Transcript
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Well, so Bain did a study.
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Every year, they do a study of the wealth
market, and the 23 study had an estimate of
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about a $145,000,000,000,000 that was owned by
retail on a global basis.
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So if you think about that 145 trillion.
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145 trillion.
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It really rivals the size of the institutional
market.
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And if you think about some percentage of that
being allocated to alts, it's a fairly large
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addressable market for the community.
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If you're successful, what will I Capital look
like in 2030?
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So what is the mission of I Capital?
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Give me a sense for the scale of the business
today.
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Sure.
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So the mission of I Capital is to create
opportunities and access for financial advisers
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to be able to invest in the highest quality
alternative products, the same types of
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products, for example, that institutions would
have access to.
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And at the same time, it's to help GPs access
the very fragmented wealth management market.
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Today, the business is about 205,000,000,000 in
assets on the platform and alternatives.
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We have about a 170,000,000,000 in structured
notes that we manage in their life cycle and
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nearly a half a $1,000,000,000,000 of data
assets that we report on.
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So walk me through going from Goldman Sachs to
the founding story of I Capital in 2013.
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Sure.
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So at Goldman, I ran tech banking, and we spent
a lot of time taking companies public, doing m
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and a, and making a lot of investments.
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And, you know, so fast forward to I Capital,
there's a a great group of people that had the
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same idea around bringing automation into this
alternative space to provide both that access I
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talked about, but not just access itself, I e,
I can now have a chance to buy the product.
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Importantly, my whole experience would be based
in technology and would be automated.
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A lot of the early advisors that we you that we
served at I Capital, they were managing a lot
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of money but were fundamentally still small
businesses, and so they didn't have the
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capability or the desire, frankly, to hire lots
of operational people, administrative people,
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etcetera.
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So they needed to be able to leverage
technology to sort of manage the life cycle
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from learning about funds to, subscribing to
funds through all of the post subscription
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activities like capital calls, distributions,
reporting, etcetera.
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And and being able to rely on a tech platform
was critical for them to be able to really,
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implement the technology or the the product in
their platforms.
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I've spoken to some of the top private equity
funds in the world, and they're all focused on
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this wealth channel.
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Why is that?
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Well, so Bain did a study.
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Every year, they do a study of the wealth
market, and, the 23 study had, an estimate of
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about a $145,000,000,000,000 that was owned by
retail on a global basis.
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So if you think about that 145,000,000,000,000.
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145,000,000,000,000.
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It really rivals the size of the institutional
market, And if you think about some percentage
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of that being allocated to alts, it's a fairly
large addressable market for the community.
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And I will tell you when we started the
business, you know, most of the GPs that we
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talked to, not all but most, were not really
focused on this channel.
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Historically, they raised all their money from
institutions.
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And so over time, as it's become very obvious
that the channel is large, it is also stickier
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than I think a lot of people assumed when they
first started thinking about the channel.
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They realized that they could build a a
foundational part of their fundraising strategy
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within this channel, and so that's really
what's evolved over the last, you know, decade.
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Was it difficult when you started?
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You had this contrarian thesis.
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You saw the world differently.
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Was it difficult to build something that a lot
of people didn't think should exist?
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Well, I don't know that they thought it
shouldn't exist versus they just didn't think
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about the question, you know.
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And I think, the the hard thing was the classic
chicken or the egg problem.
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Right?
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So if you would go to independent, financial
advisors and say we're gonna bring you a
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platform that will provide access to
alternatives, the first question is, well,
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which managers are on the platform?
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And if you go to the managers and you say,
we've built a platform that's gonna give you
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access to this massive and distributed wealth
management channel, they're gonna say, well
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well, how much money is on the platform, which
advisers are on the platform, etcetera.
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And so building that or managing that chicken
or the egg problem so both sides of the of the
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equation, if you will, sort of grow over time
was really the critical challenge that we were
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able to overcome, throughout the last decade.
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And what surprised you the most about the
interest of high net worth investors versus
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traditional institutional investors?
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You know, I think probably the biggest
threshold issue for a lot of individual
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investors is illiquidity.
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Institutions are very used to that.
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Right?
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They're investing in these assets to fund
longer term liabilities, whereas individuals,
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you know, illiquidity is a less natural and or
comfortable topic.
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Yeah.
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And so managing their perception of
illiquidity, and thinking about how do they
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properly incorporate these types of products
into their portfolio, you know, has been and
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continues to be a really important challenge
for
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the industry.
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Which if you think about the market as being
efficient, efficient market hypothesis, one of
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the only true ways to outperform is with
illiquidity, the illiquidity premium.
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So not being able to take advantage of that
really disadvantages high net worth
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investment.
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And I'll tell you, I say this a lot.
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You know, the illiquidity is not a bug.
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It's a feature.
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Right?
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And if you think about how these asset managers
generate, you know, returns for their
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shareholders, that period of illiquidity is
fundamental to what they do.
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If you think of private equity, for example,
it's it's probably the ultimate active asset
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class, where they're not just investing and
following a company.
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They're investing in the company.
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They're taking a seat or several seats on the
board.
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They may control the company.
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They're hiring management.
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Maybe they're firing management.
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They're buying divisions, selling divisions,
launching new products, changing prices,
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growing geographically.
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There's a lot of really fundamental activities
that this, you know, these asset managers are
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undertaking.
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And as we think about the asset class and as we
think about how do we evaluate the individual
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managers, probably one of the most important
things we think about is what impact do they
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have on their portfolio during this sort of
active management period?
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What are they actually doing to improve the
revenues and profitability of a company?
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And while they can generate some return maybe
with leverage or multiple expansion, the the
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real value and the differentiator, the alpha,
if you will, is in what they do with the
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companies and how those companies grow and
improve their financial characteristics over
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time.
