In Conversation with Julie Segal Institutional Investor

In episode 5, Julie talks to Oliver Fadly of NEPC about why he’s cautious on private credit right now after the explosive growth in the asset class over the last 15 years, why he expects much more transparency in the coming years, and why it’s hard to find managers with true track records that you can dig into to get a picture of their investment chops. Oliver and Julie discuss the good and the bad of consolidation and the increasing number of smaller private credit shops that are getting acquired by or doing joint ventures with larger asset managers.And amid all of those deals, Oliver is watching the inevitable shift in talent. Top people are getting contracts to stay for three or five years, but what’s happening to the people below that?

Oliver also talks about portfolio finance and so-called NAV loans, which have been increasing — and why he’s pretty cautious (again that word!) about the sector and spending time trying to understand the motivation behind both the private equity firms that are taking on these loans and the credit funds that are making them.

Oliver also speaks to capital structure stress, the result of a lot of private credit deals being done at the peak when rates were near zero. These companies have now burned through a lot of cash, and while there still isn’t a huge wave of defaults, there are a lot of hard conversations to come. For investors, there may be opportunities to provide transitional capital to get a company “to the other side,” as Oliver points out.

As always, I want to hear your thoughts. Email me at jsegal@institutionalinvestor.com or message me on LinkedIn. Which reminds me that I have to get back to a listener, who told me I should have asked a previous guest a few more questions. He’s right and I’ll respond. Thanks for listening everyone.

Michael Levy, CEO of Crow Holdings, says the bottom third of office buildings are redevelopment projects that are a “multi-decade problem.”

In today’s episode, Julie sits down in New York to talk with Michael Levy, CEO of Crow Holdings, the private real estate developer and investment firm in Dallas. After an 18-year career at Morgan Stanley, which included restructuring the firm’s real estate business during the depths of the financial crisis and being COO of Morgan Stanley Investment Management, he moved to a red state and became the first outsider to lead the family business started by Trammell Crow 75 years ago. That’s a notoriously tough job — for obvious reasons.Julie and Michael discussed the new reality of the office, why — when first joining Crow — Michael just listened to people for such a long time before moving their cheese, why Crow will NEVER go public, and what it means to run a company “for employees.” Employees. That was a new concept for me.There’s a ton more. And it’s always the details that make a story. Feel free to email me at jsegal@institutionalinvestor.com with your thoughts on this episode and any ideas.

Rishi Ganti argues there is a meaningful alternative to investing in tradeable markets — but it’s not easy.



In this episode of the podcast, Julie Segal talks to Rishi Ganti, a veteran of J.P. Morgan and Two Sigma and co-founder of Orthogon Partners, which invests in untraded or esoteric assets. Or what might be even better described as investments that require discovery, a process Rishi calls magical  — it’s finance essentialism, bringing ideas and money together.

Julie and Rishi also talk about the seemingly endless stream of college graduates who make their way to Wall Street every year to work in markets that are designed to eliminate exactly what they came for — alpha. People choose to forget what they learned in Economics 101: the law of competition. Rishi, who chose instead to invest in untraded assets, talks about the challenges of finding these opportunities, building structures so they can be invested in, and convincing allocators of the rewards.

For more on Orthogon and the problems with modern finance, read ⁠II’s story⁠ from 2020.

Bob Elliott wants to offer ETFs that replicate the return streams of hedge funds and other alternatives to both pensions and individuals who can’t justify paying 2 and 20.Bob Elliott is a co-founder of Unlimited, which wants to bring sophisticated hedge fund strategies to individual investors who haven’t had access to strategies that could help protect their savings from market swings or a prolonged downturn. But any asset manager that wants to offer alternative investments like hedge funds to individuals needs to deal with the cost problem: how to turn the traditional 2 and 20, meaning a 2 percent management fee plus a 20 percent incentive fee, into something reasonable.

In today’s episode, Elliott breaks down the technology that he uses to translate publicly available information on industry hedge fund returns into a general picture of positions that Unlimited can then deliver in an ETF.

But more importantly, Elliott talks about this type of innovation’s potential effect on the hedge fund industry and alternative investments in general. While he doesn’t think it’s going to happen tomorrow, Elliott does think the transparency and lower costs of replication could seriously challenge at least mediocre managers and either push them out entirely or force them to improve. As he says, individual should benefit if Unlimited can not only reprice the cost of access to hedge funds, but can out-compete marginal managers. Then the start-up's machine learning technology will be replicating a pool of higher returns.

And replicating the returns of private equity, private credit, and venture capital is even easier than hedge funds, Elliott argues. There are plenty of lookalikes of these companies in public markets, where investors can buy and sell at will and costs are a tiny fraction of the 6 to 8 percent charged by managers. But the big sticking point may be institutional investors who have become accustomed to having their holdings in private companies priced only quarterly and the return profile fiction that creates.

Listen as Elliott also discusses critics of democratization, the positive effect of transparency on portfolio construction, and the long lack of innovation in the investment industry.

Today I’m talking to Jonathan Lavine, co-managing partner of Bain Capital and chief investment officer of Bain Capital Credit. In this episode, Jonathan talks about his path to the esoteric world of private credit, the transformation of risk-taking on Wall Street after the global financial crisis, and his view of those changes 15 years later. With many market crises under his belt, Jonathan walks through what he’s learned and what is still unknowable about how any downturn will unfold. The best investors remain open-minded, even when they think they’ve seen the movie before.

Jonathan also talks about his work with Ken Burns, who is now working on a documentary of the Revolutionary War, and what he’s learned through his relationship with the filmmaker. Perhaps, that’s some passionate story telling. Listen to Jonathan’s view of the real world impact of private financing, what the industry could do better, the opportunities — and, of course, a few worries.

Welcome to In Conversation with Julie Segal, a podcast about the world of institutional investors.



Music: Motivate Me by Mixaund