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Ken Kencel on the Rise of Private Capital · Masters in Business

• 0:02
  Speaker 1: This is Mesters in Business with very Red Holds on
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  Speaker 1: Bloomberg Radio this weekend. On the podcast, I have an
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  Speaker 1: extra special guest, Ken can Sell of Churchill Asset Management, CEO,
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  Speaker 1: founder President. This is really a fascinating story. Ken was
• 0:21
  Speaker 1: there at the beginning of the private credit markets when
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  Speaker 1: he was working at Drexel, and he's been at a
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  Speaker 1: number of shops, including Chase and Carlisle. Really few people
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  Speaker 1: in the industry have seen the growth of this from
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  Speaker 1: a tiny, little niche form of credit to a trillion
• 0:46
  Speaker 1: dollar plus industry that's become a key part of asset
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  Speaker 1: allocation and a key part of the management of foundations, endowments,
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  Speaker 1: other large institutional investment. So I found this conversation really
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  Speaker 1: to be absolutely a masterclass and totally fascinating, and I
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  Speaker 1: think you will as well. With no further ado, my
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  Speaker 1: conversation with Ken ken Sell of Churchill Asset Management. Ken
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  Speaker 1: ken Sell, Welcome to Bloomberg. Thanks so much, very great
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  Speaker 1: to be here and love love the format. Thanks so
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  Speaker 1: much for coming. I've very much been looking forward to
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  Speaker 1: this conversation. Let's start out by digging into your career,
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  Speaker 1: which is really quite fascinating. You start at Drexel in
• 1:34
  Speaker 1: the m and a group. What was that like? That
• 1:37
  Speaker 1: had to be quite an experience. It was a fascinating
• 1:41
  Speaker 1: time and an incredible group of people. I will tell
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  Speaker 1: you that you know, in many respects, you know, you
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  Speaker 1: look at you look at experiences in your career and
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  Speaker 1: think about you know how they influence you, and think
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  Speaker 1: about you know, organizations, and you know the environment you
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  Speaker 1: want to work in. And Drexel is an incredibly exciting
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  Speaker 1: place to work. Young people given tremendous responsibility at frankly
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  Speaker 1: a very young age in their careers. And I got
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  Speaker 1: the opportunity to work with some really interesting folks who
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  Speaker 1: continue today to be involved in private equity and private
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  Speaker 1: credit and see them all the time and very proud
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  Speaker 1: of that time. Was a great time from that era.
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  Speaker 1: Any particular deals or events that stand out as as
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  Speaker 1: highlights or really memorable, well, the deal everybody thinks about
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  Speaker 1: in that era and kind of the defining deal was Rjr.
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  Speaker 1: The Barbarians at the Barbarians at the Gate and financing.
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  Speaker 1: What most people don't realize is that that deal had
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  Speaker 1: been hanging around as a potential transaction for a long
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  Speaker 1: time and a lot of firms had looked at it
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  Speaker 1: and had had conversations with the company, and you know,
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  Speaker 1: it was, you know, frankly for us, you know, younger guys,
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  Speaker 1: and I was, you know, I was a you know,
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  Speaker 1: an associate or VP. Back down, I was, you know,
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  Speaker 1: one of the younger folks in the crew. It was
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  Speaker 1: a bit of a tar bag be back then. No ords,
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  Speaker 1: you know, the senior folks would go around and say, okay,
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  Speaker 1: we're going to do yet another analysis on our JR.
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  Speaker 1: I'm going to look at a buy out and look
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  Speaker 1: at the pricing, look at the structure. So you know,
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  Speaker 1: it got to the point where you know, it was
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  Speaker 1: exciting at first as a deal, but I would say
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  Speaker 1: over time we were all kind of under our desks
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  Speaker 1: when when the assignment partner came around looking for somebody
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  Speaker 1: to work on it. So, you know, it's funny how
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  Speaker 1: deals turn out to be, you know, Bellweather deals and
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  Speaker 1: known across you know, across the didn't look but it
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  Speaker 1: didn't look better at the time. People were running, people
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  Speaker 1: were running away from working on it. So so so
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  Speaker 1: you end up at Chase Financial where you stand up
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  Speaker 1: their high yield business. Tell us a little bit about that.
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  Speaker 1: How did you get to Chase? Sure? And what was
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  Speaker 1: it like back then? They weren't the giant player. They
• 3:42
  Speaker 1: weren't In fact, that was pre merger with Mittmanny Hanny
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  Speaker 1: and Chemical and JP Morgan and et cetera. Well, you
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  Speaker 1: know it was interesting, you know when you know, I
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  Speaker 1: think all of us were a bit surprised when Drexel left,
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  Speaker 1: you know, the corporate landscape and and you know, all
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  Speaker 1: of us were out trying to figure out, okay, well
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  Speaker 1: what you know, where do we go and and what
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  Speaker 1: was fascinating about Drexsland The kind of the diaspora, if
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  Speaker 1: you will, of that era was that we all basically
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  Speaker 1: went out looking to take that experience, you know, particularly
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  Speaker 1: in a high yield and kind of buy out and
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  Speaker 1: financing and do it at either banks or you know,
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  Speaker 1: other other investment banks. So I ended up a Chase
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  Speaker 1: in the early nineties, and they, interestingly enough, had just
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  Speaker 1: formed a section twenty. They really weren't in the investment
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  Speaker 1: banking business, and they looked at the opportunity there and said, gee,
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  Speaker 1: we should really have a you know, a high yield
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  Speaker 1: business and a financing business. And so Tom Lebreck and
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  Speaker 1: Art Ryan hired me to start their high eel business,
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  Speaker 1: and it was a great it was a great place
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  Speaker 1: to work. Unfortunately, you know, they went through a series
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  Speaker 1: of about, you know, a dozen mergers in the period
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  Speaker 1: of a probably five years. I love the joke about
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  Speaker 1: the person who says they they're sitting at their same desk,
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  Speaker 1: but like every three months they get a new set
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  Speaker 1: of business cards, right, and they just keep a stack
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  Speaker 1: of all their old ones. First we were what was it,
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  Speaker 1: dime manny Hanney. There was just a run of acquisitions
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  Speaker 1: until the behemoth that they pretty much are the mac
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  Speaker 1: Daddy in the space. That's exactly right. And back then,
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  Speaker 1: you know, it was again it was a very interesting
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  Speaker 1: place to be because they had lots of capital and
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  Speaker 1: they had lots of clients, but historically they had not
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  Speaker 1: been in that business. So we started to hio business
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  Speaker 1: there in the early nineties and frankly it was going
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  Speaker 1: quite well until you know, the first of what turned
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  Speaker 1: out to be many mergers. And then I left there
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  Speaker 1: and joined a number of my colleagues from Drexel and
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  Speaker 1: launched a business that, as it turns out, was pretty
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  Speaker 1: much a carbon copy of the business we have today.
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  Speaker 1: And it was a It was backed by the largest
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  Speaker 1: bank in France. It was called Indo Suis Capital, and
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  Speaker 1: in many respects it was a lot like Drexel in
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  Speaker 1: the sense that super talented people, incredibly flexible, um, you know,
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  Speaker 1: in terms of giving young people opportunity, et cetera. It
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  Speaker 1: was a relatively small group, but we became one of
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  Speaker 1: the most active lenders and financing sources and investors to
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  Speaker 1: mid size US companies and had lots of very talented
• 6:17
  Speaker 1: folks that we worked with, so that that kind of
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  Speaker 1: led one thing leads to another, and that led us
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  Speaker 1: to led me to getting back with a lot of
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  Speaker 1: my old colleagues from from Drexeland, you know, built quite
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  Speaker 1: an interesting business there for almost ten years. So many questions,
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  Speaker 1: So Indosuez Capital sounds so exotic French bank. What was
• 6:36
  Speaker 1: their focus? Why stay investing in mid market US private
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  Speaker 1: private credit? Seems unusual? Right? So the first thing to
• 6:47
  Speaker 1: think about is that when we first met with them,
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  Speaker 1: I'll never forget meeting with the gentleman who was heading
• 6:53
  Speaker 1: up the bank in the United States, and they essentially
• 6:56
  Speaker 1: had virtually no significant business in the US. They were
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  Speaker 1: lending to aircraft, you know, under aircraft and had a
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  Speaker 1: couple other very small businesses, but they aspired to be
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  Speaker 1: a much larger player in the financing markets, and we
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  Speaker 1: brought them a plan that you know, I think was
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  Speaker 1: very similar to what the banks were doing at the time,
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  Speaker 1: which was providing financing to private equity owned companies. Huge
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  Speaker 1: area of growth in the economy. PE at that point
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  Speaker 1: was really just developing in the middle market. You had
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  Speaker 1: a lot of the big buyout firms, they were doing
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  Speaker 1: the transactions in the eighties that the early nineties, but there,
• 7:34
  Speaker 1: you know, the these large firms were spinning off smaller
• 7:37
  Speaker 1: private equity firms and they were doing midsized deals and
• 7:41
  Speaker 1: so financing and actually investing co investing in those deals.
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  Speaker 1: You know, it was a very interesting place to be
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  Speaker 1: and it was a credibly fast growing area. In some cases,
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  Speaker 1: the big banks weren't quite as interested in financing those deals.
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  Speaker 1: So we created basically a mid market lending platform that
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  Speaker 1: ultimately spun out some of the most talented and capable
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  Speaker 1: folks you know, within the private debt world today. So
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  Speaker 1: lots of folks work there that now run very large
• 8:11
  Speaker 1: alternative asset management firms and credit credit arms affirms. So
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  Speaker 1: it was a very very interesting place. But we did
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  Speaker 1: not only did the financing for deals, we actually invested
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  Speaker 1: alongside those private equity firms as an equity partner. Right.
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  Speaker 1: So the theory was, that's great that you're providing a loan,
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  Speaker 1: but if you can co invest with them and get
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  Speaker 1: the upside of partnering with some of the most successful
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  Speaker 1: private equity funds in the United States, you know, a
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  Speaker 1: great way to enhance your returns. We call that legal
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  Speaker 1: insider trading. Hey, I know this private company is about
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  Speaker 1: to get a giant line of credit and that's going
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  Speaker 1: to help them go to the next level. Let's get
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  Speaker 1: an equity piece. Also kind of like that, I mean,
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  Speaker 1: I would say that what we what we really did
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  Speaker 1: is focus on the private equity firms that really had
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  Speaker 1: a great track record. You know, we knew the principles,
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  Speaker 1: we knew that they had done. You know, a good
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  Speaker 1: deal is acquiring you know, attractive and high performing businesses,
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  Speaker 1: and so you know, we we looked to finance those deals,
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  Speaker 1: but essentially said to those those private equity firms, look,
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  Speaker 1: we you know, we we think you could do a
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  Speaker 1: great job. We love your investment strategy, we love the
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  Speaker 1: industries you invest in. You know, we'd love to co
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  Speaker 1: invest with you, not not as a control but as
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  Speaker 1: a minority investor. Right, So if they were acquiring a business,
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  Speaker 1: you know, we would often take an equity investment as well,
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  Speaker 1: and that model proved to be very very successful. Now,
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  Speaker 1: if you think about the time and place that we
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  Speaker 1: were operating, it essentially was the precursor to the current
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  Speaker 1: private credit world, you know, in the words, you know,
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  Speaker 1: really we were managed in investing um, you know, alongside
• 9:44
  Speaker 1: you know, leading private equity funds and managing the bank's capital.
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  Speaker 1: We actually started raising third party money back then as well.
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  Speaker 1: But that's really interesting. I want to circle back to
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  Speaker 1: something you mentioned about how that middle market forms if
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  Speaker 1: and let's let's put this in the frame work of
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  Speaker 1: the nineteen nineties. The market, the public markets were doing great.
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  Speaker 1: A lot of these companies were becoming very large, and
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  Speaker 1: I think the traditional sources of financing were chasing the big,
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  Speaker 1: bigger companies, and suddenly like a void developed underneath. Is
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  Speaker 1: that a fair way to describe that. That's exactly right.
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  Speaker 1: In fact, as things subsequently played out, what you saw
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  Speaker 1: is that wave of bank consolidation that I referred to
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  Speaker 1: ultimately brought banks. I mentioned Chase for example, started with
• 10:32
  Speaker 1: their section twenty when when we launched their high business
• 10:36
  Speaker 1: is the investment banking affiliates. Right, so now words Chase said,
• 10:39
  Speaker 1: wait a minute, we can be an investment bank. We're
• 10:42
  Speaker 1: going to form our own investment banking operation. In their case,
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  Speaker 1: it was called Chase Securities is now JP Morgan Securities them.
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  Speaker 1: But but what was happening is that wave of mergers,
• 10:53
  Speaker 1: you know, the elimination of Glass Stiegel and the ability
• 10:56
  Speaker 1: of banks to consolidate and form their own investment bank
• 11:00
  Speaker 1: in their own securities businesses led banks to what effectively
• 11:04
  Speaker 1: was a higher margin business. Right Rather than you know,
• 11:07
  Speaker 1: put all their capital in a single loan and hold two, three,
• 11:10
  Speaker 1: four or five million dollars a loan, they could actually
• 11:13
  Speaker 1: arrange to distribute the loan. And so what we saw
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  Speaker 1: over that period of time was that banks became much
• 11:20
  Speaker 1: more in the moving business, if you will, as opposed
• 11:23
  Speaker 1: to being in the storage business. Right. So you know
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  Speaker 1: where did that void get filled? It got filled ultimately
• 11:32
  Speaker 1: initially by you know, some of these more esoteric businesses
• 11:36
  Speaker 1: like Indoso as Capital and of course ge Capital had
• 11:39
  Speaker 1: a lending business very similar, but over time it ultimately
• 11:42
  Speaker 1: got filled by private capital managers, direct lenders, firms that
• 11:46
  Speaker 1: were raising institutional capital to invest in private companies. So
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  Speaker 1: underserved in beginning really in the nineties, but as that
• 11:55
  Speaker 1: underserved dynamic continue to grow, and as the middle market
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  Speaker 1: continue to grow. I mean, interestingly, the US middle market
• 12:02
  Speaker 1: is the third largest economy in the world. That's an
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  Speaker 1: amazing stat about, right, that really is an incredible stat
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  Speaker 1: So you're building out a middle market private credit bank,
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  Speaker 1: and alone comes Carlisle and says, hey, we'd like to
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  Speaker 1: absorb you. Tell us a little bit about that experience.