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So when you're looking at high net worth
investors today, q 1 2025, what are they
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looking for?
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So right now, people are beginning to shift
their interest back to equity.
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Over the last 2 years, I would say credit has
really dominated the the calendar.
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And what's been behind this credit interest and
credit?
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Yeah.
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So if you go back to 22 it's a great question.
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If you go back to 22, the the markets were were
in a bad place.
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People were expecting the Fed to raise interest
rates.
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And in a rising rate environment, people are
looking to be hedged.
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Right?
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So they tend to be more risk off.
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They want shorter shorter duration.
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And with respect to private credit, most of the
private credit structures are floating rate.
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So if you think the Fed's gonna raise rates, it
it creates a hedge for you.
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And and over time, as the Fed did in fact raise
rates, at at one point rates were maybe 4 or
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5%, the absolute return to private credit was
10 to 12%.
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So even the absolute return was attractive.
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Now that we're seeing rates begin to come back
down, we're seeing, more of a sort of
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reopening, if you will, of private equity into
the market.
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Right now, if I look at this year to date, if,
actually, if you go back to the first half of
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the year, private credit was roughly 45% of the
flows and equity about 35% of the flows.
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That reversed in the Q3, and we had, equity at
close to 50% of the flows and private credit in
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the low thirties.
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So we're already seeing that shift in
extension, into the private equity strategies,
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which we expect to continue.
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To double click on the equity dispersion, what
asset classes are we talking about?
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So it's, you know, growth equity, bioequity.
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You know, technology is one of the themes that
people are very interested in, but it really is
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across the board.
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I think one of the important things about our
platform is all of the different strategies and
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underlying sort of industrial focuses are on
the platform.
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So you can get private equity, private credit,
private real estate, private infrastructure,
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all the hedge funds.
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You can get funds that are focused on financial
institutions or technology or energy or health
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care, etcetera.
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And so the important thing about the platform
is that any adviser can build a a portfolio for
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their clients irrespective of the market
environment.
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So if we're back in 22 and people are risk off
and they expect rates to go up to go up, they
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can buy a a full cadre of of private credit
products.
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If the market's rallying and rates are coming
down and people are focused on equity, there's
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a full menu of equity products they can buy.
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And being able to provide that, over time is
really critical for advisers to serve their
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whole client base.
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You've made a bet on The Wealth Channel.
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You've also made a
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bet on alternatives.
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Tell me about the future of the alternatives
industry.
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We think it's a good bet.
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I mean, if you look today, and you do a survey
of where the wealth manager CIOs are suggesting
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allocating to alts, you'll find ranges from 15
to as high as 40% suggested allocation to alts.
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If you then look empirically and and see where
people are actually allocated, what you'll find
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is, you know, mid low to mid single digit
allocations.
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So we think there's a very substantial amount
of room to grow into the allocations.
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In fact, I I I like to think about 2 phenomena
as a a way to think about where we are in the
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market cycle.
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The first is the participation rate, and that
speaks to how many financial advisers are
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actually doing the business.
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Right?
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And today, you probably have 20% of the
advisers driving close to 80% of the volume, so
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the participation rate is still quite low.
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If you then look at the allocation rate as I
was just describing, it too is way below that
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sort of targeted allocation suggestions by the
CIOs.
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So I think both those dynamics as the
participation rate grows and as the allocation
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rate grows, you've got significant potential
flows into the asset class.
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I think you could also look at it from what is
the efficient what what should you be
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efficiently allocated to alts versus what's the
reality.
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And if you look at what is efficient, you have
to look at the endowment world.
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Right?
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Probably some of the sharpest investors in the
world, the Yale model, specifically a David
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Swensen model, most endowments are roughly 35
to 40% and sometimes up to 50% of their entire
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portfolio.
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And then you go to the to the wealth channels
and you see the the low single digits.
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What's the reason for that dispersion?
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So first of all, I played golf over the summer
with the CIO of a Ivy League school that has a
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60% allocation to Alts.
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Okay.
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So your your point is exactly right, though.
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And I think the issue that there's multiple
reasons, and I think probably to start, the
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most significant is just access.
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You know, institutions have been buying these
assets or investing in these assets for 45, 50
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years when the industry first really started,
and individuals except for the wealthiest
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family offices, you
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know Talk about $1,000,000,000 plus families.
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Yeah.
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Real family offices that frankly are just like
foundations and endowments in many respects.
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Many others, however, haven't really had that
systematic access I was talking about to
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alternatives.
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And so that that has changed a lot, and now
people do have access.
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But what what's needed is the automation I
talked about and also the tools and education.
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And I would say probably today, if you looked
at one of the biggest reasons for the alts
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allocation where it is broadly, education is
still really what's needed.
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There's still a lot of advisors that are newer
to the asset class, and, obviously, most
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responsible advisors aren't going to suggest
products that they first don't totally
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understand Tom.
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And understand the applicability of those
products for their clients.
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And so as that education process happens and as
advisors get more comfortable with the asset
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class and it's it's really happening, I think
you'll see those numbers start to grow.
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Whether they get to, you know, 40, 50, 60%, I'm
not sure they're gonna get that high.
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Yeah.
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But but, fundamentally, the reasons why
institutions invest in these assets are are
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every bit as germane to individuals.
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Right?
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They have long dated liabilities.
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Retirement is a long dated liability that you
have to save for.
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They have other events in their life they have
to save for.
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They wanna protect their portfolio.
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They want diversification, and assets that
aren't totally correlated with their liquid
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assets.
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So all of the things that drive institutions to
invest are are the same types of things that
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are attractive from an individual's perspective
as to why they should invest as well.
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How do you know that the the wealth channels
are not being adversely selected when it comes
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to these funds?
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You have a large fund.
