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Alternate Investing: Masters in Business with Kristin Olson · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
• 0:11
  Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
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  Speaker 2: This week on the podcast, I have an extra special guest.
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  Speaker 2: Kristin Olsen is Goldman Sachs's global head of Alternatives for Wealth.
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  Speaker 2: She's a self described Goldman Sachs lifer. She went to
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  Speaker 2: the firm straight out of Georgetown twenty seven years ago.
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  Speaker 3: She's been running the Alts.
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  Speaker 2: Group for the past twenty four years. There aren't many
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  Speaker 2: people in the world of either wealth management or alternatives
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  Speaker 2: that are as knowledgeable and experienced as Kristin is. I
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  Speaker 2: thought this conversation about everything from private equity to private
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  Speaker 2: credit to real assets including real estate and infrastructure investing
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  Speaker 2: was absolutely fascinating, and I think you will also with
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  Speaker 2: no further ado my conversation with Kristin Olsen. Kristin Olsen,
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  Speaker 2: Welcome to Bloomberg.
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  Speaker 4: Thanks for having me, Barry.
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  Speaker 2: Well, I've been looking forward to having this conversation. Alts
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  Speaker 2: are obviously a super hot topic these days, but before
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  Speaker 2: we get into that, let's talk a little bit about
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  Speaker 2: your background. You arrived at Goldman Sachs directly from undergraduated Georgetown.
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  Speaker 2: What led you to finance and what led you to Goldman.
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  Speaker 5: So I would say, you know, corraduating from Georgetown, I
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  Speaker 5: actually wasn't sure what I want to do. I was
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  Speaker 5: interested in corporate finance, but I was particularly drawn to
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  Speaker 5: the idea of joining a big analyst class with great
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  Speaker 5: training at one of the big investment banks. And then
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  Speaker 5: I'd say I was fortunate enough through the in unity
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  Speaker 5: process to land at Goldman Sacks and that turned out
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  Speaker 5: to be a fantastic place to start my career in
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  Speaker 5: investment banking in the Financial Institutions group.
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  Speaker 2: And you started as an analyst in investment banking, did
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  Speaker 2: you go the whole CFA route one, two, and three.
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  Speaker 4: Nope, just two years.
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  Speaker 5: I got my CFA as an analyst at Goldman Sachs.
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  Speaker 5: That was my that was my training, two years in FIG.
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  Speaker 2: And then how did you end up pivoting to ALTS?
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  Speaker 2: It seems so different to go from transactional banking, especially
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  Speaker 2: when you started heading right into two thousand.
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  Speaker 3: What was the appeal of ALT?
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  Speaker 5: Well, it's funny I didn't go directly into ALTS. It
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  Speaker 5: took a little segue. So in two thousand, as a
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  Speaker 5: third year analyst, I wanted to do something different. It's
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  Speaker 5: hard to think. Way back then, that was the dawn
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  Speaker 5: of the Internet, and you know, everyone was going to
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  Speaker 5: work on different dot coms, different startups, and I took
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  Speaker 5: a little bit of a safer route and decided to
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  Speaker 5: work on the Goldman dot Com.
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  Speaker 2: Project, which is what which was really their own build
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  Speaker 2: out of their own website exactly.
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  Speaker 5: That's how long ago it was, if you think about it,
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  Speaker 5: we didn't have an online ability for our clients to
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  Speaker 5: access their accounts, to trade stocks, to access information as.
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  Speaker 2: Late as two thousand, Hey maybe we should get a website.
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  Speaker 4: That was the start of it.
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  Speaker 5: And also thinking about what kind of business we could
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  Speaker 5: evolve around self directed investors going to Goldman dot com
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  Speaker 5: versus at that time, E Trades, schwab right, all the
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  Speaker 5: online access that was happening, and so I decided to
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  Speaker 5: spend my third year focused on that business endeavor, and
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  Speaker 5: then that led right to the DOCM bubble bursting, which was,
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  Speaker 5: you know, pretty much I was pretty much done with
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  Speaker 5: my third year analyst program.
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  Speaker 4: I had a few more months.
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  Speaker 5: That was kind of February March of one, and so
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  Speaker 5: when that happened, they went to the you know, US
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  Speaker 5: poor third year analysts and said, you've got a few
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  Speaker 5: more months on your program, why don't you move into
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  Speaker 5: this investment management division at Goldman Sachs, which I knew
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  Speaker 5: nothing about at the time. And you're going to interview
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  Speaker 5: with a bunch of people. And it was sort of
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  Speaker 5: a group interview. And this is funny, but.
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  Speaker 2: Meaning you with a bunch of people or what person
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  Speaker 2: with a bunch of people.
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  Speaker 5: At a bunch of analysts? Wow, and funny story. My
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  Speaker 5: mentor and longtime boss. I heard this after the fact.
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  Speaker 5: We'll say I won Kristen and the analyst lottery or
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  Speaker 5: the analyst draft. He drafted me. And I didn't know
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  Speaker 5: anything about alternatives. I didn't know anything about investment management.
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  Speaker 5: I didn't know anything about wealth management. And the seat
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  Speaker 5: I got put into at the time was called our
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  Speaker 5: Special Investments group. So that's what we called alternatives back then.