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  Speaker 1: So one stop along the way. So in subsequent to
• 12:24
  Speaker 1: that business at endows who has I launched my own
• 12:27
  Speaker 1: firm in two thousand and six and we and this
• 12:30
  Speaker 1: is now further into that bank consolidation dynamic, and we
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  Speaker 1: raised about five hundred millions of private equity. And the
• 12:37
  Speaker 1: thesis was, which turned out to be completely true, is
• 12:41
  Speaker 1: that these banks were going to move away from the
• 12:44
  Speaker 1: business of actually lending money to mid sized companies. It
• 12:48
  Speaker 1: was a huge and growing market, and in fact, asset
• 12:52
  Speaker 1: managers were going to become the giants of that business,
• 12:56
  Speaker 1: including firms like Carlisle and KKR and others, and so
• 12:59
  Speaker 1: to the extent that we could build a best in
• 13:02
  Speaker 1: class private credit direct lending platform, there would be buyers
• 13:07
  Speaker 1: of that business, because again, private equity firms always build
• 13:09
  Speaker 1: things to sell them, right, And so five years into
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  Speaker 1: that growth of our business, we sold a firm to
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  Speaker 1: Carlisle in twenty eleven. Carlisle was in the process of
• 13:19
  Speaker 1: going public. So if you think about it, they're bankers
• 13:23
  Speaker 1: were saying to them, you know, you're great in private equity.
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  Speaker 1: You've got a big real estate platform. By the way,
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  Speaker 1: you're not really in this private credit business, and that's
• 13:31
  Speaker 1: really going to be a growth area. You should have
• 13:33
  Speaker 1: a platform there. And that's really what was the genesis
• 13:37
  Speaker 1: for our sale to Carlisle. So let's talk a little
• 13:41
  Speaker 1: bit about the history of your business. You launch your
• 13:47
  Speaker 1: own firm, and a couple of years later, along comes
• 13:51
  Speaker 1: Carlisle and says, hey, let's talk about integrating what you
• 13:56
  Speaker 1: do into what we do. How did that come about
• 13:58
  Speaker 1: and what was that like during that period? Yeah, sure,
• 14:02
  Speaker 1: Now it was interesting. Um, of course we were coming
• 14:05
  Speaker 1: out of the GFC at that point, and you launched
• 14:10
  Speaker 1: an O six, launched six and we sold to carl
• 14:12
  Speaker 1: in twenty eleven. So so let's let's before we jump
• 14:15
  Speaker 1: to Carlisle. Then let me ask you private credit. The
• 14:19
  Speaker 1: bank's freeze up in O eight oh nine, right, how
• 14:22
  Speaker 1: was your business during that period? Was that a target
• 14:24
  Speaker 1: rich environment or what was that like? So interestingly enough,
• 14:29
  Speaker 1: somewhat different from today, right, because if you think back then,
• 14:33
  Speaker 1: we were we were one of only a handful of
• 14:37
  Speaker 1: private credit firms. The amount of liquidity or dry powder
• 14:40
  Speaker 1: in our world was much more limited. The banks were
• 14:43
  Speaker 1: essentially out of the business, right, They weren't landing at
• 14:46
  Speaker 1: that point. So while there was a lot of dry
• 14:48
  Speaker 1: powder and private equity probably back then two hundred billion
• 14:51
  Speaker 1: or so of liquidity, the private equity firms really did
• 14:55
  Speaker 1: not have a large amount of private dat to finance
• 14:59
  Speaker 1: their They were a handful of us, right, So you know,
• 15:02
  Speaker 1: we saw some opportunities, but I would say that it's
• 15:05
  Speaker 1: really only been in the last ten years where you've
• 15:08
  Speaker 1: seen this tremendous growth growth in private credit. So today,
• 15:11
  Speaker 1: for example, the situation is very different. Right. Yes, there's
• 15:14
  Speaker 1: a lot of aquidity in private equity, but there's also
• 15:16
  Speaker 1: a lot of aquidity in private credit to be able
• 15:18
  Speaker 1: to finance those transactions, so a very different dynamic than
• 15:22
  Speaker 1: we saw back in two thousand and seven, two eight,
• 15:25
  Speaker 1: two thousand and nine. That being said, we stuck tornating.
• 15:29
  Speaker 1: We stayed focused on high quality companies. Our track record
• 15:33
  Speaker 1: and performance through the GFC was very very good, and
• 15:36
  Speaker 1: so when we came out of the GFC, my private
• 15:39
  Speaker 1: our private equity owners were starting to think, Okay, well,
• 15:42
  Speaker 1: how do we monetize this investment we made? And fortunately
• 15:48
  Speaker 1: for us, there were a number of large scale alternative
• 15:51
  Speaker 1: asset managers like Carlisle that we're looking to grow in
• 15:55
  Speaker 1: private credit. Carlisle was in the midst of going public
• 15:57
  Speaker 1: at that point, and I know David and Bill, the founders,
• 16:01
  Speaker 1: for well over almost two decades, and so I approached
• 16:06
  Speaker 1: them about the opportunity of potentially having Churchill become the
• 16:10
  Speaker 1: private credit business within the broader Carlisle grow. So you
• 16:14
  Speaker 1: approached them, they didn't come knocking on your door. That's
• 16:16
  Speaker 1: very fascinating. I did approach them, and um, you know,
• 16:20
  Speaker 1: it quickly became clear that the fit was very very good.
• 16:24
  Speaker 1: Um it was something that gave them a broader platform
• 16:28
  Speaker 1: in terms of the ability to you know, to provide
• 16:30
  Speaker 1: private credit and frankly it was an area that that
• 16:33
  Speaker 1: all the analysts were saying was going to be an
• 16:35
  Speaker 1: air of tremendous growth. So we did the deal in
• 16:38
  Speaker 1: twenty eleven, and um, I kind of gave up my baby,
• 16:42
  Speaker 1: if you will. Um So I went from being a
• 16:45
  Speaker 1: founder and an owner to being more of an employee
• 16:48
  Speaker 1: and a and a member of the Carlisle um and
• 16:53
  Speaker 1: you know, for several years, uh, you know, we operated
• 16:56
  Speaker 1: as part of their you know, it's really their direct
• 16:58
  Speaker 1: lending platform. Of what led to you saying it's time
• 17:02
  Speaker 1: to spin out and be a standalone again. So a
• 17:04
  Speaker 1: couple of things, you know. One was I found that
• 17:09
  Speaker 1: once you're a founder and you have a lot more
• 17:12
  Speaker 1: control over your you know, your your culture and your
• 17:16
  Speaker 1: people and the environment and and really the growth dynamics
• 17:19
  Speaker 1: and your business that I missed that you know, I missed,
• 17:23
  Speaker 1: you know to me, you know, my business and really
• 17:27
  Speaker 1: the business you know that that I've done throughout my
• 17:29
  Speaker 1: career is really all about the people. You know, you see, firms,
• 17:33
  Speaker 1: I mean, capital is a commodity, right, so at the
• 17:35
  Speaker 1: end of the day, it's really about building, developing and
• 17:38
  Speaker 1: growing your people. And so for me, the ability to
• 17:42
  Speaker 1: go back and really be in control of that dynamic.
• 17:46
  Speaker 1: Be where I was, which was a founder and an
• 17:49
  Speaker 1: owner of my own firm, was really where my heart was.
• 17:52
  Speaker 1: And so, you know, I went to David and Bill
• 17:55
  Speaker 1: in two and fourteen. We had kind of served out
• 17:58
  Speaker 1: our three year term there and there was an opportunity
• 18:01
  Speaker 1: to to do that, and they were incredibly gracious and
• 18:05
  Speaker 1: allowing me to do that. And you know, for me,
• 18:08
  Speaker 1: I also saw the business changing. And what I was
• 18:12
  Speaker 1: seeing was that the ability to deliver large amounts of
• 18:16
  Speaker 1: capital to really operate like a bank. Right. You know,
• 18:20
  Speaker 1: we saw this transition starting in late nineties and early
• 18:24
  Speaker 1: two thousands, but at this point you were seeing large
• 18:27
  Speaker 1: scale institutions allocate significant dollars to private credit, right, and
• 18:31
  Speaker 1: it became a very well accepted asset class. Why because
• 18:35
  Speaker 1: the banks had been leaving these midsized companies needed financing.
• 18:39
  Speaker 1: And now it wasn't a matter of oh, we're going
• 18:41
  Speaker 1: to invest ten or twenty or thirty million dollars in
• 18:43
  Speaker 1: a private credit deal. It was we're going to be
• 18:46
  Speaker 1: the lead lender and a four hundred million dollars deal.
• 18:49
  Speaker 1: And so what I felt was that there was going
• 18:53
  Speaker 1: to be a tremendous need for significant capital, and so
• 18:57
  Speaker 1: joining a firm that had that was really an asset
• 19:00
  Speaker 1: owner and that could actually invest their own balance sheet
• 19:03
  Speaker 1: alongside third party investors was going to be a key
• 19:07
  Speaker 1: to being able to grow the business. In the case
• 19:10
  Speaker 1: of you know, the firm that we ultimately partnered with, Interestingly,
• 19:14
  Speaker 1: tia had just acquired Nuvine, so they had not only
• 19:17
  Speaker 1: did they have a balance sheet and were a significant
• 19:20
  Speaker 1: investor in private credit. In fact, TIAA is the second
• 19:23
  Speaker 1: largest investor in private credit in the world. So we
• 19:26
  Speaker 1: found a good partner, but they also owned an asset
• 19:29
  Speaker 1: management platform, so they had institutional distribution in the ability
• 19:33
  Speaker 1: to raise capital from third parties globally. So you know
• 19:37
  Speaker 1: what we saw, and you know, I've formed a relationship
• 19:42
  Speaker 1: back in twenty fourteen fifteen with jose Meniah who is
• 19:45
  Speaker 1: now the CEO of Nuvine and actually still sits on
• 19:48
  Speaker 1: our board today, and I could see his vision for
• 19:52
  Speaker 1: where he wanted to grow this business and it was
• 19:55
  Speaker 1: completely aligned with mine. And so the opportunity to launch
• 20:00
  Speaker 1: relaunch effectively my firm with our name by the way,
• 20:04
  Speaker 1: which is kind of nice with my partners and by
• 20:07
  Speaker 1: the way, all of my partners ultimately joined me. All
• 20:09
  Speaker 1: my founding partners joined me to join as an affiliate
• 20:15
  Speaker 1: of Nuvene and tia committed an initial amount of capital.
• 20:19
  Speaker 1: Back then it was three hundred million dollars and don't
• 20:22
  Speaker 1: lose it. Today we manage over twenty three billion dollars
• 20:26
  Speaker 1: for TIAA and take very very seriously our obligation to
• 20:30
  Speaker 1: their members. College professors, university professors, healthcare workers over five
• 20:35
  Speaker 1: million of them, you know, all across the US. And
• 20:37
  Speaker 1: every time I have one of these conversations, invariably and
• 20:40
  Speaker 1: variance probably you two. You know, Well, I've got an
• 20:42
  Speaker 1: uncle who's a college professor or a somebody who's a teacher,
• 20:45
  Speaker 1: and so I'm passionate about education, and so the ability
• 20:49
  Speaker 1: to invest in behalf of you know, millions of college
• 20:53
  Speaker 1: and university professors and teachers is something that means a
• 20:56
  Speaker 1: lot to me. So this raises a really interesting question.
• 21:00
  Speaker 1: When you began this industry really didn't exist. Credit was
• 21:06
  Speaker 1: you know, a twinkle in a few people's eyes. And
• 21:09
  Speaker 1: now we've watched it grow and become institutionalized, and you
• 21:13
  Speaker 1: go from Carlisle to Nouvene and TIA, what does the
• 21:19
  Speaker 1: state of private credit look like today and how different
• 21:22
  Speaker 1: is it from what we saw in the two thousands
• 21:25
  Speaker 1: and nineties, even the early days in the eighties. Well,
• 21:28
  Speaker 1: the first answer is it's very different in a number
• 21:31
  Speaker 1: of ways, but I think fundamentally better. And let me
• 21:35
  Speaker 1: explain what I mean by that. So, if you went
• 21:38
  Speaker 1: back to you know, kind of the bank era, right
• 21:42
  Speaker 1: when banks were doing these mid market loans, what you'd
• 21:47
  Speaker 1: see is that whether it's Chase Manhattan or Chemical Bank
• 21:51
  Speaker 1: or JP Morgan or whoever, what you would see is
• 21:54
  Speaker 1: these banks would make a loan and they would hold
• 21:58
  Speaker 1: virtually all that loan on their bank sheet. So you
• 22:00
  Speaker 1: would see pretty high concentrations of you know, one hundred,
• 22:03
  Speaker 1: two hundred million, three hundred million, all essentially sitting on
• 22:07
  Speaker 1: a single balance sheet of the bank. So obviously risk managers,
• 22:11
  Speaker 1: you know and you know and CROs we're very focused
• 22:14
  Speaker 1: on how do we manage that risk and diversify that
• 22:17
  Speaker 1: that credit risk that they were taking on in mid
• 22:20
  Speaker 1: market companies. What's fascinating about the model today and really
• 22:25
  Speaker 1: coming out of the GFC is if you look at
• 22:27
  Speaker 1: the best private credit managers today, the first thing you
• 22:30
  Speaker 1: see is that we compete for capital based on performance, right,
• 22:35
  Speaker 1: So we attract investors based on delivering solid risk adjusted
• 22:40
  Speaker 1: returns as opposed to banks that are basically looking to
• 22:43
  Speaker 1: make loans to drive short term earnings. So I would
• 22:46
  Speaker 1: say that the transition away from banks has helped diversify
• 22:52
  Speaker 1: the investments in private credits. What do we mean by that?