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They wanna go to endowment or pension fund.
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Why would they want to allocate to a wealth
channel?
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So it's a it's a super question, and I'm gonna
before I answer that, I'm gonna make one
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observation that strengthens the question
further, which is to say, within alternatives
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you take private equity again.
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The difference between the top performing
manager and the 4th quartile could be over a
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1000 basis points, 10 plus percent.
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You're in a totally different asset class if
you're not in the right managers.
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We'll be right back, but first, a word from our
sponsor.
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00:15:26,595 --> 00:15:31,419
Innovation is a driving force in the world and
runs through everything that Reed Smith does.
237
00:15:31,559 --> 00:15:36,199
Reed Smith is a law firm that combines
pioneering technology with industry expertise
238
00:15:36,199 --> 00:15:38,439
in order to solve their clients' most
challenging matters.
239
00:15:38,439 --> 00:15:43,035
Their approach is grounded in collaboration
with a focus on growth, efficiency, and
240
00:15:43,035 --> 00:15:48,335
customization because every client's challenges
are unique and their solutions should be too.
241
00:15:48,475 --> 00:15:52,955
I'm proud to partner with Reed Smith, a firm
that continually adapts to meet their clients'
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00:15:52,955 --> 00:15:53,455
needs.
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00:15:53,595 --> 00:15:58,889
Some say venture capital is the best asset
class, but also is the worst depending on which
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portfolio
245
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you're with.
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Right?
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If you're with the top in in venture, the the
the, pool is even smaller, I would argue.
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But, you know, with respect to really all of
these alternative strategies, you've gotta be
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with the best managers, and part of what we're
trying to deliver as a platform is access to
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those managers.
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I think, historically, when people haven't
really had robust access, you really have the
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adverse selection problem because they have a
friend who's running a real estate fund or
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they, you know, they they know someone who's in
a private equity fund.
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If you don't have robust access and you don't
have robust information to understand how any
255
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given fund performs, it's hard to make a
relative decision about who the top performer
256
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is and who's not.
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00:16:42,485 --> 00:16:43,785
And so information
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Is that also the standardization of
information?
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00:16:46,565 --> 00:16:52,039
Because I think that's one of the difficult
things is, you know, some are not even RIAs.
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00:16:52,179 --> 00:16:56,980
I'm assuming you you work you work mostly with
RIAs, but but talk talk to sometimes it's hard
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to even standardize and and look at different
asset classes.
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Yeah.
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I think access and standardization, knowing
that you have all the relevant material, is
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really important.
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We we try to provide that.
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We try to provide due diligence for, you know,
many of the funds on the platform, so there's
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the an another lens, another analysis for an
adviser to talk about with their clients.
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00:17:19,340 --> 00:17:23,759
You know, I talked about how the best managers
generate returns.
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That's one of the things, for example, in our
diligence reports, we're really focused on
270
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which of the managers are driving underlying
portfolio company growth and improvement.
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Again, the alpha Where's the value add?
272
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Where's the value add?
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Exactly.
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ICapital has both the platform, but, also, you
have a curated set of managers.
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Talk to me about that.
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The underlying thought as we were building this
company is we needed to build the full
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automated platform.
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I talked about that in terms of how important
that was for people to be able to really drive
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and grow the business, but there was also, as
we're discussing now, a lot of importance
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around making sure you have access to the right
managers.
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00:18:04,805 --> 00:18:12,325
One of the things as we go to market is that we
don't require people to use all of what we
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offer.
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We we simply say, here's what we have to offer,
an end to end technology platform, access to
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great managers, research around great managers,
and you choose what components of the offering
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is most valuable or important to you to achieve
your goals and objectives.
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00:18:29,255 --> 00:18:34,774
For many of the independent RAs, they use both
the full platform from an automation
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perspective, and they also use the products
that we've curated and made available to them.
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Many of the large banks, for example, that have
their own historic access and incredible set of
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00:18:45,049 --> 00:18:49,929
relationships might just use the technology or
some of the services that we offer around
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managing the business, same for the GPs.
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00:18:53,849 --> 00:18:59,275
And that's part of, you know, sort of meet the
customer base where they are in terms of
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providing the solutions they need and not
requiring people to take things they don't.
293
00:19:03,355 --> 00:19:08,075
There's a saying in private equity and
alternatives that nothing takes more time to
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manage than a $25,000 check.
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00:19:10,140 --> 00:19:14,059
You make an exception for for a friend and
family, and you end up spending more time than
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00:19:14,059 --> 00:19:16,000
the $25,000,000 check.
297
00:19:16,859 --> 00:19:23,740
How do you obfuscate the investor relations,
you know, pains of dealing with small check
298
00:19:23,740 --> 00:19:25,580
writers, and how does iCapital help?
299
00:19:25,580 --> 00:19:26,355
Good question.
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And this really speaks to one
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of the important services that we provide for
GPs in addition to technology is this
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aggregation.
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00:19:34,414 --> 00:19:39,740
And so if you look at the infrastructures of
most general partners, because of where they
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they've always raised money, they're tuned to
getting a very small number of really large
305
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commitments.
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00:19:47,659 --> 00:19:48,159
Okay?
307
00:19:48,460 --> 00:19:54,144
The high net worth space, however, is the exact
opposite, a really large number of smaller
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00:19:54,144 --> 00:19:54,644
commitments.
309
00:19:55,184 --> 00:20:00,164
And so their infrastructures aren't tuned for
that new reality.
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00:20:00,625 --> 00:20:06,484
So we step in, and we aggregate in lots of
different ways all of these smaller tickets.
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00:20:06,869 --> 00:20:10,970
And so we look to a GP like one large
institution.