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  Speaker 5: Special investment.
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  Speaker 3: Huh.
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  Speaker 2: Really interesting? And to be clear, Goldman has long had
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  Speaker 2: a reputation as very savvy traders and very savvy participants
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  Speaker 2: in public markets, and very very savvy in terms of seating. Hey,
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  Speaker 2: we have this great trader, but he wants to leave
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  Speaker 2: and start his own hedge fund. Let's be his prime
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  Speaker 2: broker and let's see them and participate in the upside.
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  Speaker 2: So I typically think of Goldman as a big public player.
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  Speaker 2: This has been developing for you know, longer than you've
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  Speaker 2: been there. What's the total assets that Goldman runs in
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  Speaker 2: terms of privates.
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  Speaker 4: Over five hundred million dollars.
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  Speaker 3: That's real money.
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  Speaker 5: Yeah, I mean, I think it's one of the things
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  Speaker 5: that people don't realize, which is you talk about going
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  Speaker 5: back twenty seven years ago. We've had a private investing
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  Speaker 5: business going back well over three decades wow, and over
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  Speaker 5: five hundred million assets today. We are one of the
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  Speaker 5: largest managers of alternative assets.
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  Speaker 4: So people don't know.
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  Speaker 2: So how has this space changed over the twenty three
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  Speaker 2: twenty four years you've been working in.
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  Speaker 4: Alts incredibly, right?
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  Speaker 5: I mean I think if you thought about the expansion
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  Speaker 5: of the different asset classes that sit under alternatives, right,
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  Speaker 5: So that's a broad word that describes lots of different
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  Speaker 5: types of strategies.
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  Speaker 2: Break it down for us, what are the key.
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  Speaker 5: You were starting with hedge funds, So that's one sector.
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  Speaker 5: But if you actually think about where we focus more,
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  Speaker 5: it's much more on the private side than the public alls.
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  Speaker 5: So if you think about under that umbrella, it's private equity.
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  Speaker 5: But again, under private equity, let's think about the different
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  Speaker 5: strategies there, everything from buy out through growth equity, through
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  Speaker 5: venture capital, then the advent up a big private credit
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  Speaker 5: asset class with an alternatives right, and even within that
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  Speaker 5: everything from direct lending to hybrid capital solutions to distress right,
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  Speaker 5: all of that falls under this private credit bucket. And
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  Speaker 5: then you have real assets, real estate, infrastructure, and so
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  Speaker 5: the asset class has become much more mature and much broader.
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  Speaker 5: And then obviously we've seen tremendous inflows over the last
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  Speaker 5: two three decades, and it's.
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  Speaker 2: It's still a fraction of the size of the public market.
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  Speaker 2: So I think that kind of gets lost in all
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  Speaker 2: the enthusiasm. Well, it's relatively small compared to stocks, bonds,
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  Speaker 2: or any other private.
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  Speaker 5: Exactly, Yet a lot of the economy is driven by
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  Speaker 5: private companies, right, And so I think that's part of
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  Speaker 5: the impetus right now as we see kind of the
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  Speaker 5: aperture opening for alternatives to individual investors, right, is how
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  Speaker 5: do you tap into other sources of growth in the
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  Speaker 5: economy if you're only investing in public markets? Right? So
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  Speaker 5: I think there's an imperative for a lot of investors
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  Speaker 5: to learn more and start to invest in private markets.
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  Speaker 2: So some of the drivers of the growth in the
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  Speaker 2: space are obviously privates are the majority of economic activity
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  Speaker 2: in the country. At the same time, we've seen the
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  Speaker 2: number of public companies shrinking between buybacks and mergers and
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  Speaker 2: the limited number of IPOs, the total number of public
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  Speaker 2: companies are becoming smaller as privates get bigger. I'm going
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  Speaker 2: to ask you to speculate what might reverse that shrinkage
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  Speaker 2: in the number of US public companies.
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  Speaker 5: Well, look, I think high quality, high growth companies are
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  Speaker 5: many of them are still going to revert back to
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  Speaker 5: the public markets, right, and hopefully we're starting to see
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  Speaker 5: a pick up an IPO activity. I think you'll see
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  Speaker 5: some of the marque growth companies, tech companies, AI companies
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  Speaker 5: that need massive amounts of capital to fund themselves.
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  Speaker 3: There's no alternative to go back to.
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  Speaker 4: The IPO markets, right.
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  Speaker 5: But you've seen a lot of innovation in the private
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  Speaker 5: markets to allow companies to say private for a lot longer, right,
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  Speaker 5: And so I think average time to IPO now is
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  Speaker 5: ten years. But what you're seeing the interim are secondary
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  Speaker 5: funds doing things like continuation vehicles right to allow to
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  Speaker 5: change the investor base but stay private for a.
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  Speaker 4: Longer period of time.
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  Speaker 5: There's just a lot more liquidity in private markets to
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  Speaker 5: allow these companies to maybe not have to ever go
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  Speaker 5: public if they don't want to.
