. Tune in to learn more about this emerging industry of capital raisers in today’s episode - you’ll be glad you did. ***** Explore the world of real estate capital allocators—a fresh approach to financing that’s reshaping the industry. In this series, I talk with allocators, investors, sponsors, and service providers to give you an inside look at this fast-growing space. PLUS, subscribe to my free newsletter for real estate investors and gain access to: * Introductions to sponsors, allocators, and investment opportunities. * Insights drawn from my 30+ years of experience in real estate investing. * Hacks and tactics for raising capital to help you scale your real estate portfolio. Visit GowerCrowd.com/subscribe