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00:20:11,509 --> 00:20:18,630
And so we can interact and and connect to their
infrastructure a lot more seamlessly than 2
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00:20:18,630 --> 00:20:21,609
1,000, 50,000, or a $100,000 investors.
314
00:20:22,325 --> 00:20:27,204
And and that's a big part of the service
offering to the GPs as well as helping to
315
00:20:27,204 --> 00:20:31,305
create access to this fragmented group of
people in the first place.
316
00:20:32,005 --> 00:20:35,204
You mentioned earlier in the interview
something that surprised me that the wealth
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channel is sticky.
318
00:20:36,164 --> 00:20:41,679
A lot of managers would look at high net worth
individuals as the last one on the boat, first
319
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one off.
320
00:20:42,720 --> 00:20:44,339
Why is The Wealth Channel sticky?
321
00:20:44,720 --> 00:20:46,799
Well, I think it's like anything else in life.
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If people are having a good experience, you
know, with a manager, and and the manager is
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delivering what they've promised.
324
00:20:54,005 --> 00:21:00,404
And and what they promise beyond just, I'm
gonna invest in this in in these strategies in
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00:21:00,404 --> 00:21:06,430
this way, and it's gonna generate x returns,
It's also, and I'm gonna report to you.
326
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I'm gonna, you know, have transparent support.
327
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Experience matters as much as the objective.
328
00:21:10,589 --> 00:21:10,829
Yes.
329
00:21:10,829 --> 00:21:17,789
And I and I think in a lot of cases, there's a
relationship that forms with the manager, and
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delivering, you know, consistent returns, being
transparent about your your your investments,
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00:21:24,634 --> 00:21:29,515
your reporting, your fees, etcetera, is how you
go about building that relationship because it
332
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develops trust.
333
00:21:31,275 --> 00:21:37,109
And just like institutions that, you know, have
good experiences with some managers and they
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00:21:37,109 --> 00:21:41,589
and they grow their relationship, and maybe
with others they don't and they probably shrink
335
00:21:41,589 --> 00:21:45,049
or eliminate those relationships, this channel
is the same way.
336
00:21:45,109 --> 00:21:49,904
And I think it represents an incredibly long
term channel for GPs.
337
00:21:50,125 --> 00:21:56,285
And and I'll tell you going back to 2014,
running around talking to GPs and having many
338
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GPs say, you know, why would I ever need to be
in that channel as we talked about.
339
00:22:00,365 --> 00:22:08,200
Today, I would say almost every GP that we talk
to understands my my comment from the Bain
340
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report, the size of the market, and now they're
all very focused on figuring out what is the
341
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right way for them to access this channel.
342
00:22:16,444 --> 00:22:18,224
It's also the final frontier.
343
00:22:18,924 --> 00:22:22,765
A lot of the top institutional investors have
made their allocations, have made their bets on
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their horses, and, they don't typically change
that often.
345
00:22:26,365 --> 00:22:30,045
So you almost have to if you're an emerging
manager, you almost have to go after that
346
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channel.
347
00:22:30,710 --> 00:22:31,029
Yeah.
348
00:22:31,029 --> 00:22:32,390
I I I think you're right.
349
00:22:32,390 --> 00:22:38,069
I think a lot of the the the newer managers
tend to have sort of a friends and family sort
350
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of origin to their capital base.
351
00:22:41,829 --> 00:22:48,474
And and then as they create track record and
they have demonstrated success, then they tend
352
00:22:48,474 --> 00:22:50,734
to go out and raise more institutional money.
353
00:22:51,755 --> 00:22:58,015
But but I I will tell you the decision making,
having spent a lot of time with these advisers
354
00:22:58,075 --> 00:23:04,369
whether they're, you know, on a bank platform
or independent RIAs or IBDs, they're very smart
355
00:23:04,369 --> 00:23:05,509
and they're very discerning.
356
00:23:06,049 --> 00:23:12,869
And, you know, what no manager should think is
that that this channel is any less discerning,
357
00:23:14,065 --> 00:23:17,924
any less shrewd and and thoughtful as the
institutional channel.
358
00:23:18,225 --> 00:23:22,545
And as you see, you know, one of the big trends
in wealth management is this sort of growing
359
00:23:22,545 --> 00:23:23,045
aggregation.
360
00:23:23,585 --> 00:23:26,884
The RIAs are combining, creating much larger
entities.
361
00:23:28,079 --> 00:23:31,700
And as they do, they represent more dollars.
362
00:23:32,720 --> 00:23:41,694
They've got, you know, mature, built out
staffs, and and they will look to the GPs like
363
00:23:41,835 --> 00:23:46,575
the banks look to GPs today in terms of their
size, their reach, their breadth, etcetera.
364
00:23:46,634 --> 00:23:52,234
And so, it's it's a very exciting market, and,
you know, I I think, we're gonna see, as we
365
00:23:52,234 --> 00:23:57,029
talked about earlier, a a a growing amount of
allocation to this asset class.
366
00:23:57,029 --> 00:24:02,389
I think every top 100 private equity firm will
have a head of private wealth within the next 5
367
00:24:02,389 --> 00:24:02,789
years is
368
00:24:02,789 --> 00:24:03,190
my sense.
369
00:24:03,269 --> 00:24:06,244
Or most already do, and and it's and it's
coming down the line.
370
00:24:06,244 --> 00:24:11,125
What you know, one of the really interesting
things in the earlier days is that, you know,
371
00:24:11,125 --> 00:24:17,224
as people started to embrace this channel, they
they asked some of their institutional
372
00:24:17,444 --> 00:24:22,740
fundraisers to kinda manage the channel off the
side of their desk, And and that's not the
373
00:24:22,740 --> 00:24:24,980
right way to do it, and you don't have focus.
374
00:24:24,980 --> 00:24:27,559
This channel needs focus just like any other
channel.