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  Speaker 2: You know, it felt like in the nineties there was
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  Speaker 2: this mad rush to go public, very often with flimsy
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  Speaker 2: business models, clicks and eyeball stuff like that, And now
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  Speaker 2: it seems like we've swung the pendulum completely in the
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  Speaker 2: other direction, where there is no rush to go. But
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  Speaker 2: at a certain point, some of these companies get so large,
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  Speaker 2: really there's no alternatives there. So at that point size
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  Speaker 2: matters and you have to go public once you're looking
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  Speaker 2: for Well, we just sort of take private for fifty
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  Speaker 2: five billion, So maybe that IPO line is higher than
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  Speaker 2: I imagine, maybe it's seventy five billion. Let's bring this
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  Speaker 2: back to alternatives. What was it about the alternative investment
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  Speaker 2: world that you found so compelling versus your early experience
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  Speaker 2: with public stocks and bonds.
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  Speaker 5: Well, I think one of the fortunate things that I
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  Speaker 5: had with that pivot into alternatives was it was the
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  Speaker 5: intersection of not just alternatives, but alternatives and wealth management, right,
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  Speaker 5: thinking about how we deliver alternative investments to our Goldman
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  Speaker 5: Sacks wealth management clients, right, and you think about the industry,
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  Speaker 5: it really started alternatives focused on big institutions, pension funds, endowments,
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  Speaker 5: sovereign wealth funds. But actually at Goldman Sachs, we've been
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  Speaker 5: investing in alternatives for our wealth clients for over thirty years.
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  Speaker 5: So that intersection has been really interesting, and obviously, you know,
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  Speaker 5: fast forward to today. You know, the intersection of wealth
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  Speaker 5: and alts is a topic that you hear about pretty
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  Speaker 5: much every day.
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  Speaker 3: Right.
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  Speaker 2: When I think about the original institutions, you think of
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  Speaker 2: the Yale model and David Swinson and what was that
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  Speaker 2: the early nineteen eighties something like that, So that's forty
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  Speaker 2: something years ago. You guys have been doing this for
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  Speaker 2: thirty years. Not only has that market change, but there's
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  Speaker 2: been strategy and culture changes over the same period. Explain
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  Speaker 2: what you've observed and how you've helped shape this.
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  Speaker 5: Yeah, So, look, I think the process of allocating to
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  Speaker 5: alternatives for individual investors we've sort of honed and shaped
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  Speaker 5: over the last you know, twenty five years. Part of
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  Speaker 5: that starts with what do we advocate in terms of
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  Speaker 5: how much our clients should have in alternatives. Right, So
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  Speaker 5: go back to you know, when I started doing this
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  Speaker 5: in two thousand and one, for a moderate risk client,
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  Speaker 5: we already had at that point of twenty percent or
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  Speaker 5: so allocation alternatives. Fast forward to today, we would tell
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  Speaker 5: a moderate risk client they should have closer to twenty
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  Speaker 5: seven percent of their.
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  Speaker 2: I've heard some people say sixty twenty twenty is the
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  Speaker 2: new sixty forty. Is that just a cute line or
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  Speaker 2: is there anything.
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  Speaker 3: To those No?
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  Speaker 5: No, I think we're heading in that direction, right. I
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  Speaker 5: think for the clients that can withstand the liquidity, which
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  Speaker 5: we should talk about and understand kind of the risk
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  Speaker 5: return of alternatives, the idea of having a twenty percent
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  Speaker 5: or so allocation to alternatives is something I think we're
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  Speaker 5: going to talk about a lot more across all levels
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  Speaker 5: of investors.
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  Speaker 2: And it sounds like given that even where current rates are,
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  Speaker 2: it's still historically relatively low, which means we're not seeing
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  Speaker 2: a lot of yield on the fixed income side of
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  Speaker 2: the ledger. If we're talking sixty twenty twenty, it sounds
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  Speaker 2: like all or most of the shift into alts are
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  Speaker 2: coming from low yielding bonds.
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  Speaker 5: So look, I think the twenty percent is the part
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  Speaker 5: that I think I'm convicted on in the Alts piece.
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  Speaker 5: The question of where you fund it from, I think
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  Speaker 5: there's debate around, right, You've heard people say fifty thirty,
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  Speaker 5: twenty sixty, twenty twenty. I think that depends a little
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  Speaker 5: bit on where where are you going within alternatives?
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  Speaker 4: Right?
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  Speaker 5: Are you leaning into private credit to your point and
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  Speaker 5: looking for a high single digit yield in private credit?
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  Speaker 5: Then yes, then maybe you're funding it out of the
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  Speaker 5: fixed income bucket, or if you're leaning more into equity
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  Speaker 5: related strategies right, than maybe the funding source comes a
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  Speaker 5: little more of equities.
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  Speaker 4: Right. So I think the part that I'm focused on
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  Speaker 4: is the.
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  Speaker 5: Idea that people should have that twenty percent in there, right,
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  Speaker 5: And then I think it's a bespoke conversation about is
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  Speaker 5: it fifty or sixty equities?
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  Speaker 4: You know, where's it fun from?
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  Speaker 2: And last question about your career, you describe yourself as
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  Speaker 2: a Goldman lifer. What's kept you there for almost three decades?