• 22:55
  Speaker 1: If you look at our funds today, we manage about
• 22:58
  Speaker 1: forty six billion capital at Churchill today and we'll talk
• 23:01
  Speaker 1: about the acquisition that Navine did of Arkmont in a
• 23:05
  Speaker 1: few minutes. But at Churchill Historical Business we manage that
• 23:08
  Speaker 1: capital on behalf of over fifteen hundred investors globally. So
• 23:13
  Speaker 1: when you think about the individual exposure to a specific
• 23:19
  Speaker 1: name in our funds, it represents less than one half
• 23:23
  Speaker 1: of one percent of the portfolio. So those investors are
• 23:27
  Speaker 1: getting an incredibly diversified and I would argue lower risk
• 23:31
  Speaker 1: profile than if, for example, one bank makes a four
• 23:33
  Speaker 1: hundred million dollars loan and holds the whole thing on
• 23:35
  Speaker 1: their balance sheet. So in that sense, it's very performance driven.
• 23:41
  Speaker 1: It's meaning the best managers attract capital, which was not
• 23:46
  Speaker 1: the case in the banking world. Two, the investments are
• 23:51
  Speaker 1: held over a broad range of institutional investors and highly
• 23:56
  Speaker 1: diversified because of the nature of how we fund our loans.
• 24:00
  Speaker 1: They're not held by one fund in our case, they're
• 24:03
  Speaker 1: held by separately manage accounts, coming funds, publicly registered vehicles, etc.
• 24:08
  Speaker 1: So healthier in the sense that the risk is more diversified.
• 24:12
  Speaker 1: And then thirdly, I would say, in the case of
• 24:14
  Speaker 1: of of of our business, we have a number of
• 24:17
  Speaker 1: real advantages over you know, over our competitors and over
• 24:20
  Speaker 1: banks that give us, I think, a better and ability
• 24:24
  Speaker 1: to deliver better outcomes for our investors, including the fact
• 24:27
  Speaker 1: that TIAA as our largest investor, invest directly alongside every
• 24:32
  Speaker 1: investor in our you know, in our in our in
• 24:35
  Speaker 1: our firm. And I want to put a little meat
• 24:38
  Speaker 1: on the bones when you were talking about the growth
• 24:41
  Speaker 1: of the space private debt AUM has grown to one
• 24:45
  Speaker 1: point three trillion dollars. That's a five x increase since
• 24:50
  Speaker 1: the financial crisis, and a doubling since twenty fifteen. So
• 24:55
  Speaker 1: this is not like a little niche anymore. This is
• 24:57
  Speaker 1: a trillion dollars space. Absolutely, And you know it's funny
• 25:01
  Speaker 1: when I you know, when I was on the road
• 25:03
  Speaker 1: in the early days, you know, talk about you know,
• 25:05
  Speaker 1: even even post GFC, you'd meet with large scale institutions
• 25:10
  Speaker 1: and you'd talk about senior secured loans, private lending covenants,
• 25:16
  Speaker 1: reasonable leverage, etc. Etc. And they would look at you
• 25:20
  Speaker 1: and say, well, that's all fantastic and sounds really interesting,
• 25:23
  Speaker 1: and the risk adjusted returns look really good, but we
• 25:25
  Speaker 1: don't really know where to put it right. In words,
• 25:28
  Speaker 1: it's not private equity, and it's not traditional fixed income,
• 25:31
  Speaker 1: you know, like investment grade fixed income, and so it's
• 25:34
  Speaker 1: sat in this kind of middle ground, and you know,
• 25:38
  Speaker 1: it took a while before larger institutions really accepted that
• 25:43
  Speaker 1: this could be a very attractive place to earn very
• 25:46
  Speaker 1: good risk adjusted returns. And early days it was you know,
• 25:51
  Speaker 1: probably ten percent, maybe maybe twenty percent of investors that
• 25:57
  Speaker 1: we would meet with that would really be allocating to
• 26:00
  Speaker 1: private credit. Today, ninety percent of the investors we meet
• 26:04
  Speaker 1: with have not only allocated to private credit, but there
• 26:07
  Speaker 1: they have a plan to increase their allocation to private credit.
• 26:11
  Speaker 1: So what what I've been able to, you know, have
• 26:13
  Speaker 1: a kind of a front row seat too during my
• 26:15
  Speaker 1: career was this tremendous transition from the mid market lending
• 26:21
  Speaker 1: business being really a bank led business, and then kind
• 26:25
  Speaker 1: of had an interim stop at ge Capital where it
• 26:28
  Speaker 1: was more of a kind of a finance company, if
• 26:29
  Speaker 1: you will, and then really accelerating over the last you know,
• 26:33
  Speaker 1: fifteen twenty years of being really an asset management business
• 26:36
  Speaker 1: in some respects no different than private equity right. In fact,
• 26:39
  Speaker 1: some private equity firms have private credit arms that managed
• 26:43
  Speaker 1: credit as well as equity. And you mentioned the acquisition
• 26:46
  Speaker 1: of Archman Asset Management by Nouvene. Tell us about the
• 26:50
  Speaker 1: thinking behind that. Does that get integrated to Churchhill or
• 26:53
  Speaker 1: is that a co investor? How does that work out? Sure? So,
• 26:57
  Speaker 1: you know, we you know, over the course of our
• 26:59
  Speaker 1: time as part of Nivene, it's been a fantastic partnership.
• 27:05
  Speaker 1: We've had great support from first Roger Ferguson, the former CEO,
• 27:09
  Speaker 1: and now to sound Brown Duckett whose current CEO of
• 27:11
  Speaker 1: TIAA and the CIO CEO and then also the CIO
• 27:15
  Speaker 1: as well. But what we saw was that we were
• 27:19
  Speaker 1: really not truly a global private credit manager. We were
• 27:23
  Speaker 1: one hundred percent focused on managing investments in the US.
• 27:29
  Speaker 1: About three or four years into our business, we TI
• 27:32
  Speaker 1: TIA actually moved all of the management of their private
• 27:35
  Speaker 1: equity fund commitments, all of the management of their private
• 27:39
  Speaker 1: equity co investments, and so we went from being just
• 27:41
  Speaker 1: a private debt investor to being a private capital investor.
• 27:46
  Speaker 1: And so that was a big event for us because
• 27:49
  Speaker 1: all of those private equity relationships as a limited partner
• 27:53
  Speaker 1: are fantastic drivers of knowledge and relationships and deal flow
• 27:59
  Speaker 1: to finance those deals with those private equity firms. So
• 28:02
  Speaker 1: today we manage over two hundred and seventy private equity
• 28:06
  Speaker 1: fund commitments and co invest alongside those investors. Interestingly enough,
• 28:11
  Speaker 1: that business, our business today is virtually identical to the business,
• 28:16
  Speaker 1: but much bigger than the business we had at Indo
• 28:18
  Speaker 1: Suez over twenty years ago. Meaning you're doing lending, you're
• 28:22
  Speaker 1: co investing in the equity. But what we didn't have
• 28:26
  Speaker 1: when we really stepped back and looked at it, we
• 28:28
  Speaker 1: didn't have Europe right. We didn't have an ability to
• 28:31
  Speaker 1: do what we do in the context of a European
• 28:35
  Speaker 1: market that was in many respects developing very rapidly and
• 28:41
  Speaker 1: probably five years behind the US. Does ARC mount solve
• 28:45
  Speaker 1: that problem for you? They do, And in fact, when
• 28:48
  Speaker 1: we started looking at potential partners, and I mean partners
• 28:51
  Speaker 1: in a very real sense. We looked at pretty much
• 28:54
  Speaker 1: all the direct lenders in Europe and what we saw
• 28:57
  Speaker 1: in arc Mount was in many respects the car and
• 29:00
  Speaker 1: copy of US in the United States. Entrepreneurial had been
• 29:05
  Speaker 1: part of a big firm at one point, had spun
• 29:07
  Speaker 1: out from that firm. We're very much focused on high quality,
• 29:13
  Speaker 1: conservative credits, you know, primarily private equity financed and owned businesses.
• 29:18
  Speaker 1: So you know, a mirror image of many respects of
• 29:21
  Speaker 1: what we were doing in the US mental market they
• 29:23
  Speaker 1: were doing in the mid and upper mental market in Europe.
• 29:26
  Speaker 1: And because Europe has been roughly five to ten years
• 29:31
  Speaker 1: behind the US in terms of that bank transition that
• 29:34
  Speaker 1: I described, it was an ability to participate in essentially
• 29:39
  Speaker 1: the same transition that's been going on the consolidation. Of course,
• 29:42
  Speaker 1: we just saw another consolidation with credit squeeze into ubs,
• 29:46
  Speaker 1: so Europe going through a very similar bank you know,
• 29:50
  Speaker 1: retrenchment as it relates to direct lending. Arcmont one of
• 29:54
  Speaker 1: the early adopters in Europe. They actually launched their firm
• 29:57
  Speaker 1: back in two ten, two eleven, so we wanted we
• 30:00
  Speaker 1: saw an opportunity to really partner with a leader in
• 30:04
  Speaker 1: the same business as US. And so what we did
• 30:07
  Speaker 1: really is take Churchill, which today is a top three
• 30:10
  Speaker 1: lender in the US middle market. We do over eleven
• 30:13
  Speaker 1: billion dollars of investment per year and over almost four
• 30:16
  Speaker 1: hundred companies. And we saw with arcmon and ability to
• 30:20
  Speaker 1: essentially take that model and partner with it a very
• 30:24
  Speaker 1: same market leading business in Europe, and we formed a
• 30:27
  Speaker 1: holding company called Nuvene Private Capital that basically is a
• 30:33
  Speaker 1: sixty seven billion dollar parent company that myself and the
• 30:37
  Speaker 1: CEO of Arcmond Co. Had And so we've taken a
• 30:41
  Speaker 1: market leading business in the US, a market leading business
• 30:44
  Speaker 1: in Europe, and now collectively we now have a global
• 30:48
  Speaker 1: private credit manager that can provide financing to cross border transactions,
• 30:53
  Speaker 1: can deliver a global solution to our investors. Right if
• 30:57
  Speaker 1: we have an investor that says, you know, I like Europe,
• 31:00
  Speaker 1: I like the US, can you give me a US
• 31:03
  Speaker 1: European global private capital solution? And obviously now we can
• 31:07
  Speaker 1: do that. Let's talk a little bit about twenty twenty two,
• 31:11
  Speaker 1: which for a lot of people in the capital markets
• 31:14
  Speaker 1: was a difficult and not exactly pleasant year. You guys
• 31:19
  Speaker 1: had a huge year. You invested eleven billion dollars. That's
• 31:22
  Speaker 1: a record three hundred and seventy five transactions. You raised
• 31:26
  Speaker 1: another eleven billion dollars in capital regard despite the economic environment.
• 31:32
  Speaker 1: Tell us a little bit about what made everything click
• 31:35
  Speaker 1: in twenty twenty two. Yeah, well, I think that you know,
• 31:39
  Speaker 1: twenty twenty two in many respects, and I would say
• 31:41
  Speaker 1: COVID in general, certainly the last three years of COVID
• 31:44
  Speaker 1: have really been a watershed for our firm. And I
• 31:47
  Speaker 1: think a lot of it has to do with investors
• 31:50
  Speaker 1: recognizing that how we invest and the advantages we have
• 31:56
  Speaker 1: in the ability to deliver attractive risk adjusted returns because
• 32:01
  Speaker 1: of our scale, our differentiated private equity relationships, and the
• 32:05
  Speaker 1: fact that we've been doing this a long time really
• 32:07
  Speaker 1: all came together in COVID. So it's not just twenty
• 32:10
  Speaker 1: twenty two. I would say it's rasically been through the
• 32:14
  Speaker 1: past three years. And what and what it's set the
• 32:17
  Speaker 1: stage for was investors really looking carefully at private credit
• 32:22
  Speaker 1: managers and saying, gee, you know, there's been this rush
• 32:25
  Speaker 1: to private credit. We need to really look deeper at
• 32:29
  Speaker 1: performance and track record. It's all well and good when
• 32:32
  Speaker 1: everything's going up, then the market environment, it's good and
• 32:35
  Speaker 1: you know, credits flowing. But when things get more difficult,
• 32:39
  Speaker 1: and certainly they did for everyone during COVID, how do
• 32:43
  Speaker 1: they manage to grow the business and how is their
• 32:46
  Speaker 1: portfolio performing in a in a you know, in a
• 32:50
  Speaker 1: essentially you know, an economy that was basically frozen. And
• 32:53
  Speaker 1: I think that what our investors saw is that Number one,
• 32:57
  Speaker 1: our portfolio held up incredibly well. We actually did not
• 33:02
  Speaker 1: have a full scale default during cod which is pretty interesting,
• 33:07
  Speaker 1: right when you think about, now, why is that? Well,
• 33:10
  Speaker 1: we financed high quality businesses. We don't invest in oil
• 33:13
  Speaker 1: and gas and restaurants in retail and more volatile businesses.