375
00:24:27,940 --> 00:24:28,820
How does that scale?
376
00:24:28,820 --> 00:24:31,400
How does focus scale in the Wealth Channel?
377
00:24:31,460 --> 00:24:36,420
So it's building relationships, you know, with
with certainly, the wires create lots of scale
378
00:24:36,420 --> 00:24:40,045
because, they represent banks to JPMorgan Yes.
379
00:24:40,045 --> 00:24:42,704
JP Goldman Sachs, UBS, Morgan Stanley, BofA.
380
00:24:43,005 --> 00:24:46,785
They represent very large pools of money.
381
00:24:47,085 --> 00:24:53,080
And over the years, the banks have done a lot
to educate advisers on how these assets fit
382
00:24:53,080 --> 00:24:59,500
into the portfolio, so they represent very
attractive places for the GPs to invest.
383
00:24:59,720 --> 00:25:06,075
But as we were just discussing, the RA channel
is is also quite attractive, particularly as
384
00:25:06,855 --> 00:25:12,535
we've seen the m and a trend that has created
larger and larger entities, which now therefore
385
00:25:12,535 --> 00:25:16,375
represent more money and have the
sophistication and the interest.
386
00:25:16,375 --> 00:25:19,674
Economics are very attractive in rolling up
these RIAs.
387
00:25:19,799 --> 00:25:21,320
They pay for themselves very quickly.
388
00:25:21,320 --> 00:25:22,220
It's a great trade.
389
00:25:22,360 --> 00:25:22,759
Yeah.
390
00:25:22,759 --> 00:25:24,920
That's the thought, and and they continue to
grow.
391
00:25:24,920 --> 00:25:32,299
And and I think the more m and a we see in the
RIA space, the more integration and automation
392
00:25:32,600 --> 00:25:39,054
we're also gonna need to see because they need
to take, you know, disparate platforms and
393
00:25:39,054 --> 00:25:44,674
integrate them so that not only do they have
asset growth, but they also have margin growth.
394
00:25:45,214 --> 00:25:52,180
And and by the way, the the private equity
space is investing very actively in this trend.
395
00:25:52,559 --> 00:25:56,400
So it's it's really interesting how these
worlds are coming together Very meta.
396
00:25:56,480 --> 00:25:57,279
In a powerful way.
397
00:25:57,279 --> 00:25:57,779
Exactly.
398
00:25:58,000 --> 00:25:59,700
So how do you invest your portfolio?
399
00:26:00,079 --> 00:26:05,035
You know, somewhat conservatively, you know, I
I have a significant allocation to
400
00:26:05,035 --> 00:26:10,715
alternatives, you know, both in terms of the
funds I have as well as, you know, I Capital is
401
00:26:10,715 --> 00:26:16,299
a is a private company, and I own private
equity, if you will, in my equity in in I
402
00:26:16,299 --> 00:26:16,700
Capital.
403
00:26:16,700 --> 00:26:21,039
You own essentially a small piece of each fund
through your ownership of a parent company?
404
00:26:21,179 --> 00:26:21,419
No.
405
00:26:21,419 --> 00:26:23,440
The I Capital doesn't own its funds.
406
00:26:23,500 --> 00:26:23,819
Right?
407
00:26:23,819 --> 00:26:29,445
And so there are a handful of funds that I have
invested in, and then, obviously, you know, I
408
00:26:29,445 --> 00:26:31,384
Capital is a is a big position.
409
00:26:32,085 --> 00:26:38,025
And then a lot of what else I do is invest in,
you know, in municipal bonds, private credit,
410
00:26:39,125 --> 00:26:40,825
and so I have a bit of a barbell.
411
00:26:41,440 --> 00:26:45,200
And what are some mistakes that you made early
on in your investing career that drive how you
412
00:26:45,200 --> 00:26:46,500
are as an investor today?
413
00:26:46,960 --> 00:26:50,100
Probably the biggest thing is investing in
things I didn't understand.
414
00:26:50,880 --> 00:26:56,815
And in my life growing up in investment
banking, we had a number of chances to invest
415
00:26:56,815 --> 00:26:57,795
in certain things.
416
00:26:58,174 --> 00:27:06,575
And in some cases, they sounded good, and I did
a cursory review and invested, and didn't
417
00:27:06,575 --> 00:27:10,609
really understand how it was gonna perform
under different market environments.
418
00:27:10,669 --> 00:27:15,950
And so I would say probably the biggest
mistakes was was investing in things I I hadn't
419
00:27:15,950 --> 00:27:21,389
fully taken the time to really dig into, which
is why, frankly, with I Capital, we're so
420
00:27:21,389 --> 00:27:24,674
focused on making sure people are understanding
what they're doing.
421
00:27:25,294 --> 00:27:27,634
Not everything works out the way you expect.
422
00:27:28,174 --> 00:27:32,494
But if you really understand, then when rates
go way up, you'll have an expectation of what's
423
00:27:32,494 --> 00:27:33,615
gonna happen to your portfolio.
424
00:27:33,615 --> 00:27:36,400
If they go down, the market goes up, it goes
down.
425
00:27:36,619 --> 00:27:40,720
You should have a set of expectations for
what's gonna happen to your investments.
426
00:27:40,859 --> 00:27:45,119
I think that's one of the things that makes,
Warren Buffett so good, his buy box.
427
00:27:45,259 --> 00:27:49,724
He's one of the most disciplined investors
ever, and I've had a lot of people that
428
00:27:50,365 --> 00:27:53,244
complain about this and say you can't move him
from his buy box.
429
00:27:53,244 --> 00:27:53,744
Yep.
430
00:27:53,964 --> 00:27:58,704
So you've been building Icapital, but alongside
it, you've been building a large organization.