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  Speaker 5: So the number one thing is definitely the people, right,
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  Speaker 5: I mean going somewhere for twenty seven years, which I
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  Speaker 5: never thought I would be doing. You know at the
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  Speaker 5: same firm. It's all about the quality of the people
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  Speaker 5: and the engagement. I think it's high quality people I
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  Speaker 5: enjoy working with every day. I think the second part
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  Speaker 5: is I think I got lucky falling into a really
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  Speaker 5: interesting part of Goldman's Acts where I get to watch
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  Speaker 5: the evolution of the alternative investment's asset class and the
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  Speaker 5: growth of our wealth business. And I think that dynamism
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  Speaker 5: of that has also kept me engaged for.
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  Speaker 2: That interesting super fast growing and constantly evolving. I would
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  Speaker 2: imagine that no week is the same over the past
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  Speaker 2: twenty three twenty four years running ALTS exactly.
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  Speaker 5: And I think the other interesting part about it is
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  Speaker 5: when you have a dislocation in the markets in the world,
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  Speaker 5: alternatives is actually a part of the portfolio where you
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  Speaker 5: usually go to capitalize on that, Right.
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  Speaker 4: So I think that's also really interesting. Right.
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  Speaker 5: So you have a dislocation, well, let's look at special
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  Speaker 5: situations or distress managers, right, or Wow, you have incredible
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  Speaker 5: innovation happening in technology, You're going to do private growth
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  Speaker 5: equity investing, right, And so I think that that's the
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  Speaker 5: dynamism I'm talking about in terms of tapping into dislocations,
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  Speaker 5: tapping into innovation.
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  Speaker 4: A lot of that happens in the private market.
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  Speaker 2: Really super interesting. Coming up, we continue our conversation with
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  Speaker 2: Kristin Olsen, Goldman Sachs, Global head of Alternatives for Wealth
• 13:54
  Speaker 2: clients describing the Goldman Sachs alternative wealth experience.
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  Speaker 3: I'm very rich Helts.
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  Speaker 2: You're listening to Masters in Business on Bloomberg Radio.
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  Speaker 3: I'm Barry red Halts.
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  Speaker 2: You're listening to Masters in Business on Bloomberg Radio. My
• 14:28
  Speaker 2: extra special guest this week is Kristen Olsen. She is
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  Speaker 2: Goldman's global head of Alternatives for Wealth. She's been with
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  Speaker 2: the firm for twenty seven years, and she's been running
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  Speaker 2: the old Capital Markets group for twenty four of those
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  Speaker 2: twenty seven years. So we were talking earlier about sixty
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  Speaker 2: twenty twenty or fifty thirty twenty. How do you think
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  Speaker 2: about those allocation ranges? How do you determine what's the
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  Speaker 2: best recommendation for an ultra high networth portfolio line portfolio
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  Speaker 2: who maybe they're not all that familiar with alternatives, but
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  Speaker 2: they want to diversify and have a little bit more
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  Speaker 2: of non correlated returns.
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  Speaker 5: So I think we are blessed at Goldman Sachs to
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  Speaker 5: have the benefit of our CIO and our investment strategy group.
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  Speaker 5: So that's sort of where we start writing a conversation
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  Speaker 5: with a client, which is how much of the portfolio
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  Speaker 5: should we have in alternatives? And we need to look
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  Speaker 5: a lot of factors in terms of risk tolerance, tolerance
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  Speaker 5: for illiquidity, what are they looking to derive from that
• 15:30
  Speaker 5: portion of the portfolio. But sort of as a starting point,
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  Speaker 5: we talked a little about this earlier. We would talk
• 15:35
  Speaker 5: to a client who has a moderate risk appetite about
• 15:37
  Speaker 5: having twenty seven percent alternatives, and so we'd have that
• 15:40
  Speaker 5: conversation around does that feel right? Is that the number
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  Speaker 5: that we want to get to? And then once we're there,
• 15:46
  Speaker 5: then it becomes how do we get there? Because that's
• 15:48
  Speaker 5: actually the really hard part and alternatives.
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  Speaker 3: When you say how do we get there?
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  Speaker 2: How do we over time allocate from some other bucket
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  Speaker 2: into the Olds buck exactly.
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  Speaker 5: And the complication is traditional private alternatives are capital commitments
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  Speaker 5: that generally call down capital and make investments over five
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  Speaker 5: to ten years, and so there's a lot of art
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  Speaker 5: and science of how do you get to twenty seven percent?
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  Speaker 5: In alt right, it's going to take you five, seven,
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  Speaker 5: ten years to get to that target as you sort
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  Speaker 5: of ladder into these different commitments that you make. So
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  Speaker 5: we spend a lot of time with clients talking about
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  Speaker 5: that process.
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  Speaker 2: So I'm very familiar with capital calls, typically from venture
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  Speaker 2: capital funds, occasionally for some oversubscribe funds, that you do
• 16:36
  Speaker 2: all the docks and then you wait for a window
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  Speaker 2: to open up where they'll take your money. I don't
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  Speaker 2: usually think of private equity of private credit in those terms,
• 16:46
  Speaker 2: but you have a whole lot more experience in this
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  Speaker 2: space than I do. Is that what typically takes place
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  Speaker 2: Someone says, hey, I want to commit up to ten
• 16:54
  Speaker 2: million dollars to this fund.