• 33:16
  Speaker 1: We stay away from all that, right, So we focus
• 33:19
  Speaker 1: on quality, We focus on market leaders. We partner with
• 33:24
  Speaker 1: private equity firms that themselves have a great track record
• 33:27
  Speaker 1: that focus on the kind of industries where we do invest,
• 33:30
  Speaker 1: which is technology and healthcare and business services and market
• 33:34
  Speaker 1: leaders in those areas, distribution logistics. So we go through COVID,
• 33:40
  Speaker 1: we perform extremely well. The portfolio does well, and investors
• 33:44
  Speaker 1: take note of that, and TIA takes note of that
• 33:46
  Speaker 1: as our largest investor, and so their allocations and investors
• 33:51
  Speaker 1: interest in US as a private credit manager grow exponentially,
• 33:56
  Speaker 1: and so you see our capital raising. You mentioned eleven
• 33:59
  Speaker 1: billion dollar last year. It was about twelve billion dollars
• 34:02
  Speaker 1: a year before that, and a significant number prior to that.
• 34:05
  Speaker 1: So during COVID we have raised well over thirty billion
• 34:09
  Speaker 1: dollars from TIA and other investors. And so performance, which
• 34:16
  Speaker 1: is kind of what I said earlier about you know,
• 34:19
  Speaker 1: performance attracts capital, right, So the lesser performers I think
• 34:22
  Speaker 1: struggled during COVID, and I'd say twenty twenty two is
• 34:25
  Speaker 1: the culmination of that, because not only did you have COVID,
• 34:28
  Speaker 1: but now you've got rising interest rates, and so if
• 34:31
  Speaker 1: you're financing marginal businesses, suddenly the cost of their loan.
• 34:36
  Speaker 1: The good news is our interest rate goes up. With
• 34:39
  Speaker 1: rising all of our loans are floating rate was gonna
• 34:43
  Speaker 1: no no good news for us. So let me jump
• 34:45
  Speaker 1: in and ask this. So prior to twenty twenty two,
• 34:48
  Speaker 1: we're effectively at zero, that's right, So how does the
• 34:53
  Speaker 1: my loans We're yielding six to seven percent, and then
• 34:55
  Speaker 1: what happens when rates go up to four? Loans today
• 34:58
  Speaker 1: are yielding eleven to twelve percent. So the very same
• 35:01
  Speaker 1: loan that we did a year ago at six to
• 35:03
  Speaker 1: seven percent is now yielding for our investors eleven to
• 35:07
  Speaker 1: twelve percent. So is it libor plus whatever the substitute.
• 35:12
  Speaker 1: That's exactly right, that's right, sofur right. So what we
• 35:16
  Speaker 1: saw was that not only did online base rates go
• 35:19
  Speaker 1: up about four hundred and fifty basis points maybe more today, right,
• 35:23
  Speaker 1: spreads widened and so that very same loan, a six
• 35:28
  Speaker 1: to seven percent loan today is yielding in our portfolio.
• 35:31
  Speaker 1: Reflects that our yield now is you know, eleven percent plus,
• 35:35
  Speaker 1: So better returns for our investors. Now. Conversely, you've got
• 35:40
  Speaker 1: to look at the companies and say, can they handle
• 35:43
  Speaker 1: you know, eleven percent interest? Right? Well, because we were
• 35:46
  Speaker 1: a very conservative lender, and because we were going into
• 35:49
  Speaker 1: transactions with very reasonable leverage. In fact, our average equity
• 35:52
  Speaker 1: and our transactions has been running about fifty five sixty
• 35:55
  Speaker 1: percent equity, right, so well capitalized, conservatives, structures, covenants, and
• 36:01
  Speaker 1: so the rise in rates has been beneficial to our investors,
• 36:04
  Speaker 1: but it is not caused broad based issues in our portfolio.
• 36:08
  Speaker 1: So we're sitting in a great place track record performance,
• 36:13
  Speaker 1: portfolio doing well, lots of liquidity, we continue to raise capital,
• 36:18
  Speaker 1: and investors institutions see that and as a result, gravitate
• 36:22
  Speaker 1: toward the better quality manager. So today, our yields on
• 36:27
  Speaker 1: our funds are, you know, at the highest levels they've
• 36:30
  Speaker 1: ever been in our history. Our portfolio remains in very
• 36:34
  Speaker 1: solid shape. We have a very very small number of
• 36:38
  Speaker 1: names even in our kind of watchless category, and we're
• 36:42
  Speaker 1: seeing interestingly enough, and this is I think a bit
• 36:44
  Speaker 1: of a surprise. The more challenged businesses are actually not
• 36:48
  Speaker 1: coming to market today. Right. If you've got a company
• 36:50
  Speaker 1: and they're struggling under their interest burden, or they're struggling
• 36:53
  Speaker 1: as a result of inability to pass on price increases
• 36:56
  Speaker 1: or problems with dealing with the rise and rates or
• 36:59
  Speaker 1: the consumer, they're probably not going to be businesses that
• 37:02
  Speaker 1: are being sold today. So the businesses that we are
• 37:06
  Speaker 1: seeing in our coming to market are higher quality, you know,
• 37:09
  Speaker 1: and so overall, you know, I would argue that the
• 37:13
  Speaker 1: current environment for us is really a golden age for
• 37:16
  Speaker 1: our ability to lend to quality businesses. By the way,
• 37:21
  Speaker 1: with lower leverage, right, because you can't lever it, you
• 37:24
  Speaker 1: can't lend it six times leverage today when rates are
• 37:26
  Speaker 1: eleven percent versus six. Right, So now leverage is lower,
• 37:30
  Speaker 1: covenants are more in favor of lenders like ourselves, and
• 37:34
  Speaker 1: I think, frankly, what we're seeing play out today in
• 37:37
  Speaker 1: the banking industry will only enhance that dynamic. Right, So
• 37:41
  Speaker 1: let's talk a little bit about the types of businesses
• 37:44
  Speaker 1: you're lending to. You said no restaurants, no retail, no
• 37:48
  Speaker 1: oil and gas. So anything that's either very volatile or
• 37:53
  Speaker 1: very specific like a good restaurant is a great business,
• 37:58
  Speaker 1: but as an industry, it's a razor thin margin, difficult
• 38:01
  Speaker 1: business with high turnover. What sort of businesses do you like?
• 38:05
  Speaker 1: Where do you follow? Sure? So we like market leading businesses.
• 38:09
  Speaker 1: So we like businesses that are in their niche a
• 38:12
  Speaker 1: you know, one or two player in terms of their business.
• 38:16
  Speaker 1: We like businesses that are really what I would call
• 38:18
  Speaker 1: traditional side middle market companies. So what does that really mean?
• 38:22
  Speaker 1: You know, we don't like the micro companies, right, companies
• 38:25
  Speaker 1: with you know, three four million dollars a year in
• 38:27
  Speaker 1: cash flow. Frankly, we saw in the GFC those businesses
• 38:31
  Speaker 1: were much more heavily impacted, right, So we want businesses
• 38:35
  Speaker 1: that are typically you know, fifty million to one hundred
• 38:40
  Speaker 1: million in cash flow maybe as small as twenty five million,
• 38:42
  Speaker 1: but but significant companies, market leaders in industries and with
• 38:49
  Speaker 1: demonstrated track records of strong historical growth. So what do
• 38:53
  Speaker 1: we mean by that? So software is a service business, right, So,
• 38:57
  Speaker 1: for example, a business that providesides software to banks or
• 39:03
  Speaker 1: to manufacturing companies where the software is actually embedded in
• 39:08
  Speaker 1: the business, right, highly unlikely to switch providers. Subscription subscription
• 39:13
  Speaker 1: model correct, by the way, not revenue based cash flow base.
• 39:16
  Speaker 1: No words, We're not lending to kind of pine this guy,
• 39:19
  Speaker 1: venture capital businesses. We're financing real companies that are the
• 39:23
  Speaker 1: lifeblood of the US economy. Healthcare. We're major financing provider
• 39:29
  Speaker 1: to healthcare businesses. Right. We financed, as an example, m
• 39:34
  Speaker 1: orthopedic practice build up, a large scale practice that is
• 39:39
  Speaker 1: providing healthcare services to you know, individuals and is a
• 39:44
  Speaker 1: leading practice in the in the New York area. We
• 39:47
  Speaker 1: financed that business. We financed us. You mentioned software um
• 39:51
  Speaker 1: a firm called Diligent. We have been a financing partner
• 39:54
  Speaker 1: of them for years. So you know, they're used to
• 39:56
  Speaker 1: keep information secure for boards and endowments and other public
• 40:04
  Speaker 1: and private investment boards. Optical scanning secure information ability to
• 40:10
  Speaker 1: update in a regular basis. You have a board meeting,
• 40:12
  Speaker 1: you want to update the materials. Five minutes before the meeting.
• 40:15
  Speaker 1: You downloaded that into their site, and so they are
• 40:17
  Speaker 1: the leader in that space. So market leaders recurring revenue,
• 40:21
  Speaker 1: recurring cash flow, information services, software, healthcare, distribution, logistics, business services.
• 40:30
  Speaker 1: But away from businesses that are very volatile, right, because
• 40:35
  Speaker 1: volatility brings all sorts of challenges, liquidity issues, issues with
• 40:41
  Speaker 1: respect to wiping out underlying equity value, or businesses that, frankly,
• 40:46
  Speaker 1: we could be completely right on the credit but wrong
• 40:48
  Speaker 1: on the commodity. Right. Oil goes up, going gas businesses
• 40:52
  Speaker 1: do well, it goes down. It takes everybody down, right,
• 40:55
  Speaker 1: So we like businesses where we can do our homework.
• 40:58
  Speaker 1: We can finance strong management teams backed by leading private
• 41:01
  Speaker 1: equity firms, and that's where we've been for our history.
• 41:04
  Speaker 1: So let's talk about those management teams. Once you make
• 41:09
  Speaker 1: either a credit or an equity or both investment into
• 41:13
  Speaker 1: a company, how closely do you stay involved with the
• 41:17
  Speaker 1: management team once the deal? You know, once the ink
• 41:20
  Speaker 1: has dried, do you stay involved or is it arms
• 41:23
  Speaker 1: length of them? Very very involved, And I think that's
• 41:26
  Speaker 1: that is in many respects and buy product of the
• 41:29
  Speaker 1: private equity business today, which has changed dramatically. So you know,
• 41:32
  Speaker 1: when you think about very you know, twenty twenty five
• 41:35
  Speaker 1: years ago, you know, private equity firms were buying businesses,
• 41:38
  Speaker 1: putting up ten percent equity, you know, buying companies for
• 41:42
  Speaker 1: you know, six seven, eight times cash flow and really
• 41:44
  Speaker 1: looking at cut costs and and and um and flip
• 41:49
  Speaker 1: those businesses a few years later. That's not the business today.
• 41:52
  Speaker 1: What we see in private equity today is really private
• 41:56
  Speaker 1: investment firms buying and growing businesses, creating value through growth
• 42:02
  Speaker 1: through acquiring smaller players. I look at a company like Diligent.
• 42:05
  Speaker 1: When we first financed that business, it was doing twenty
• 42:09
  Speaker 1: million a year in cash flow. It's doing you know,
• 42:11
  Speaker 1: two hundred plus million cash today. So the model today
• 42:15
  Speaker 1: is a growth model, and with that growth comes a
• 42:19
  Speaker 1: much closer relationship with the lender. So in most of
• 42:23
  Speaker 1: our deals today, the private equity firm that's buying the
• 42:26
  Speaker 1: business is already talking to us about the next acquisition,
• 42:30
  Speaker 1: the next opportunity, the next geographic expansion. So what they're
• 42:34
  Speaker 1: bringing to the table really is equity and looking for
• 42:37
  Speaker 1: us to be a full scale partner. Of theirs providing
• 42:41
  Speaker 1: that financing. And so the model, if you will, isn't
• 42:44
  Speaker 1: just oh, we lend money these guys when we walk
• 42:46
  Speaker 1: away and we hope they don't breach a covenant. The
• 42:48
  Speaker 1: model today is no, no, no no, no, we're buying off
• 42:51
  Speaker 1: on the strategy of growth. How can we be a
• 42:55
  Speaker 1: you know, an important and very strategic partner of that
• 42:59
  Speaker 1: private investment for as they grow the business. And I'll
• 43:02
  Speaker 1: give an example. At the time of our financing, our
• 43:05
  Speaker 1: average company is about forty to fifty million cash flow.
• 43:08
  Speaker 1: Yet our portfolio today, you know, obviously several years on
• 43:12
  Speaker 1: from when we finance the original deal, our portfolio today
• 43:15
  Speaker 1: is approaching seventy million in average cash flow of a business.
• 43:19
  Speaker 1: So signific growth in the underlying portfolio companies, because those
• 43:24
  Speaker 1: private equity firms see their role is really driving that
• 43:27
  Speaker 1: growth in Our role obviously is to be a good
• 43:30
  Speaker 1: partner for them. So on the one end of the spectrum,
• 43:33
  Speaker 1: a bank makes a loan and they hope it dozens
• 43:36
  Speaker 1: of faults. On the other end of the spectrum, private
• 43:39
  Speaker 1: equity companies accumulate a portfolio of separate companies that they're running.
• 43:46
  Speaker 1: They have thousands of employees, you seem to straddle the
• 43:52
  Speaker 1: two of them. You have a foot in each camp.