431
00:27:59,884 --> 00:28:02,544
What are the lessons learned from building such
a large organization?
432
00:28:03,269 --> 00:28:07,210
The most important thing is creating a cohesive
culture.
433
00:28:07,910 --> 00:28:12,390
You know, I grew up at Goldman Sachs, and
culture was really important there.
434
00:28:12,390 --> 00:28:16,964
And and it was something that was very obvious
and, I would say, sort of one of the most
435
00:28:16,964 --> 00:28:21,845
significant unifying principles in that culture
was that our clients' interests always come
436
00:28:21,845 --> 00:28:22,345
first.
437
00:28:22,884 --> 00:28:29,384
And I would say here at I Capital, you know, I
write a letter to the company every weekend.
438
00:28:30,039 --> 00:28:36,200
I've been doing that for nearly a decade, and
it's so that people understand what we're
439
00:28:36,200 --> 00:28:40,839
trying to do and why we're trying to do it, and
they get a readout or report on what's
440
00:28:40,839 --> 00:28:41,339
happening.
441
00:28:41,720 --> 00:28:48,115
And in in every one of those, I I make two
observations, which is that, you know,
442
00:28:48,335 --> 00:28:50,755
everything we do has to help our clients
succeed.
443
00:28:51,535 --> 00:28:55,315
And the second thing is everything we do, we
have to do to do together as a team.
444
00:28:56,174 --> 00:29:02,720
We're we're offering a, I think, a very
valuable and complex service, and you need to
445
00:29:02,720 --> 00:29:03,460
work together.
446
00:29:03,519 --> 00:29:07,519
Lots of different, you know, people with
different skills coming together to provide
447
00:29:07,519 --> 00:29:12,900
that service, and or technology to help our
clients meet their objectives.
448
00:29:13,519 --> 00:29:23,035
And I would say that culture is a
differentiating thing in companies, because
449
00:29:23,035 --> 00:29:23,275
companies
450
00:29:23,515 --> 00:29:26,015
for for retention, for recruiting?
451
00:29:26,715 --> 00:29:27,035
Yes.
452
00:29:27,035 --> 00:29:27,275
Where where
453
00:29:27,275 --> 00:29:28,170
does it help the most?
454
00:29:28,410 --> 00:29:28,809
Everywhere.
455
00:29:28,809 --> 00:29:29,309
Everywhere.
456
00:29:29,369 --> 00:29:29,769
Everywhere.
457
00:29:29,769 --> 00:29:34,350
I mean And does that mean you have to be anti
something to be pro something in your culture?
458
00:29:34,490 --> 00:29:34,970
No.
459
00:29:34,970 --> 00:29:35,289
No.
460
00:29:35,289 --> 00:29:38,430
You you need to be you need to be pro team.
461
00:29:39,049 --> 00:29:45,495
You need to understand that that your success
is a function of the whole team's success.
462
00:29:46,275 --> 00:29:52,275
And if you are the type of person that that
needs to do things on your own, this may not be
463
00:29:52,275 --> 00:29:54,195
the right, you know, the right place.
464
00:29:54,195 --> 00:29:58,590
We have incredibly talented people here who
understand that by working with other
465
00:29:58,590 --> 00:30:01,250
incredibly talented people, they'll get a lot
more done.
466
00:30:01,549 --> 00:30:09,650
And so, I think that that desire to work
together as a team is a really important thing,
467
00:30:10,029 --> 00:30:16,265
and I think always understanding that the only
reason any companies exist is so they can
468
00:30:16,265 --> 00:30:22,284
deliver something of value that somebody else
will will buy and use to to achieve a goal.
469
00:30:22,904 --> 00:30:28,250
And keeping that sort of end customer in mind,
I think, is really critical in everything you
470
00:30:28,250 --> 00:30:28,569
do.
471
00:30:28,569 --> 00:30:29,789
It's like a road map.
472
00:30:29,849 --> 00:30:34,809
You know, as you get bigger and and, you know,
when you're small and you you can have line of
473
00:30:34,809 --> 00:30:38,649
sight manage, you can see what everybody's
doing and everybody can hear everybody and you
474
00:30:38,649 --> 00:30:39,549
know what's happening.
475
00:30:39,690 --> 00:30:47,154
As you get to be 1700 people and beyond, you
know, people have to know what are the things
476
00:30:47,154 --> 00:30:53,955
that are important to the company so that while
they're making the 100 or more decisions they
477
00:30:53,955 --> 00:30:58,109
make every day on their own, they're guided by
these two things.
478
00:30:58,589 --> 00:31:01,309
I've read a lot of leaders of organization.
479
00:31:01,309 --> 00:31:06,109
The bigger the the organization, the more pithy
the sayings and the fewer there are.
480
00:31:06,109 --> 00:31:09,009
They go around and say kind of the same 2, 3, 4
things.
481
00:31:09,150 --> 00:31:11,569
How do you make your your culture stick?
482
00:31:11,710 --> 00:31:15,684
I I think it's it's it's a 1,000 little things.
483
00:31:15,904 --> 00:31:16,305
Right?
484
00:31:16,305 --> 00:31:17,904
It's how you compensate people.
485
00:31:17,904 --> 00:31:19,025
It's how you promote people.
486
00:31:19,025 --> 00:31:21,025
It's your behavior more than what you say.
487
00:31:21,025 --> 00:31:28,419
What you say is interesting, but what you do
but I do think that, there's value in
488
00:31:28,419 --> 00:31:31,319
consistency and repetitiveness.
489
00:31:31,700 --> 00:31:32,200
Right?
490
00:31:32,419 --> 00:31:39,000
So if, I I remember, you know, at Golden, we
had 14 business principles, and they were all
491
00:31:39,779 --> 00:31:40,919
incredibly powerful.