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  Speaker 3: How long does it take for those capital calls to
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  Speaker 3: come in?
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  Speaker 2: How long is the client waiting? And then what are
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  Speaker 2: they sitting in while they're waiting? Are they just sitting
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  Speaker 2: in treasuries?
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  Speaker 5: And this is where alternatives are complicated, right? So if
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  Speaker 5: you thought we'll talk a little bit about where alternatives
• 17:11
  Speaker 5: are going, right and when we talk about evergreens and
• 17:13
  Speaker 5: open ended which kind of get rid of that capital
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  Speaker 5: called dynamic, But if you thought about ultrahigh network clients
• 17:19
  Speaker 5: who historically and continue to really invest in traditional closed
• 17:22
  Speaker 5: down alternatives. You need to be very close to that
• 17:26
  Speaker 5: client and how you build that portfolio year and year
• 17:28
  Speaker 5: out making commitments they are going to call capital in
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  Speaker 5: private equity, in private traditional private credit funds, in real
• 17:34
  Speaker 5: asset funds. General is a ten year fund and they're
• 17:37
  Speaker 5: making investments over the first five years and trying to
• 17:39
  Speaker 5: harvest those over the second five years. And so our
• 17:42
  Speaker 5: job as advisors to our clients is how do we
• 17:45
  Speaker 5: build that laddered portfolio. How do we commit every single
• 17:48
  Speaker 5: year so that when we get to five to six
• 17:49
  Speaker 5: years in you hopefully have a self funding portfolio and
• 17:53
  Speaker 5: hopefully you have money you're invested. Capital is getting you
• 17:57
  Speaker 5: to that twenty seven percent of your portfolio in the ground,
• 18:01
  Speaker 5: but it's hard to get there, and so we spend
• 18:02
  Speaker 5: a lot of time advising clients on how to how
• 18:05
  Speaker 5: to build those portfolio.
• 18:06
  Speaker 2: So typically, all right, I have fifty million dollars, I'm
• 18:09
  Speaker 2: going to put ten million. I'm going to commit ten
• 18:12
  Speaker 2: to this. How long will it take before about five
• 18:15
  Speaker 2: years before that's fully general? And then what are am
• 18:18
  Speaker 2: I sitting in treasuries or money markets?
• 18:20
  Speaker 3: What am I doing in the meeting?
• 18:21
  Speaker 4: Then you're diluting your return right. And so this is
• 18:23
  Speaker 4: the other part.
• 18:24
  Speaker 5: You need to be really fully invested other than what
• 18:26
  Speaker 5: you think the short term capital call needs are. So again,
• 18:29
  Speaker 5: this is where the complexity comes in, which is how
• 18:31
  Speaker 5: do I not have drag and make sure I'm fully
• 18:33
  Speaker 5: invested right, but still have liquidity to fund a capital
• 18:36
  Speaker 5: that might come up the next month. And so that's
• 18:38
  Speaker 5: where our advisors spend a lot of time with clients
• 18:41
  Speaker 5: on making sure that we're not sitting in cash while
• 18:44
  Speaker 5: we're waiting for capital calls.
• 18:45
  Speaker 2: So ten million over five years sounds like two per year.
• 18:48
  Speaker 2: So in other words, it's not like I'm going to
• 18:51
  Speaker 2: allocate that money to this, correct I just am anticipating
• 18:54
  Speaker 2: a call for each of the next five years for
• 18:57
  Speaker 2: about two million, and the money is already invested rather
• 19:01
  Speaker 2: than sitting around waiting for this exactly.
• 19:04
  Speaker 3: It's a lot of moving parts.
• 19:05
  Speaker 4: It's a lot of moving parts.
• 19:06
  Speaker 5: But by the way, but that's what leads to when
• 19:08
  Speaker 5: you think about opening up the aperture and trying to
• 19:11
  Speaker 5: make alternatives more accessible. What you've seen over the last
• 19:15
  Speaker 5: few years is this incredible innovation around different structures that
• 19:20
  Speaker 5: are catering to individual investors. So if you think about
• 19:22
  Speaker 5: evergreen and open ended alternatives, you take away the complexity
• 19:27
  Speaker 5: of capital calls and distributions and managing liquidity because that
• 19:30
  Speaker 5: all gets done then within the vehicle, and there's trade
• 19:34
  Speaker 5: offs to that. But that's where you're seeing over the
• 19:37
  Speaker 5: last five years a tremendous amount of growth in alternatives
• 19:41
  Speaker 5: targeted at individual investments.
• 19:42
  Speaker 2: So you might be giving up some performance in exchange
• 19:46
  Speaker 2: for a whole lot more simplicity exactly. So let's shift
• 19:50
  Speaker 2: from the process of allocating and getting calls to the
• 19:53
  Speaker 2: actual ALT managers. I'm assuming you have dozens and dozens
• 19:58
  Speaker 2: of not hundreds on your platform, some in house, some
• 20:01
  Speaker 2: outside of the firm. How do you start the process
• 20:04
  Speaker 2: of figuring out what do we want this spread of
• 20:07
  Speaker 2: managers to look like?