• 43:54
  Speaker 1: You're making loans, you're providing equity investments, but you're not
• 43:58
  Speaker 1: accumulating folio companies the way pe farms. Well interestingly, so
• 44:03
  Speaker 1: here's the angle and the difference between us and virtually
• 44:06
  Speaker 1: any of our peers. If you look at most of
• 44:09
  Speaker 1: our peers in private credit, certainly the large ones, they
• 44:12
  Speaker 1: all have their own dedicated private equity arms. Right. So
• 44:16
  Speaker 1: if you look at the publicly traded asset managers, they
• 44:19
  Speaker 1: have private credit, but then they also have a control
• 44:22
  Speaker 1: private equity arm that actually does deals. Right. So in
• 44:25
  Speaker 1: some respects you could argue competing against themselves a little bit, right.
• 44:28
  Speaker 1: I mean they're buying companies, but then they're financing in
• 44:33
  Speaker 1: large private equity firms that are competing to buy those
• 44:36
  Speaker 1: very same companies, right, Not always, but occasionally. In our case,
• 44:41
  Speaker 1: we don't have a control private equity business, right. Our
• 44:43
  Speaker 1: private equity business is partner oriented, and it starts with
• 44:47
  Speaker 1: the fact that we have investments in over two hundred
• 44:52
  Speaker 1: and seventy mid market private equity funds, Right, So what
• 44:57
  Speaker 1: does that do for us? It gives us tremendou insight
• 45:01
  Speaker 1: into their performance, right, and so we do all that research.
• 45:05
  Speaker 1: We understand their focus. We obviously see what industries they
• 45:09
  Speaker 1: invest in, understand we see their rrs, their returns they generate.
• 45:13
  Speaker 1: We invest with the best, and then we look to
• 45:16
  Speaker 1: do other things with them. Right. So we're a limited partner.
• 45:20
  Speaker 1: We may co invest in the equity and some of
• 45:22
  Speaker 1: those deals, but equally as important, we now understand the firm.
• 45:27
  Speaker 1: We have an ongoing relationship. We sit on the advisory
• 45:30
  Speaker 1: board today of two hundred US private equity firms, so
• 45:33
  Speaker 1: on their advisory board. Let's drill into that a little bit.
• 45:36
  Speaker 1: When you say you're a limited partner, I think of
• 45:38
  Speaker 1: LPs as Oh, here's a Carlisle fun twenty seven, Right,
• 45:42
  Speaker 1: I give you X dollars. I'm an LP. That what
• 45:45
  Speaker 1: you're describing sounds like a much tighter relationship where you're
• 45:50
  Speaker 1: co investing in a specific project. That's right, not just
• 45:53
  Speaker 1: handing off dollars to a fund. That's exactly right. We
• 45:55
  Speaker 1: have a separate team that does that, right. So they
• 45:58
  Speaker 1: are managing our investments in private equity firms and co
• 46:03
  Speaker 1: investing in those deals, and part of their goal is
• 46:07
  Speaker 1: to assist the lending side and understanding who's doing it
• 46:12
  Speaker 1: the best, what industries are they doing it, and ultimately
• 46:15
  Speaker 1: making sure that we're connected on the lending side with
• 46:18
  Speaker 1: how we can finance their deals. I was about to
• 46:20
  Speaker 1: say that sounds like it's really good for deal flow.
• 46:22
  Speaker 1: It's really good for deal flow. And in fact, what
• 46:25
  Speaker 1: we're seeing in the current environment is that those two
• 46:28
  Speaker 1: hundred and seventy private equity funds where we're a limited
• 46:30
  Speaker 1: partner and sit on their advisory boards, are increasingly consolidating
• 46:35
  Speaker 1: their lending relationships, right because they're saying, you know what,
• 46:38
  Speaker 1: we want to go to partners that when we bring
• 46:40
  Speaker 1: a deal to them, we know they're going to be there, right,
• 46:43
  Speaker 1: And if you've financed twenty thirty forty fifty deals with
• 46:47
  Speaker 1: that firm over the past twenty years. As we have,
• 46:50
  Speaker 1: we've become in many respects, the go to partner of
• 46:53
  Speaker 1: many many of these private equity firms now. And it's
• 46:56
  Speaker 1: a huge advantage, right because if you think about it,
• 46:58
  Speaker 1: if you're a private equity fund and you're try to
• 47:00
  Speaker 1: buy a transaction, you're competing to buy a business, right
• 47:04
  Speaker 1: and you need financing, you need committed financing. Are you
• 47:07
  Speaker 1: going to go to a firm that has done thirty
• 47:09
  Speaker 1: deals with you over the last twenty years, and you
• 47:12
  Speaker 1: know is going to be there or are you going
• 47:15
  Speaker 1: to try a new guy? Right, You're gonna go where
• 47:17
  Speaker 1: you've got a relationship and you've got a history. So
• 47:20
  Speaker 1: let's talk about that. Because I have a limited amount
• 47:24
  Speaker 1: of experience with a couple of different firms doing the
• 47:28
  Speaker 1: sort of stuff. And one of the things I found
• 47:30
  Speaker 1: fascinated and I won't mention any names, but every household
• 47:34
  Speaker 1: names that everybody knows, and one of the deals that
• 47:37
  Speaker 1: we did, I just came away thinking every interaction with
• 47:41
  Speaker 1: these people has been fantastic. Everybody at everyone, every level
• 47:46
  Speaker 1: is a rock star. Hey, we're looking for a buyer,
• 47:49
  Speaker 1: we're looking for seller. Everybody comes together with the same
• 47:51
  Speaker 1: objective in mind and it happens, and I'm like, wow,
• 47:54
  Speaker 1: that was really a delight to deal with. I have
• 47:59
  Speaker 1: to think when you have these long term relationships, it's personal.
• 48:03
  Speaker 1: There's a ton of trust. It's not every step along
• 48:07
  Speaker 1: the way. All right, let's bring on the team of
• 48:08
  Speaker 1: lawyers to fight over commas. It's right, we know who
• 48:11
  Speaker 1: you are, you know who we are. Let's make this happen. Well,
• 48:14
  Speaker 1: if you think about it, if we've financed thirty deals,
• 48:19
  Speaker 1: as we have with many leading private equity firms, we
• 48:22
  Speaker 1: start out on the five yard line, right. Words, we've
• 48:25
  Speaker 1: done thirty documents with them, right, I mean, we don't
• 48:28
  Speaker 1: need to recreate the docs. Right. So we've got personal
• 48:32
  Speaker 1: chemistry and history, We've got a course of dealing where
• 48:35
  Speaker 1: we both know kind of we start with okay, we
• 48:38
  Speaker 1: just did your last deal. Let's let's start with that document, right.
• 48:41
  Speaker 1: So all of a sudden, we're at the ninety five
• 48:43
  Speaker 1: yard line, right, So, so a lot ability to move
• 48:46
  Speaker 1: much more quickly. Third, there's a level of trust. So
• 48:49
  Speaker 1: when we say that that private investment firm, we're good.
• 48:52
  Speaker 1: You know, we're issuing a commitment letter. We're good. They
• 48:55
  Speaker 1: know we're good, right, They know that after twenty years
• 48:59
  Speaker 1: of working with us, we're going to be there for them.
• 49:02
  Speaker 1: And oh, by the way, just one other element, we're
• 49:04
  Speaker 1: a limited partner in your fund, and our private equity
• 49:07
  Speaker 1: team sits on your advisory board. And oh, by the way,
• 49:10
  Speaker 1: we've got a long term connection with you guys. We're
• 49:12
  Speaker 1: you know, we're here for the longest. It seems very
• 49:14
  Speaker 1: comfortable for everybody involved. It is, and you know what,
• 49:17
  Speaker 1: that doesn't mean that we don't negotiate over terms and
• 49:20
  Speaker 1: we have to and they do too, But at the
• 49:22
  Speaker 1: end of the day, there's a level of respect and
• 49:24
  Speaker 1: trust that we're going to get there. We like the business,
• 49:26
  Speaker 1: it makes sense, and it's been a huge driver for
• 49:29
  Speaker 1: growth in our business. You know, I would venture to
• 49:31
  Speaker 1: say that there have been very few direct lending firms
• 49:35
  Speaker 1: like ourselves then in a relatively short period of time.
• 49:38
  Speaker 1: If you think about it's been seven years that we've
• 49:40
  Speaker 1: been part of TIAA, it'll be it'll be eight years. Actually,
• 49:44
  Speaker 1: are of an anniversaries coming up here. If you think
• 49:47
  Speaker 1: about how, you know, how we have grown this business.
• 49:50
  Speaker 1: You know, last year we were the second most active
• 49:52
  Speaker 1: direct lender in the United States. That's a relatively short
• 49:55
  Speaker 1: time When you look at every you know, look at
• 49:57
  Speaker 1: the firms that are around us, many of the have
• 50:00
  Speaker 1: been around for you know, as many as fifteen or
• 50:02
  Speaker 1: even twenty years. So in that sense, we've grown the
• 50:05
  Speaker 1: business quite significantly. And I'd be remissive I didn't. I
• 50:09
  Speaker 1: just got asked this question last week, so I think
• 50:11
  Speaker 1: this is important. So I was actually on speaking at
• 50:15
  Speaker 1: a conference to Greenwich Economic Forum last week, we are
• 50:19
  Speaker 1: your folks interviewed me. Actually so, I had a very
• 50:21
  Speaker 1: nice conversation, but I was asked the question, how does
• 50:26
  Speaker 1: that happen? How do you go from three hundred million
• 50:29
  Speaker 1: dollars from TIAA that they were only investor. We had
• 50:31
  Speaker 1: one investor eight years ago. We have nearly two thousand
• 50:36
  Speaker 1: investors today, including many many of the largest US pension
• 50:39
  Speaker 1: funds and sovereign wealth funds and internationally investors. And I
• 50:44
  Speaker 1: said three things. I said, Number one, it's all about
• 50:47
  Speaker 1: your people, and it's particularly all about the first ten
• 50:52
  Speaker 1: to twenty people you hire. If they are the right people,
• 50:57
  Speaker 1: and obviously technical capability, but also just culturally other right people,
• 51:03
  Speaker 1: they multiply like crazy, right, those are the people are
• 51:06
  Speaker 1: going to be running hiring, and they're going to be
• 51:09
  Speaker 1: hiring people. So next thing you go, you know, you
• 51:11
  Speaker 1: go from ten to fifteen twenty people. Suddenly we've got
• 51:15
  Speaker 1: fifty people. We were at fifty professionals when we went
• 51:19
  Speaker 1: into COVID. We're one hundred and fifty today. We were
• 51:23
  Speaker 1: managing six billion dollars when we hit COVID. We're managing
• 51:26
  Speaker 1: forty six billion dollars today. People, so Number one, It's
• 51:30
  Speaker 1: all about the people, and I'm so proud of the
• 51:33
  Speaker 1: team and the culture we've built. I mean, we literally
• 51:35
  Speaker 1: just had our offsite two weeks ago and you know,
• 51:38
  Speaker 1: I was practically crying. I couldn't believe what a great
• 51:40
  Speaker 1: team we've put together. Secondly, the partners you have. You know,
• 51:45
  Speaker 1: if you look at TIAA and Nuvene, they've been unbelievable partners.
• 51:49
  Speaker 1: Nuvine's raising money for us ta's investing their own capital
• 51:53
  Speaker 1: and obviously their their members capital. They've been incredible, unwavering supporters.
• 51:58
  Speaker 1: As I've mentioned, we managed twenty three billion dollars today
• 52:00
  Speaker 1: for tia and their participants, but also Nuvene has helped
• 52:04
  Speaker 1: raise capital and we wouldn't be here without them. And
• 52:07
  Speaker 1: then Jose obviously as the CEO, has really been an
• 52:10
  Speaker 1: incredible supporter. And then I would say it's at the
• 52:14
  Speaker 1: end of the day, it's also about recognizing that this
• 52:18
  Speaker 1: is never easy. I mean, you know this very right.
• 52:20
  Speaker 1: It looks so easy now, right, I tell other people's stories,
• 52:23
  Speaker 1: you know, like, oh, it looks so easy. Tom, it
• 52:26
  Speaker 1: was inevitable. I mean Tom Brady was drafting the fifth round,
• 52:29
  Speaker 1: and you know he was sitting on the bench in
• 52:30
  Speaker 1: New England and how does this happen? You know? And
• 52:32
  Speaker 1: I tell my kids this all the time. You have
• 52:35
  Speaker 1: to be willing to pay the price in tenacity and
• 52:39
  Speaker 1: a willingness to just keep you know, if I told
• 52:42
  Speaker 1: you how many times, not just me but all of
• 52:45
  Speaker 1: us who are really leaders in this space get got
• 52:47
  Speaker 1: turned down raising money, I mean, no, thank you very much,
• 52:51
  Speaker 1: come back later, no, thank you very much. Interesting, come
• 52:54
  Speaker 1: see us a year from now. So it's a willingness
• 52:57
  Speaker 1: to be incredibly tenacious and really not give up, you know.