492
00:31:42,304 --> 00:31:46,544
When we were smaller, the first thing that
occurred to me is that's a lot of things for
493
00:31:46,544 --> 00:31:47,444
people to remember.
494
00:31:48,384 --> 00:31:53,505
At least as we thought about it, you know, what
are the handful of what are the most important
495
00:31:53,505 --> 00:31:56,849
things that we never want anybody to forget?
496
00:31:57,549 --> 00:32:04,450
And so what what's happened, you know, is we
we've we've really distilled what we're doing
497
00:32:04,910 --> 00:32:08,210
to those two things for as the root of our
culture.
498
00:32:08,265 --> 00:32:09,884
I mean, excellence is important.
499
00:32:10,105 --> 00:32:11,065
Integrity is important.
500
00:32:11,065 --> 00:32:15,865
But the way I look at it is if you're focused
on your client success, then you're gonna be
501
00:32:15,865 --> 00:32:16,365
excellent.
502
00:32:16,664 --> 00:32:19,945
You're gonna have integrity in terms of how you
deal with your your colleagues and your
503
00:32:19,945 --> 00:32:20,339
clients.
504
00:32:20,900 --> 00:32:29,940
And so, repeating the same things over and over
again, it just reinforces what matters to the
505
00:32:29,940 --> 00:32:30,440
company.
506
00:32:31,220 --> 00:32:34,440
If you're successful, what will iCapital look
like in 2030?
507
00:32:35,795 --> 00:32:41,974
I think iCapital is going to be a a company
that has really built out the infrastructure
508
00:32:42,674 --> 00:32:51,119
for the global wealth managers and asset
managers to scale very large businesses, either
509
00:32:51,119 --> 00:32:57,059
as consumers of or or managers of these private
assets across all the different strategies.
510
00:32:57,279 --> 00:33:01,904
And what we're really trying to do is create
that operating system just like a major stock
511
00:33:02,065 --> 00:33:07,585
exchange creates a a platform and a mechanism
for people to buy and sell, you know, stocks,
512
00:33:07,585 --> 00:33:14,625
for example, very efficiently and easily, we
wanna create a a platform for people to be able
513
00:33:14,625 --> 00:33:22,140
to learn about, buy, and and sell and manage
alternative assets of all different strategies.
514
00:33:22,519 --> 00:33:27,740
What do you think the biggest challenge is
facing the alternatives industry and I Capital?
515
00:33:28,359 --> 00:33:31,580
I would say probably the biggest thing today is
sort of education.
516
00:33:31,804 --> 00:33:32,125
Right?
517
00:33:32,125 --> 00:33:35,265
You've got a lot of advisors who are newer to
the asset class.
518
00:33:35,964 --> 00:33:38,204
We've talked about the allocation rates being
low.
519
00:33:38,204 --> 00:33:38,704
Yeah.
520
00:33:39,244 --> 00:33:45,325
And so, you know, that next wave of advisors,
which is a really big wave, by the way, is just
521
00:33:45,325 --> 00:33:50,170
by definition less familiar with the asset
class, And so making sure that they're educated
522
00:33:50,309 --> 00:33:55,029
in a way they really understand the product and
can represent it and and and show it to their
523
00:33:55,029 --> 00:33:57,369
clients, kinda 1 by 1.
524
00:33:57,910 --> 00:34:03,414
And I think this is frankly a multiyear journey
that everybody needs to be involved with.
525
00:34:03,414 --> 00:34:08,234
And and I would say that, you know, when when
there's a lot of excitement around something,
526
00:34:08,614 --> 00:34:14,074
you know, there's often a tendency to to rush,
move move quickly, etcetera.
527
00:34:15,019 --> 00:34:22,780
And I think this is one where the opportunity
is so large in terms of what alternatives can
528
00:34:22,780 --> 00:34:28,784
become relative to these client portfolios that
everybody is better off just making sure that,
529
00:34:28,784 --> 00:34:30,964
you know, the investment is made in the
education.
530
00:34:31,025 --> 00:34:36,244
All the GPs are doing, you know, what they can
to help educate advisors and clients.
531
00:34:36,704 --> 00:34:42,065
We certainly need to be doing that and others
so that people invest in a really thoughtful
532
00:34:42,065 --> 00:34:43,349
and knowledgeable way.
533
00:34:43,430 --> 00:34:45,610
You guys are investing heavily into technology.
534
00:34:46,309 --> 00:34:49,369
What are the problems you're solving with your
technology for your clients?
535
00:34:49,590 --> 00:34:49,989
Sure.
536
00:34:49,989 --> 00:34:54,869
So, you know, we're looking at, you know, a a
couple of different things that are important.
537
00:34:54,869 --> 00:34:56,410
1 is around decision making.
538
00:34:56,795 --> 00:34:57,295
Right?
539
00:34:58,075 --> 00:34:59,535
2 is around data collection.
540
00:35:00,075 --> 00:35:04,315
How do you as as you grow your business, as you
make more alternate investments, as you do more
541
00:35:04,315 --> 00:35:06,474
m and a, you've got data in lots of places.
542
00:35:06,474 --> 00:35:09,614
How do you bring that all together and turn it
into useful information?
543
00:35:11,099 --> 00:35:12,960
3 is how do you connect the ecosystem?
544
00:35:13,659 --> 00:35:13,980
Right?
545
00:35:13,980 --> 00:35:21,500
So you've got managers, administrators, tax
preparers, you know, iCapital, wealth managers.
546
00:35:21,500 --> 00:35:27,704
You've got lots of different people that are
dealing with information often, you know, with
547
00:35:27,704 --> 00:35:29,025
an old or different version.
548
00:35:29,304 --> 00:35:31,324
Gonna be getting our k ones before September?
549
00:35:33,625 --> 00:35:34,664
That's a harder question.