• 20:08
  Speaker 5: Yeah, so that's what I think we spend a lot
• 20:10
  Speaker 5: of time focused on. I think our north star is
• 20:13
  Speaker 5: how do we have the best platform of opportunities for
• 20:16
  Speaker 5: our clients, and so one I think that starts with
• 20:19
  Speaker 5: diversification right across a number of different vectors. So one
• 20:24
  Speaker 5: is we talked about the different strategies under the ALT banner.
• 20:28
  Speaker 5: We need to have different opportunities in each of those
• 20:30
  Speaker 5: lanes buy out, growth, venture, private credit, real assets, right.
• 20:36
  Speaker 5: And then we want to be open architecture for our clients, right,
• 20:39
  Speaker 5: so meaning.
• 20:40
  Speaker 3: Not just gold Man, not just gold Man.
• 20:41
  Speaker 5: So product we have, as we talked about, a phenomenal
• 20:44
  Speaker 5: alternative capability over five hundred million dollars in assets under management.
• 20:48
  Speaker 5: We have a thirty plus year track record, and we
• 20:50
  Speaker 5: have strategies that span all those various alternabasset classes. So
• 20:55
  Speaker 5: that's one way we implement for clients. The other is
• 20:58
  Speaker 5: open architecture. So we have vehicles where clients can invest
• 21:03
  Speaker 5: in different fund of funds, different strategies like our Secondari's funds,
• 21:07
  Speaker 5: our co investment vehicles, and then lastly curating direct access
• 21:13
  Speaker 5: to some of the best alts managers out there on
• 21:15
  Speaker 5: a single name basis. And so there's different ways that
• 21:18
  Speaker 5: clients can actually implement their portfolio right across those three
• 21:22
  Speaker 5: different implementation methods.
• 21:24
  Speaker 2: So it's interesting we're talking about diversification and lack of correlation,
• 21:30
  Speaker 2: and I'm really hearing two distinct types of diversification. One is, hey,
• 21:34
  Speaker 2: these aren't public stocks, they don't follow that cycle, so
• 21:37
  Speaker 2: you should get some sort of non correlated returns. But
• 21:42
  Speaker 2: within each of the major subgroups of alternatives, and then
• 21:48
  Speaker 2: across those groups, this should be somewhat non correlated. Is
• 21:52
  Speaker 2: that is that affair of someone uncorrelated?
• 21:54
  Speaker 3: Yeah?
• 21:54
  Speaker 5: Look, I think what clients are looking for in alternatives
• 21:57
  Speaker 5: is diversification, so different return drivers than what they're getting
• 22:02
  Speaker 5: from public markets, hopefully, a lack of correlation to those markets,
• 22:08
  Speaker 5: and alpha to those markets, meaning outperformance relative to what
• 22:11
  Speaker 5: they otherwise would have gotten had they gone in the
• 22:14
  Speaker 5: public markets.
• 22:15
  Speaker 4: Right.
• 22:15
  Speaker 5: So, when we think about returns and alternatives, some of
• 22:18
  Speaker 5: it is absolute, right, so what type of returns are
• 22:21
  Speaker 5: those managers underwriting to in the portfolio? And that's an
• 22:24
  Speaker 5: absolute target, But then there's also a relative target, which
• 22:27
  Speaker 5: is how do we think about the premium you're getting
• 22:30
  Speaker 5: for that illiquidity? Right, So, if I'm going to tie
• 22:33
  Speaker 5: my money up for in a ten year private equity fund,
• 22:36
  Speaker 5: I want to be paid for that illiquidity. And so
• 22:39
  Speaker 5: then we think about am I getting several hundred basis
• 22:41
  Speaker 5: points a year better return then had I put that
• 22:45
  Speaker 5: money in at the same time and we're taking the
• 22:48
  Speaker 5: money out at the same time from the relevant public
• 22:50
  Speaker 5: market benchmark, Right, then I think I've been rewarded if
• 22:53
  Speaker 5: I've gotten three hundred basis points a year or something
• 22:56
  Speaker 5: in that ballpark better than the public alternative, and then
• 23:00
  Speaker 5: maybe you would say it was worth it for that.
• 23:01
  Speaker 4: Inliquidity, well, that's the.
• 23:02
  Speaker 2: Whole idea of the liquidity premium, right that not only
• 23:07
  Speaker 2: are you getting paid for illiquidity, but it becomes a
• 23:10
  Speaker 2: somewhat less efficient market, which means there's greater opportunity for
• 23:14
  Speaker 2: upside exactly.
• 23:15
  Speaker 5: I mean, look, the private markets, they have a lot
• 23:17
  Speaker 5: more information than the public markets. Many strategies they have control, right,
• 23:22
  Speaker 5: so they can actually change the outcome at their portfolio companies.
• 23:25
  Speaker 5: They can change management, they can change strategy, a lot
• 23:29
  Speaker 5: of different ways to drive return that are not available
• 23:32
  Speaker 5: in the public markets.
• 23:33
  Speaker 4: Right.
• 23:34
  Speaker 2: So, given the fact that information is so important and
• 23:38
  Speaker 2: so different than publicly traded stocks and or bonds, how
• 23:42
  Speaker 2: do you start out doing the due diligence that has
• 23:45
  Speaker 2: to be like a giant lift, especially if you have
• 23:48
  Speaker 2: a few hundred managers on the platform.