• 53:02
  Speaker 1: And you know, I know that sounds kind of cliche like,
• 53:05
  Speaker 1: but it's cliche for a reason, but it's you know what,
• 53:08
  Speaker 1: it's really the truth. And you know, on the people front,
• 53:11
  Speaker 1: we've been very focused on really building a diversified, diversity,
• 53:17
  Speaker 1: diverse workforce. So today you know, nearly half our people
• 53:21
  Speaker 1: are women or ethnic minorities. Because it's good business. You
• 53:26
  Speaker 1: want diversity of a thought, you want diversity of backgrounds,
• 53:28
  Speaker 1: you want diversity of ideas. Right. I need somebody around
• 53:31
  Speaker 1: to tell me when I'm being a knucklehead. Right, And
• 53:34
  Speaker 1: sometimes you know, you can make wrong decisions, but it's
• 53:37
  Speaker 1: a lot, it's a lot harder to make a bad decision,
• 53:41
  Speaker 1: and there's a lot more of a defense mechanism if
• 53:43
  Speaker 1: you surround yourself with people who have diverse ideas and
• 53:46
  Speaker 1: diversity of thought and can say to you, you know what,
• 53:49
  Speaker 1: I've actually been in that situation, this is probably not
• 53:52
  Speaker 1: the right right decision. So listening, building in a very
• 53:57
  Speaker 1: diverse team, listening to them, and and and ultimately being
• 54:02
  Speaker 1: willing to change your mind when sometimes you don't have
• 54:05
  Speaker 1: all the answers and you need to, you know, you
• 54:07
  Speaker 1: need to rely on folks that you know can really
• 54:09
  Speaker 1: bring value. So I'm very humbled by that. And it's
• 54:12
  Speaker 1: been a great run. So let's talk about the experience
• 54:16
  Speaker 1: you've had in the industry, working with lots and lots
• 54:20
  Speaker 1: of different companies, some not so successful, some incredibly successful.
• 54:27
  Speaker 1: When you look at the landscape out there, what's the
• 54:30
  Speaker 1: difference between the rockstar firms that are killing it and
• 54:34
  Speaker 1: the also runs who just seem to be bogged down
• 54:37
  Speaker 1: in bureaucracy and can't get out of their own way. Yeah, now,
• 54:40
  Speaker 1: and I think it's a it's a great question. And
• 54:43
  Speaker 1: and you know, obviously I've had a front row seat
• 54:45
  Speaker 1: to lots of different institutions and certainly my own as well.
• 54:49
  Speaker 1: And I think in the final analysis that you know,
• 54:51
  Speaker 1: I mentioned people, but it's even even more than that,
• 54:55
  Speaker 1: in a very important way. It's ultimately about leadership. Right
• 54:59
  Speaker 1: if if the leadership of an organization empowers their people,
• 55:04
  Speaker 1: puts their people in a position to succeed, and understands
• 55:08
  Speaker 1: that at the end of the day, you know, their
• 55:10
  Speaker 1: job is not to micro manage people. Their job is
• 55:13
  Speaker 1: to set their people free and make sure that they're
• 55:16
  Speaker 1: you know, in a word, kind of bulldozing all the
• 55:18
  Speaker 1: barriers away. Right, that that's my job at the end
• 55:21
  Speaker 1: of the day, and you approach it with a sense
• 55:23
  Speaker 1: of humility and certainly a lot of passion. But at
• 55:27
  Speaker 1: the end of the day, as I mentioned earlier, having
• 55:30
  Speaker 1: hired what I view are the best team in the industry,
• 55:34
  Speaker 1: you now have to empower the best team in the industry,
• 55:37
  Speaker 1: and you have to mentor the best team in the industry.
• 55:39
  Speaker 1: And I look across the organization, it's all about, at
• 55:43
  Speaker 1: the end of the day, providing that leadership in support
• 55:47
  Speaker 1: and so the best organizations and I certainly try to
• 55:50
  Speaker 1: do my best to to to emulate this are really
• 55:53
  Speaker 1: all about leadership. That is, in many respects, a servant leader.
• 56:00
  Speaker 1: That's what I believe, leader, servant leader. I believe my
• 56:04
  Speaker 1: job is to serve my people and to make sure
• 56:08
  Speaker 1: that they are able to do their absolute best at
• 56:12
  Speaker 1: their job, not to create bearers or not to micro
• 56:15
  Speaker 1: manage them, but to empower them and to knock those
• 56:18
  Speaker 1: barriers down and to put them in a position where
• 56:21
  Speaker 1: they can be successful. You are not the first CEO
• 56:24
  Speaker 1: who has said that to me. I've heard similar things
• 56:27
  Speaker 1: from other folks, and these are all very successful companies.
• 56:31
  Speaker 1: So I assume there's something to that. Well, you know it.
• 56:36
  Speaker 1: In many respects, it gets it gets back to you know,
• 56:40
  Speaker 1: my background, which is quite unique, and I think, um,
• 56:45
  Speaker 1: so let's talk about that. What makes your background so unique? Well,
• 56:50
  Speaker 1: it's probably the most unique background of of any anyone
• 56:54
  Speaker 1: you've you've interviewed in a while. Um, there's one other
• 56:57
  Speaker 1: Okrison who has a similar background. But tell us so.
• 57:01
  Speaker 1: I was born in Buffalo, New York. I was left
• 57:06
  Speaker 1: for ultimately for adoption when when I was born, But
• 57:09
  Speaker 1: I was basically left at the hospital. I was, by
• 57:12
  Speaker 1: the way, unclear whether I was actually gonna make it,
• 57:15
  Speaker 1: so I was put on I was put in a
• 57:17
  Speaker 1: life support and an incubator and lots of other stuff. Anyway,
• 57:20
  Speaker 1: long story short, I did obviously I'm here, um, but
• 57:24
  Speaker 1: I was adopted by a couple that you know, luck
• 57:29
  Speaker 1: would have it. Both my father and mother died when
• 57:32
  Speaker 1: I was quite young. And so I my mother, my
• 57:37
  Speaker 1: mother's brother, or my my uncle raised his hand and said,
• 57:41
  Speaker 1: you know I can do this. You know I'll step
• 57:44
  Speaker 1: in for my sister because as he's an only child.
• 57:47
  Speaker 1: And you know, um, I grew up in a pretty
• 57:51
  Speaker 1: ramshackle part of Buffalo called Woodlawn, Um, and Um, Ultimately
• 57:56
  Speaker 1: my uncle became my guardian. It took him well over
• 58:00
  Speaker 1: a year. He never graduated from high school. He worked
• 58:04
  Speaker 1: in the steel plant. We actually lived across the street
• 58:07
  Speaker 1: from the Bethlehem Steel where he worked. But he changed
• 58:12
  Speaker 1: everything in my life. And what he changed is he
• 58:15
  Speaker 1: had a tremendous amount of humility. And you know, always
• 58:19
  Speaker 1: taught me growing up that you know, it's not about you,
• 58:22
  Speaker 1: it's about how you can influence and change other people's lives.
• 58:26
  Speaker 1: And so I've always had that focus. And so he
• 58:29
  Speaker 1: sent me to an all boys Jesuit high school called Canisius.
• 58:34
  Speaker 1: The Jesuits kind of got behind the program and sent
• 58:36
  Speaker 1: me to a Jesuit high school Georgetown University. And in
• 58:42
  Speaker 1: my career, I've always tried to dedicate myself to making
• 58:47
  Speaker 1: everyone around me better. So let's let's focus on that.
• 58:50
  Speaker 1: Because you said something earlier that I let slip by,
• 58:53
  Speaker 1: but I want to address, especially given the growth the
• 58:58
  Speaker 1: pharmacy and over the past couple of years, you mentioned
• 59:02
  Speaker 1: the first ten or twenty HighRes you make are the
• 59:05
  Speaker 1: most important HighRes. Tell us why what happens to those
• 59:09
  Speaker 1: first twenty people as a firm grows to one hundred,
• 59:13
  Speaker 1: one hundred and fifty employees. It's very interesting, you know.
• 59:16
  Speaker 1: And I interviewed all of them, every single one of them.
• 59:19
  Speaker 1: One of them is here in the studio with us
• 59:20
  Speaker 1: today and Jessica tan Obama, who heads up our marketing
• 59:24
  Speaker 1: area in Communications, and at the end of the day,
• 59:29
  Speaker 1: you see something and you know it when you see
• 59:32
  Speaker 1: it's it's a level of passion and enthusiasm. Obviously, all
• 59:37
  Speaker 1: of the boxes are checked right, experience, background, knowledge, understanding
• 59:42
  Speaker 1: of the job, etc. But there's something else, And I
• 59:45
  Speaker 1: would say that something else is in an outward facing
• 59:50
  Speaker 1: dynamic where they are clearly incredibly passionate about what they do,
• 59:55
  Speaker 1: but also that enthusiasm and passion isn't infectious, and and
• 1:00:00
  Speaker 1: they recruit people just like them, and suddenly you know,
• 1:00:04
  Speaker 1: you instead of you know, you have a core group
• 1:00:06
  Speaker 1: that maybe ten, fifteen, twenty people you know. And I'm
• 1:00:09
  Speaker 1: sure this is probably similar with other firms like this.
• 1:00:12
  Speaker 1: I mean, if you look at you know, Bloomberg, I'm
• 1:00:14
  Speaker 1: sure it was you know, Mike and three guys in
• 1:00:16
  Speaker 1: a conference room when they got started, right, but it
• 1:00:18
  Speaker 1: was the right three or the right ten, right. And
• 1:00:20
  Speaker 1: you look at you know, you look at firms you
• 1:00:22
  Speaker 1: know in the asset management industry, and the similar the
• 1:00:25
  Speaker 1: stories in many respects very similar. So you know, you
• 1:00:28
  Speaker 1: want you want individuals that are UM outwardly focused, focusing
• 1:00:34
  Speaker 1: on building a team of incredibly talented people and understand
• 1:00:38
  Speaker 1: that it's really important to act as a mentor and
• 1:00:41
  Speaker 1: a coach and ultimately a cheerleader and a provider of UM,
• 1:00:47
  Speaker 1: you know, opportunity to really grow in their career and
• 1:00:50
  Speaker 1: their UM in their in their jobs. And what's fascinating
• 1:00:54
  Speaker 1: about us is we've had virtually no turnover over the
• 1:00:57
  Speaker 1: last several years, all through COVID, and I think that
• 1:01:00
  Speaker 1: you know, that's a mark of an organization that has
• 1:01:02
  Speaker 1: tremendous stability. And you know, I walk around all the
• 1:01:06
  Speaker 1: time and I'm talking to everyone, you know, literally. I
• 1:01:08
  Speaker 1: think my people get sick of me walking around because
• 1:01:10
  Speaker 1: I'm literally walking around. But I think it's really important
• 1:01:13
  Speaker 1: to let them know you care and that you know
• 1:01:15
  Speaker 1: they feel that, and then they thrive on that passion.
• 1:01:19
  Speaker 1: So I've I've had a number of CEOs I've either
• 1:01:22
  Speaker 1: have them tell me this on the show or I've
• 1:01:24
  Speaker 1: read it elsewhere that I've all said, hiring is not
• 1:01:28
  Speaker 1: only the most important part of our job, it's the
• 1:01:31
  Speaker 1: single most difficult thing we do. Do you agree with that?
• 1:01:36
  Speaker 1: What makes it so challenging? And how can we do
• 1:01:40
  Speaker 1: it well or better? I think that, first of all,
• 1:01:43
  Speaker 1: it is absolutely the most it's the most important part
• 1:01:46
  Speaker 1: of your job, but it's also the hardest, right because
• 1:01:48
  Speaker 1: you have a half an hour or forty five minutes
• 1:01:51
  Speaker 1: and you're trying to assess whether this person is really
• 1:01:53
  Speaker 1: going to fit well in the organization. Sometimes they self
• 1:01:56
  Speaker 1: select out by the way right, you know, or as
• 1:01:58
  Speaker 1: they in the process it becomes clear it's not a
• 1:02:00
  Speaker 1: good fit. But those are the easies are the easy ones, Okay,
• 1:02:03
  Speaker 1: the harder ones are where you know, look people gear
• 1:02:06
  Speaker 1: up for an interview. You see one side of a
• 1:02:08
  Speaker 1: person during an interview, and sometimes that's not the side
• 1:02:11
  Speaker 1: you get, and so it's important in a couple ways. One,
• 1:02:15
  Speaker 1: we typically have an individual that we hire interviewed by
• 1:02:20
  Speaker 1: at least a dozen people, sometimes more, because we want,
• 1:02:25
  Speaker 1: you know, we want to get a look at them
• 1:02:27
  Speaker 1: in all different facets, in all different environments. Are you
• 1:02:31
  Speaker 1: quantifying them? Is there a checklist or is it very
• 1:02:33
  Speaker 1: subjective and I think this person is a good fit
• 1:02:36
  Speaker 1: or not. I you know, in many respects, I wouldn't
• 1:02:39
  Speaker 1: call it subjective, but I would say, you know, we
• 1:02:41
  Speaker 1: have folks that do lots of interviews, and I would
• 1:02:44
  Speaker 1: say there are certain people in our organization to do
• 1:02:47
  Speaker 1: more than others because they're really good at it, and
• 1:02:49
  Speaker 1: so we keep going back to them. But I would
• 1:02:51
  Speaker 1: say that at the end of the day, it's very
• 1:02:55
  Speaker 1: important not only to get a broad based consensus around
• 1:02:58
  Speaker 1: a person, but also to do the background checks. It's
• 1:03:02
  Speaker 1: mind blowing to me how many firms hire and in
• 1:03:05
  Speaker 1: some cases very senior people and just think, well, this
• 1:03:09
  Speaker 1: person is well known we're going to hire them, and
• 1:03:11
  Speaker 1: if they had made one or two phone calls, they
• 1:03:13
  Speaker 1: would find out pretty quickly that actually that individual is
• 1:03:16
  Speaker 1: a bit of a disaster in their prior job. So
• 1:03:19
  Speaker 1: not only do we make this effort with relatively junior people,
• 1:03:23
  Speaker 1: but if we ever do we do sometimes hire more senior.