550
00:35:34,664 --> 00:35:35,065
That's a hard
551
00:35:35,065 --> 00:35:35,664
that's a hard one.
552
00:35:35,784 --> 00:35:37,065
A harder question, but a very
553
00:35:37,065 --> 00:35:37,920
good 20, 30.
554
00:35:38,719 --> 00:35:46,480
I do think that, you know, using technology
using technology like AI to help automate how
555
00:35:46,480 --> 00:35:51,059
information is collected, extracted, aggregated
is really important.
556
00:35:51,405 --> 00:35:57,184
Using AI to help people get to the types of
products and strategies they want to get to
557
00:35:57,244 --> 00:35:59,025
more quickly is really important.
558
00:35:59,885 --> 00:36:08,190
Using this the distributed ledger to be able to
connect the ecosystem in in a really powerful
559
00:36:08,190 --> 00:36:11,489
and automated way so that people aren't
reconciling.
560
00:36:11,869 --> 00:36:12,909
I'll give you an example.
561
00:36:12,909 --> 00:36:18,590
In a typical private fund, all of the
constituents, 6 different constituents in that
562
00:36:18,590 --> 00:36:24,244
private fund, are going to reconcile every
transaction that happens.
563
00:36:24,244 --> 00:36:25,384
So there's an onboarding.
564
00:36:25,444 --> 00:36:26,424
There's a subscription.
565
00:36:26,964 --> 00:36:30,184
There's a capital call, a distribution, a
redemption, a report.
566
00:36:30,724 --> 00:36:35,605
Every you know, the GP, the wealth managers,
the administrators, the taxpayers repetitive
567
00:36:35,605 --> 00:36:35,924
work.
568
00:36:36,005 --> 00:36:38,309
A lot of repetitive work in different systems.
569
00:36:38,929 --> 00:36:43,809
And so what we're trying to do is leverage the
distributed ledger and have people connect into
570
00:36:43,809 --> 00:36:50,449
the APIs so that whenever there's a change in
the main system so maybe an administrator has
571
00:36:50,449 --> 00:36:51,269
an update.
572
00:36:52,085 --> 00:36:56,724
Everybody's system can consume that update
immediately, and you don't have people keying
573
00:36:56,724 --> 00:37:01,224
in that information in separate systems, which
obviously leads to to some mistakes.
574
00:37:01,525 --> 00:37:07,400
And so bringing the industry together is a
powerful part of where we're investing and how
575
00:37:07,400 --> 00:37:10,059
we think we can improve the experience for the
whole ecosystem.
576
00:37:11,400 --> 00:37:11,880
Yeah.
577
00:37:11,880 --> 00:37:16,920
People like Christopher Zook and Tony Robbins
lobbying congress to allow more people to
578
00:37:16,920 --> 00:37:19,739
become accredited investors through credit
investor rule.
579
00:37:19,894 --> 00:37:21,494
What are your thoughts on this?
580
00:37:21,494 --> 00:37:26,614
So we we had a rewrite or expansion of the
rule, you know, a handful years ago where
581
00:37:26,614 --> 00:37:33,114
people who, you know, may not have met the
wealth test can meet the test with experience,
582
00:37:33,734 --> 00:37:35,275
their place of business, etcetera.
583
00:37:36,140 --> 00:37:41,500
I think that was a smart thing to do because it
it it it allowed people who were truly
584
00:37:41,500 --> 00:37:46,780
qualified to invest to have a chance to invest
even if they they weren't, you know, at at a
585
00:37:46,780 --> 00:37:47,840
certain wealth level.
586
00:37:48,755 --> 00:37:54,055
I do think that, you know, it's about people
understanding what they're doing.
587
00:37:54,275 --> 00:37:54,675
Right?
588
00:37:54,675 --> 00:38:00,675
And you can have some very wealthy people who
don't fully understand these investments, and
589
00:38:00,675 --> 00:38:04,829
you can have some people who aren't as wealthy
who understand them really, you know,
590
00:38:04,829 --> 00:38:05,329
thoroughly.
591
00:38:05,710 --> 00:38:13,389
And so I think that behind that definition
needs to be an understanding a true
592
00:38:13,389 --> 00:38:17,304
understanding of the products and how they work
so people can make thoughtful decisions.
593
00:38:17,364 --> 00:38:20,964
You could have a university professor that is
not an accredited investor, maybe even a
594
00:38:20,964 --> 00:38:22,424
university professor in finance.
595
00:38:22,565 --> 00:38:23,065
Right.
596
00:38:23,284 --> 00:38:23,784
Exactly.
597
00:38:23,844 --> 00:38:24,244
And you could
598
00:38:24,244 --> 00:38:30,059
have a 3rd generation wealthy person that's
never, you know, that's doesn't even know what
599
00:38:30,059 --> 00:38:32,000
an alternative is, that is a credit.
600
00:38:32,140 --> 00:38:32,539
Yeah.
601
00:38:32,539 --> 00:38:33,019
Exactly.
602
00:38:33,019 --> 00:38:40,098
And so I think, you know, whatever the rules,
however they evolve, they, I think, should be
603
00:38:40,098 --> 00:38:44,418
based substantively and fundamentally on, you
know, on what people understand about what
604
00:38:44,418 --> 00:38:45,478
they're investing in.
605
00:38:45,618 --> 00:38:46,118
Absolutely.
606
00:38:46,178 --> 00:38:48,018
Well, Lawrence, I've really enjoyed the
podcast.
607
00:38:48,018 --> 00:38:49,058
Thanks for jumping on.
608
00:38:49,058 --> 00:38:49,538
Thank you.
609
00:38:49,538 --> 00:38:49,858
Thanks.
610
00:38:49,858 --> 00:38:50,723
Great to be here.