• 23:51
  Speaker 4: Yeah.
• 23:51
  Speaker 5: Look, I think most investors need to seek the help
• 23:55
  Speaker 5: of a professional organization that can help them do that diligence.
• 23:59
  Speaker 5: So I think for us we have a group called
• 24:01
  Speaker 5: our External Investing Group it's over four hundred people globally,
• 24:04
  Speaker 5: it's two hundred and fifty people doing manager selection and diligence.
• 24:08
  Speaker 5: And so we like to deploy that team to do
• 24:12
  Speaker 5: the fiduciary diligence and all the outside managers that we're
• 24:15
  Speaker 5: partnered with, and that's a pretty intense process, right, Each
• 24:18
  Speaker 5: manager is going to take a couple months to do
• 24:21
  Speaker 5: the diligence. It's going to go through an investment committee process.
• 24:24
  Speaker 5: And as you know, like you look at a track
• 24:26
  Speaker 5: record from a manager, you really need to dig in
• 24:28
  Speaker 5: and understand kind of what's behind that track record, right,
• 24:31
  Speaker 5: lots of caveats sometimes, and so that's the work that
• 24:35
  Speaker 5: they're doing and going to their investment committees and getting approval.
• 24:38
  Speaker 5: So we work with that team to diligence the managers
• 24:41
  Speaker 5: that we think makes sense for our clients.
• 24:42
  Speaker 2: So I'm going to guess there's some analysts, some lawyers,
• 24:45
  Speaker 2: some compliance people, some regulatory specialists. Like this isn't the
• 24:49
  Speaker 2: sort of thing that the average investor.
• 24:51
  Speaker 3: Can undertake on their own.
• 24:52
  Speaker 2: You really need a team of professionals to dive in.
• 24:55
  Speaker 5: I think you want to have the advice of professionals.
• 24:58
  Speaker 5: The other part that we've found as we talk about
• 25:00
  Speaker 5: diversification being so important. So when we think about an
• 25:02
  Speaker 5: individual investor, I always think there's a couple of vectors
• 25:05
  Speaker 5: of diversification for them. One is diversification of strategy, which
• 25:09
  Speaker 5: you talked about under the al umbrella number two, diversification
• 25:12
  Speaker 5: by manager, right you want to work with different managers,
• 25:15
  Speaker 5: and then diversification by vintage year. So we think it's
• 25:18
  Speaker 5: very important for clients to be pretty programmatic about making
• 25:22
  Speaker 5: allocations every single year, because again, you don't want to
• 25:25
  Speaker 5: market time. You don't know when the best opportunities are
• 25:28
  Speaker 5: going to be, and actually it's usually when times feel
• 25:30
  Speaker 5: the worst is probably the best time to be allocating, right,
• 25:33
  Speaker 5: And so you know, and then when you dial that back,
• 25:36
  Speaker 5: you might be needing to make ten commitments a year,
• 25:39
  Speaker 5: fifteen commitments a year. How can you diligence enough managers
• 25:42
  Speaker 5: to decide that you've picked us the best one, right,
• 25:44
  Speaker 5: And so it gets very challenging and very complicated, and
• 25:47
  Speaker 5: that's why you see a lot of individual investors partnering
• 25:50
  Speaker 5: with an advisor or an advisor that has diligence capabilities
• 25:53
  Speaker 5: to help navigate them through who are the best managers
• 25:55
  Speaker 5: in each of their each of those lanes.
• 25:57
  Speaker 2: So diligence is the first step, and that is all
• 26:02
  Speaker 2: the legal and the paperwork that has to be done.
• 26:04
  Speaker 2: Let's talk about risk assessment. How do you figure out
• 26:08
  Speaker 2: when you're looking at a variety of different investment strategies
• 26:11
  Speaker 2: and managers, Hey, how much bang am I getting relative
• 26:16
  Speaker 2: to the risk the client is assuming in this investment?
• 26:19
  Speaker 2: It would it would seem that's really challenging.
• 26:22
  Speaker 4: Also, yeah, look, I mean there's things that you need
• 26:24
  Speaker 4: to look at.
• 26:25
  Speaker 5: Obviously, you're going to look at the track record over time,
• 26:27
  Speaker 5: and you're going to look at the stability of the
• 26:29
  Speaker 5: team and do they have all the fundamental things that
• 26:31
  Speaker 5: lead to a repeatable investment process, right, which should argue
• 26:36
  Speaker 5: that you can rely on that track card as being
• 26:38
  Speaker 5: hopefully something that you could look at that could be
• 26:40
  Speaker 5: repeatable in the future.
• 26:41
  Speaker 4: Right.
• 26:43
  Speaker 5: I think the other important part is what's the concentration
• 26:45
  Speaker 5: of that strategy?
• 26:46
  Speaker 1: Right?