• 1:03:26
  Speaker 1: We actually redouble the effort when we're talking about a
• 1:03:29
  Speaker 1: senior person because one of the things you learn, having
• 1:03:32
  Speaker 1: been doing this for twenty five plus years is you
• 1:03:35
  Speaker 1: can't hide from your reputation you are. You know, once
• 1:03:38
  Speaker 1: you've been doing this that long, you know people know
• 1:03:41
  Speaker 1: who you are and what you're about. And so we
• 1:03:43
  Speaker 1: want to make sure that we understand that when we
• 1:03:45
  Speaker 1: make a hire at a senior level, but absolutely about
• 1:03:48
  Speaker 1: the people. Absolutely important to vet them. Incredibly hard to do,
• 1:03:52
  Speaker 1: and by having lots of folks involved in the process,
• 1:03:56
  Speaker 1: particularly ones that are good at it, and spending a
• 1:03:58
  Speaker 1: lot of time doing follow up in background checks, you
• 1:04:01
  Speaker 1: get a pretty good picture of that person, and those
• 1:04:04
  Speaker 1: are the people we want really really interesting stuff. Let
• 1:04:07
  Speaker 1: let me throw you a curveball question. Okay, you play
• 1:04:11
  Speaker 1: guitar in a band called Suburban Chaos. Come on, First
• 1:04:16
  Speaker 1: of all, what sort of music do you play and
• 1:04:18
  Speaker 1: how often do you guys gig? You yeah, we gig
• 1:04:20
  Speaker 1: a lot. Well, first of all, we just say this,
• 1:04:23
  Speaker 1: I've been playing guitar since I was six years old,
• 1:04:26
  Speaker 1: seven years old, and you know, all of us, you know,
• 1:04:29
  Speaker 1: have you've been playing guitar that long? All of us
• 1:04:31
  Speaker 1: guitar players harbor the dream of being a rock star,
• 1:04:37
  Speaker 1: a rhythm guitar player, and a singer. Okay, my band,
• 1:04:41
  Speaker 1: which I've had now for about ten years, and it
• 1:04:44
  Speaker 1: actually came about interestingly enough because um full credit to
• 1:04:48
  Speaker 1: my wife, she actually happens to be a competitive ballroom dancer.
• 1:04:52
  Speaker 1: So my wife would go off to competitions and you
• 1:04:55
  Speaker 1: could see the passion she had for really, you know,
• 1:04:59
  Speaker 1: be being a great dancer. And she's been a dancer
• 1:05:01
  Speaker 1: for as long as I've been a guitar player. So
• 1:05:04
  Speaker 1: I watched her, you know, starting to really get into
• 1:05:06
  Speaker 1: this ballroom dance thing, and I realized, I'm gonna get
• 1:05:09
  Speaker 1: with my game here, I I you know, so I
• 1:05:11
  Speaker 1: need to have something to do too while my wife
• 1:05:13
  Speaker 1: is traveling all over these dance competitions. So and by
• 1:05:17
  Speaker 1: the way, she was US ballroom dance Champion for many
• 1:05:21
  Speaker 1: years as well, so she's really good at that. So anyway,
• 1:05:23
  Speaker 1: so I figured, okay, I've gotta I gotta have my gig, right,
• 1:05:26
  Speaker 1: So we formed a band about ten years ago, and
• 1:05:31
  Speaker 1: I like to say that, you know, our repertoire is,
• 1:05:33
  Speaker 1: let's say, vintage. Well you know, listen, we're not that
• 1:05:37
  Speaker 1: far apart on edge. Yeah, so I assume it's vintage.
• 1:05:41
  Speaker 1: But the question is is it Credence and John Fogerty,
• 1:05:45
  Speaker 1: is it Allman Brothers? What sort of stuff do you play? Right?
• 1:05:49
  Speaker 1: So I would characterize our music style as yacht rock
• 1:05:55
  Speaker 1: meets seventies disco that's eclectic or so. Yeah, when I
• 1:06:00
  Speaker 1: think yacht rock, I think as much as I love
• 1:06:04
  Speaker 1: Steely Dan, Yeah, which are really both, you know, spectacular
• 1:06:10
  Speaker 1: well written music and especially with Steely Dan, not easy
• 1:06:14
  Speaker 1: to play or at least not easy to play well, yes,
• 1:06:17
  Speaker 1: depending on the song and on the disco side, dance music.
• 1:06:21
  Speaker 1: So Michael Jackson, Patti LaBelle, So you could be any
• 1:06:27
  Speaker 1: bar mitzvah bands in the Northeast exactly and show up
• 1:06:30
  Speaker 1: and get everybody before the Viennese table. Everybody gets up
• 1:06:34
  Speaker 1: and can move. Well, Look, it's all about entertaining people.
• 1:06:37
  Speaker 1: It's all about playing music that uplifts them. It's all
• 1:06:40
  Speaker 1: about playing music they want to dance too. And you
• 1:06:43
  Speaker 1: know what, you know, you may have seen the same thing.
• 1:06:45
  Speaker 1: I've certainly seen it. Our vintage music has had a
• 1:06:48
  Speaker 1: bit of a resurgence, right. I mean, you know, I
• 1:06:50
  Speaker 1: hear songs that I listened to when I was a kid,
• 1:06:53
  Speaker 1: and I'm like, wait a second, that song is forty
• 1:06:55
  Speaker 1: years old. And there's to satellite music. You go to
• 1:06:59
  Speaker 1: XM and a lot of stations that aren't like a
• 1:07:02
  Speaker 1: decade station, right, but like the blend that's where coming from.
• 1:07:07
  Speaker 1: That's exactly right blend. So and then the other thing
• 1:07:10
  Speaker 1: is when you look at the streaming services, new acts
• 1:07:15
  Speaker 1: aren't breaking into streaming. It's all older stuff that has
• 1:07:19
  Speaker 1: already has an established So. So, last band question, Just
• 1:07:23
  Speaker 1: give me your three favorite cover songs you play and
• 1:07:27
  Speaker 1: that'll allow me to know exactly who you are. Yeah, okay,
• 1:07:32
  Speaker 1: Well it'll show you a cross section of Okay, we do, so,
• 1:07:36
  Speaker 1: I would say, um, we do. Uh, we do a
• 1:07:40
  Speaker 1: lot of you know, as you say, seventies rocks. So,
• 1:07:42
  Speaker 1: but we also do you know, you know chade. So,
• 1:07:45
  Speaker 1: for example, we play smooth Operator. So we play Smooth Operator,
• 1:07:50
  Speaker 1: which is great. Uh, we we do. Um, you're not
• 1:07:54
  Speaker 1: doing the vocals to Smooth Operator, I assume. Oh no,
• 1:07:56
  Speaker 1: we have a we have a female at who is fantastic. Uh.
• 1:08:01
  Speaker 1: You know, we do more of a rock song called
• 1:08:04
  Speaker 1: all right Now by Free of course. That was Paul Rodgers.
• 1:08:08
  Speaker 1: Paul Roger. That was a giant song. And we do
• 1:08:14
  Speaker 1: a song that is a little bit less known by
• 1:08:16
  Speaker 1: a guy named Paul Carrick when he was with a
• 1:08:18
  Speaker 1: band called Ace, called so long excuse me, how long?
• 1:08:23
  Speaker 1: How long has this been going on? Yeah? That was
• 1:08:25
  Speaker 1: a Spencer's Gift soundtrack type of thing. Exactly back exactly
• 1:08:30
  Speaker 1: so sore. I think we're almost the same exactly. Yeah,
• 1:08:33
  Speaker 1: so age at least musically. Yeah. So we play. You know,
• 1:08:37
  Speaker 1: we play all over New York, in Connecticut, and we've
• 1:08:40
  Speaker 1: played as far as Newport, Rhode Island in New Jersey.
• 1:08:42
  Speaker 1: But you know, one thing about a band that's very interesting, Barry,
• 1:08:46
  Speaker 1: is that, unlike a company like ours, where there is
• 1:08:50
  Speaker 1: clear you know, you're the boss or she's the boss
• 1:08:53
  Speaker 1: or whoever, it's a different dynamic. Oh, it's a democracy.
• 1:08:56
  Speaker 1: And by the way, you know, I have to put
• 1:08:58
  Speaker 1: all of my CEO you know, tendencies, you know it,
• 1:09:03
  Speaker 1: you know, leave them at the door. Right, So suddenly,
• 1:09:06
  Speaker 1: you know, our band is named Suburban Chaos, and in
• 1:09:09
  Speaker 1: many respects it can be chaos. Right. Everybody wants to
• 1:09:12
  Speaker 1: play their own songs. Everybody wants to do this, and
• 1:09:15
  Speaker 1: this is first et cetera. And you really have to
• 1:09:17
  Speaker 1: be much more of a you know, it's a democratic process,
• 1:09:20
  Speaker 1: let's put it that way, as opposed to a you know,
• 1:09:22
  Speaker 1: as opposed to a to a company. But it's a
• 1:09:24
  Speaker 1: lot of fun. And you know, we play, you know,
• 1:09:27
  Speaker 1: we probably you know during COVID, we you know when
• 1:09:30
  Speaker 1: obviously all that music was was turned off, but we
• 1:09:33
  Speaker 1: had something like forty or fifty gigs you know, teed
• 1:09:36
  Speaker 1: up when we you know when we uh, when we
• 1:09:38
  Speaker 1: went out for COVID. So we play. A lot of
• 1:09:40
  Speaker 1: people were doing remote zoom gigs during during the lockdown.
• 1:09:43
  Speaker 1: Absolutely and and uh but you know, I think you
• 1:09:45
  Speaker 1: have to have a passion, you know, and I think
• 1:09:48
  Speaker 1: in my case, you know, music is my happy place,
• 1:09:51
  Speaker 1: and you know, everybody needs to have a place they
• 1:09:54
  Speaker 1: can go, and you know, my my happy places, you know,
• 1:09:57
  Speaker 1: Michael Jackson or whoever, you know, I totally get it.
• 1:10:00
  Speaker 1: So so I only have you for a few more minutes.
• 1:10:02
  Speaker 1: Let me jump to my speed round my favorite questions,
• 1:10:06
  Speaker 1: starting with what has been keeping you entertained? What are you?
• 1:10:10
  Speaker 1: What are you watching? Um on Netflix or Amazon Prime?
• 1:10:15
  Speaker 1: So I watched a movie that really, you know, given
• 1:10:20
  Speaker 1: I you know, I've spoken about my background and more recently,
• 1:10:23
  Speaker 1: actually found my birth family. Oh really, you know, kind
• 1:10:28
  Speaker 1: of interesting. And turns out that I grew up thinking
• 1:10:31
  Speaker 1: I was an only child, and it turns out I
• 1:10:33
  Speaker 1: have nine siblings. Get out nine siblings. And by the way,
• 1:10:38
  Speaker 1: they've been fantastic and incredibly excited and supportive, and most
• 1:10:42
  Speaker 1: of them are still back in Buffalo, New York. How
• 1:10:44
  Speaker 1: did you find them? Because I've heard from people who
• 1:10:48
  Speaker 1: do twenty three and me, all of a sudden, these
• 1:10:50
  Speaker 1: local relatives pop up that they had no idea about ancestry.
• 1:10:53
  Speaker 1: So I found I found my family and ancestry. And
• 1:10:56
  Speaker 1: and I was watching a movie called Three Identical Stranger. Sure,
• 1:11:01
  Speaker 1: and obviously a lot of those dynamics you know, really
• 1:11:05
  Speaker 1: hit home to me, you know, as I watched three
• 1:11:09
  Speaker 1: brothers who've been separated at birth. You know, I have
• 1:11:12
  Speaker 1: you know, I have three brothers as well, and you know,
• 1:11:16
  Speaker 1: it was very interesting to see. And of course the
• 1:11:19
  Speaker 1: big question in that movie is is it nature or
• 1:11:23
  Speaker 1: is it nurture? And the conclusion initially they all thought
• 1:11:28
  Speaker 1: that it was nature, as you recall, oh, well he
• 1:11:32
  Speaker 1: does the same thing. Actually, then you find out that
• 1:11:35
  Speaker 1: it really was nurture, and it really was how you
• 1:11:38
  Speaker 1: were raised, not you know, you were born. You your
• 1:11:41
  Speaker 1: three brothers, and you do everything the same together and
• 1:11:42
  Speaker 1: you're identical. Remember early on in that movie, they were
• 1:11:45
  Speaker 1: all talking about, oh, this person does this, and we
• 1:11:47
  Speaker 1: all do the same thing, and always there's no doubt
• 1:11:49
  Speaker 1: they are all these crazy parallels. And then when you
• 1:11:52
  Speaker 1: start to take peel off, that first layers all about
• 1:11:55
  Speaker 1: it's all about how you were raised, and it's all
• 1:11:57
  Speaker 1: about you know, were you raised in an ronment of
• 1:12:00
  Speaker 1: love and happiness and positivity and you can do this,
• 1:12:04
  Speaker 1: or were you raised in a very tough environment. And so,
• 1:12:07
  Speaker 1: you know, that movie was incredibly moving to me because
• 1:12:11
  Speaker 1: you know, I watched the thesis unfold and so that's
• 1:12:14
  Speaker 1: an example, you know, of of of one of the
• 1:12:18
  Speaker 1: things that I watched. So let's talk about mentors. You've
• 1:12:21
  Speaker 1: had a really fascinating career, working with a lot of
• 1:12:24
  Speaker 1: really interesting people who helped shape your career. So I
• 1:12:30
  Speaker 1: met David Rubinstein very very early on, actually even before
• 1:12:35
  Speaker 1: my Drexful days. I was a lawyer for for a
• 1:12:38
  Speaker 1: few years, and David was as well. I actually met
• 1:12:40
  Speaker 1: him when he was a lawyer and I was a
• 1:12:42
  Speaker 1: loyalty as well. It was kind of a funny story.
• 1:12:44
  Speaker 1: I was a new associated a law firm and I
• 1:12:48
  Speaker 1: was directed to report to him, and as it turns out,
• 1:12:50
  Speaker 1: he really didn't need anyone to help him, so I
• 1:12:52
  Speaker 1: never really got a chance to work for him, but
• 1:12:54
  Speaker 1: I met him. Then we ended up at the business
• 1:12:57
  Speaker 1: that I mentioned, Indos, who as we ended up being
• 1:12:58
  Speaker 1: one of their law are just limited partners and financed
• 1:13:01
  Speaker 1: many money deals for not just David, but Glenn Yungcan
• 1:13:05
  Speaker 1: who was an associate back then and being clear in others.
• 1:13:08
  Speaker 1: And so I've known David for you know, over twenty
• 1:13:10
  Speaker 1: five years. Obviously we sold our firm to Carlisle, and
• 1:13:14
  Speaker 1: I would say, of all the folks that I know
• 1:13:16
  Speaker 1: in our business, really truly just an incredible, you know,
• 1:13:22
  Speaker 1: incredible person and frankly brilliant in terms of how he
• 1:13:26
  Speaker 1: built Carlisle into a global private equity firm, and of course,
• 1:13:30
  Speaker 1: as you know, being here at Bloomberg, you know how
• 1:13:33
  Speaker 1: he has transitioned incredibly to be one of the most
• 1:13:39
  Speaker 1: interesting media personalities and interviewers. And you know, we need
• 1:13:43
  Speaker 1: to get him on your show. I mean, he's well.
• 1:13:45
  Speaker 1: I think we were scheduled when his first book came out,
• 1:13:48
  Speaker 1: and then the pandemic lockdown happened, I got postponed. What
• 1:13:51
  Speaker 1: I find fascinating about him is the more people are
• 1:13:55
  Speaker 1: running around with their hair on fire, the more he
• 1:13:58
  Speaker 1: is just calm and the voice of reason. I love
• 1:14:01
  Speaker 1: that sort of contrarianism that you know, you you really
• 1:14:06
  Speaker 1: when you could see clearly when chaos erupts. That's a
• 1:14:10
  Speaker 1: really valuable skill and he seems to have have that
• 1:14:14
  Speaker 1: in spades. He really is full up with that. He
• 1:14:17
  Speaker 1: is and and you know, I've gotten obviously to you know,
• 1:14:19
  Speaker 1: continue to know him well. And I will say that,
• 1:14:23
  Speaker 1: you know, you know, the other thing that I would
• 1:14:25
  Speaker 1: I would say about about his time is if you
• 1:14:27
  Speaker 1: look at his leadership of Carlisle and really building that firm,
• 1:14:31
  Speaker 1: and you look across the folks that are both there
• 1:14:34
  Speaker 1: now and are alumni, you can see what I refer
• 1:14:37
  Speaker 1: to in terms of the people. I mean, if you
• 1:14:39
  Speaker 1: look at the first twenty or so folks that that
• 1:14:42
  Speaker 1: were at Carlisle, you know, many of them were still
• 1:14:45
  Speaker 1: there at the firm, you know, you know, fifteen twenty
• 1:14:47
  Speaker 1: years later, And I think that speaks to that same
• 1:14:50
  Speaker 1: dynamic I referred to, you know, building a real culture.
• 1:14:53
  Speaker 1: And you know, that's something I admire tremendously and I
• 1:14:55
  Speaker 1: certainly feel that, you know, he's a good example of
• 1:14:58
  Speaker 1: someone who's done that and trans Asians so you know,
• 1:15:01
  Speaker 1: seamlessly into being an author, an author and an investor
• 1:15:05
  Speaker 1: and ultimately a media personality. So he's somebody admired very much.
• 1:15:08
  Speaker 1: So so let's talk about some books. What are your favorites?
• 1:15:12
  Speaker 1: What are you reading right now? So I listen to books.
• 1:15:15
  Speaker 1: You know, I'm kind of, you know, I'm kind of
• 1:15:17
  Speaker 1: the point now where a little bit lazy, but you know,
• 1:15:19
  Speaker 1: you just you know, you go on, you go on audible,
• 1:15:21
  Speaker 1: and you know, you just you know, just stop and
• 1:15:23
  Speaker 1: then you keep going. So I'm listening to a book
• 1:15:25
  Speaker 1: right now that I think is absolutely fascinating. I would
• 1:15:28
  Speaker 1: certainly recommend it. It's called The Splendid in the Vial
• 1:15:32
  Speaker 1: Uh Eric Eric Larson, and it's all about England in
• 1:15:37
  Speaker 1: Churchill in advance of World War Two and really leading
• 1:15:42
  Speaker 1: up through World War Two. And what's fascinating about it is,
• 1:15:45
  Speaker 1: I guess, you know, maybe never and I never really
• 1:15:47
  Speaker 1: fully realized how totally unprepared England was for World War Two,
• 1:15:52
  Speaker 1: let alone the United States, and how vulnerable they were,
• 1:15:57
  Speaker 1: you know, in those early days, and how easy it
• 1:16:00
  Speaker 1: would have been for you know, Germany, which had basically
• 1:16:03
  Speaker 1: conquered the entire continent. I'm at the point now where
• 1:16:05
  Speaker 1: you know, they've they've they've you know, they've conquered France.
• 1:16:08
  Speaker 1: I won't spoil the ending for you, but it's fantastic
• 1:16:10
  Speaker 1: and it's a great book. Everything he's ever written is deep, fascinating,
• 1:16:14
  Speaker 1: deeply researched. He's a fabulous writer, he is. And it's
• 1:16:18
  Speaker 1: it's a super colorful book because it really you really
• 1:16:21
  Speaker 1: feel like you're in the shoes of Churchill as he's
• 1:16:26
  Speaker 1: kind of navigating what is a you know, you know,
• 1:16:29
  Speaker 1: potentially could have been the end of the free world
• 1:16:31
  Speaker 1: or know it right. So it's a great read. I
• 1:16:34
  Speaker 1: won't spoil the you know, the the dynamics of it,
• 1:16:36
  Speaker 1: but it's it's terrific. Let's get to our last two questions,
• 1:16:41
  Speaker 1: starting with what sort of advice would you give to
• 1:16:44
  Speaker 1: a recent college grad interested in a career in private credit,
• 1:16:49
  Speaker 1: private equity finance in general? Yeah, so you know, I
• 1:16:54
  Speaker 1: think you know, in this age of instant success, if
• 1:16:57
  Speaker 1: you will, people become media personalities overnight. They become TikTok
• 1:17:01
  Speaker 1: you know, stars, and you know and and and in
• 1:17:05
  Speaker 1: a week. Um, I would say the advice I would
• 1:17:08
  Speaker 1: give to young people is that, UM, make sure that
• 1:17:13
  Speaker 1: you understand going in that you know, it's all about
• 1:17:17
  Speaker 1: the people you work with, the people you learn from.
• 1:17:21
  Speaker 1: Surround yourself. And then this is both personal and professional.
• 1:17:25
  Speaker 1: Surround yourself with people that love you, people that want
• 1:17:28
  Speaker 1: you to be successful. If you surround yourself with people
• 1:17:32
  Speaker 1: that have negativity and negative thoughts, you'll have negative thoughts, right,
• 1:17:36
  Speaker 1: But if you surround yourself with people that you admire
• 1:17:39
  Speaker 1: and respect and truly want you to be successful and
• 1:17:42
  Speaker 1: that you can learn from and grow from, that's an
• 1:17:45
  Speaker 1: incredibly important dynamic. And the other thing I would say,
• 1:17:48
  Speaker 1: which is I think you know and by the way,
• 1:17:49
  Speaker 1: those friendships and relationships last a lifetime. I've got folks
• 1:17:53
  Speaker 1: that I was in the bullpen with at Drexel back
• 1:17:56
  Speaker 1: in you know, back in the mid eighties that I'm
• 1:17:59
  Speaker 1: still great friends with and still learn from and talk
• 1:18:01
  Speaker 1: to all the time. So you know, surrounding yourself with
• 1:18:04
  Speaker 1: those people creates lifelong relationships and often coming very handy
• 1:18:09
  Speaker 1: in the business worlds I'm sure you've seen in your career.
• 1:18:11
  Speaker 1: The other thing I would say is I would remind
• 1:18:15
  Speaker 1: them something that I think is a little bit hard.
• 1:18:18
  Speaker 1: I think for a young person understand thinking, oh my gosh,
• 1:18:20
  Speaker 1: you know I went from my first interview and I
• 1:18:22
  Speaker 1: got rejected. You will be rejected, You will fail. The
• 1:18:27
  Speaker 1: mark of the most successful people I know. And this
• 1:18:30
  Speaker 1: includes athletes like Tom Brady, who, by the way, you know,
• 1:18:34
  Speaker 1: was drafted in the fifth round and thought of his
• 1:18:36
  Speaker 1: career I'm sure thought of his career was you know,
• 1:18:38
  Speaker 1: m quasi over at that point, sitting on the bench
• 1:18:41
  Speaker 1: in New England. But what you realize is it's all
• 1:18:44
  Speaker 1: about having the tenacity and the willingness to pay the
• 1:18:48
  Speaker 1: price to be really good at what you do. So
• 1:18:51
  Speaker 1: you will fail. Do not let failure stop you in
• 1:18:55
  Speaker 1: any way, shape or form. Recognize you learn from failure,
• 1:18:59
  Speaker 1: and it's the failures that ultimately inspire the successes. When
• 1:19:03
  Speaker 1: I think about my career, it was absolutely the times
• 1:19:06
  Speaker 1: when it didn't work out for whatever reason that you know,
• 1:19:09
  Speaker 1: you analyze, you determine, Okay, what was it that made
• 1:19:14
  Speaker 1: it not work out? And how do I fix that?
• 1:19:16
  Speaker 1: And I think in many respects, where we are today
• 1:19:18
  Speaker 1: as a firm is a great example of that because
• 1:19:21
  Speaker 1: we tacked several times along the way with our firm
• 1:19:24
  Speaker 1: and now we're in a phenomenal position with great partners
• 1:19:27
  Speaker 1: and great people. So learning from and not letting failure
• 1:19:31
  Speaker 1: deter you is really important. And our final question, what
• 1:19:34
  Speaker 1: do you know about the world of private credit and
• 1:19:37
  Speaker 1: investing today? You wish you knew forty years or so
• 1:19:40
  Speaker 1: ago when you were first getting started. You know, I
• 1:19:45
  Speaker 1: think that you know when I was, you know, like
• 1:19:47
  Speaker 1: all of us, when you're young in the business, you know,
• 1:19:49
  Speaker 1: you're convinced that it's all about showing everyone how smart
• 1:19:53
  Speaker 1: you are and running the fastest models. I can remember
• 1:19:56
  Speaker 1: the days at Direct, so we were all in the bullpen.
• 1:19:58
  Speaker 1: They used to call it the model room, and everybody
• 1:20:00
  Speaker 1: would go in there, and you know, everybody would you know,
• 1:20:02
  Speaker 1: we would all compete for who had the most, you know,
• 1:20:04
  Speaker 1: the technologically advanced financial models, and it was all about
• 1:20:07
  Speaker 1: the numbers. And I think that, you know, there's certain
• 1:20:10
  Speaker 1: an element of our business that is, you know, is
• 1:20:12
  Speaker 1: about the numbers. But you know, thirty years ago, you know,
• 1:20:16
  Speaker 1: I was a young kid thinking, Okay, well, you know,
• 1:20:18
  Speaker 1: it's all about the numbers, and whoever's the fastest model
• 1:20:21
  Speaker 1: or wins, whoever's got the most, you know, whoever's the
• 1:20:23
  Speaker 1: smartest wins. But what becomes very clear is it's all
• 1:20:27
  Speaker 1: about the people, not the numbers, and it's all about
• 1:20:30
  Speaker 1: building relationships and working with people that ultimately make you better.
• 1:20:35
  Speaker 1: And I think if you know, you know, I certainly
• 1:20:37
  Speaker 1: know that today, and I certainly figure that out along
• 1:20:40
  Speaker 1: the way, but I think understanding that, yes, the technical
• 1:20:44
  Speaker 1: side of the business is important, but it's really ultimately
• 1:20:47
  Speaker 1: the people side, the relationship side, that the ability to
• 1:20:51
  Speaker 1: surround yourself and to motivate and mentor the best people
• 1:20:55
  Speaker 1: that create the best organizations. I mean, look at this
• 1:20:57
  Speaker 1: organization here. I mean, you know, it's all about that.
• 1:21:00
  Speaker 1: And I think that you know, that's something I've learned
• 1:21:03
  Speaker 1: along the way, and I wish i'd known that a
• 1:21:06
  Speaker 1: lot earlier. Thanks Ken for being so generous with your time.
• 1:21:10
  Speaker 1: We have been speaking with Ken ken Sell, Founder, president
• 1:21:14
  Speaker 1: and CEO of Churchill Asset Management. If you enjoy this conversation,
• 1:21:19
  Speaker 1: well check out any of the previous four hundred and
• 1:21:21
  Speaker 1: ninety two we've done over the past nine years. You
• 1:21:26
  Speaker 1: can find those at iTunes, Spotify, YouTube, wherever you find
• 1:21:30
  Speaker 1: your favorite podcasts. Sign up from my daily reading list
• 1:21:34
  Speaker 1: at Ritholtz dot com. Follow me on Twitter at Rivolts,
• 1:21:38
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• 1:21:43
  Speaker 1: I would be remiss if I did not thank the
• 1:21:45
  Speaker 1: crack team that helps put these conversations together each week.
• 1:21:48
  Speaker 1: Justin Milner is my audio engineer. Fatigua Valbron is my
• 1:21:53
  Speaker 1: project manager. Sean Russo is my researcher. Paris Wald is
• 1:21:57
  Speaker 1: my producer. I'm Barry Ritolts. You've been listening to Masters
• 1:22:01
  Speaker 1: in Business on Bloomberg Radio.