• 26:46
  Speaker 5: How many investments are they making? Is it highly concentrated,
• 26:49
  Speaker 5: is it more diversified. So, for example, one thing that
• 26:53
  Speaker 5: our clients have been long time investors in is secondary
• 26:57
  Speaker 5: private equity. And one of the interesting things about sexonies
• 27:00
  Speaker 5: is underneath one single fund, you may have thousands of companies,
• 27:05
  Speaker 5: so you have a tremendous amount of diversification. And because secondaries,
• 27:09
  Speaker 5: if you thought it secondary private equity, it's already partially invested.
• 27:12
  Speaker 5: So most traditional private equity funds it's a blind pool. Right,
• 27:16
  Speaker 5: you're committing capital that's going to investor in the next
• 27:18
  Speaker 5: five years. Secondaries allows you to take a look at
• 27:20
  Speaker 5: some of the money that's already in the ground and
• 27:23
  Speaker 5: actually buy that theoretically at a discount to it fair values.
• 27:26
  Speaker 4: Right.
• 27:26
  Speaker 2: So there are two types of secondaries that I'm familiar with,
• 27:29
  Speaker 2: and I want you to comment on this. One of
• 27:32
  Speaker 2: them is, Hey, a co investor in a fund suddenly
• 27:36
  Speaker 2: has a change in their liquidity needs, and hey, we
• 27:39
  Speaker 2: will want to sell this for you know, fifteen percent
• 27:41
  Speaker 2: discount from what the last closing date was, so you
• 27:45
  Speaker 2: get to buy in an earlier vantage at a discount.
• 27:49
  Speaker 2: That's one secondary you Is that something you were talking about.
• 27:53
  Speaker 4: Yes, So that's an LP secondary.
• 27:55
  Speaker 3: Right.
• 27:55
  Speaker 5: Could be a big institution that for whatever reason wants
• 27:58
  Speaker 5: to do so that earlier this year he bounce their portfolio,
• 28:01
  Speaker 5: big university that as liquidity needs, right, we'll look to
• 28:04
  Speaker 5: go and get liquitting in the secondary market be individuals,
• 28:06
  Speaker 5: So that's sort of a traditional LP secondary.
• 28:09
  Speaker 2: So the other thing I occasionally see is, hey, one
• 28:13
  Speaker 2: of our portfolio companies suddenly is adding this or pivoting
• 28:17
  Speaker 2: in this direction, and we're comfortable with how much US
• 28:20
  Speaker 2: as a fund they're putting into this company, and we're
• 28:23
  Speaker 2: going to continue maintaining this investment, but they need additional capital.
• 28:27
  Speaker 3: Do you want to do well one off.
• 28:29
  Speaker 2: Side pocket or people call it all sorts of different things.
• 28:32
  Speaker 2: How often you see that sort of thing coming?
• 28:34
  Speaker 5: Yeah, So the other so when you look at the
• 28:35
  Speaker 5: secondary market, you have the LP secondaries, which you just
• 28:38
  Speaker 5: talked about. The other would be GP led secondaries. So
• 28:41
  Speaker 5: that's not initiated by the LP of the fund. It's
• 28:43
  Speaker 5: actually the manager of the fund to your point, saying, hey,
• 28:45
  Speaker 5: we have a company that we don't want to sell
• 28:47
  Speaker 5: right now. We want to continue to own, but we
• 28:50
  Speaker 5: need to find new capital to fund it. Right So
• 28:51
  Speaker 5: you might want to take out some of the old investors,
• 28:53
  Speaker 5: the GP might want to roll their capital, roll their
• 28:56
  Speaker 5: incentive fee. So that's the GP LED secondary also to
• 29:00
  Speaker 5: continuation vehicle. Many times you're hearing a lot about this
• 29:04
  Speaker 5: and so that's another part of what we do within
• 29:06
  Speaker 5: our secondary franchise that our clients have exposure.
• 29:08
  Speaker 3: To really really interesting.
• 29:10
  Speaker 2: Coming up, we continue our conversation with Kristin Olsen, Goldman's
• 29:14
  Speaker 2: global head of Alternatives for wealth, discussing the state of
• 29:18
  Speaker 2: alternative investing today.
• 29:20
  Speaker 3: I'm Bury Results.
• 29:21
  Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
• 29:38
  Speaker 2: Bury Results. You're listening to Masters in Business on Bloomberg Radio.
• 29:42
  Speaker 2: My extra special guest is Kristin Olsen. Kristen is the
• 29:45
  Speaker 2: global head of Alternatives for wealth management clients at Goldman Sachs,
• 29:50
  Speaker 2: a position she's held for twenty four of her twenty
• 29:53
  Speaker 2: seven years at Goldman. So before we get into the
• 29:58
  Speaker 2: state of altern of investing today, I'm fascinated by this
• 30:03
  Speaker 2: big survey you guys do each year. Over a thousand
• 30:07
  Speaker 2: clients and other people participat in it, and some of
• 30:10
  Speaker 2: the answers that come along are kind of expected, some
• 30:13
  Speaker 2: are really kind of surprising. Let's go over a few
• 30:17
  Speaker 2: of these because they're really fascinating. So, first, your survey
• 30:21
  Speaker 2: reveals wealthy individuals adopt alternative investments as their net worth grows.
• 30:28
  Speaker 2: That wasn't a surprise surprising but some of the specifics,
• 30:32
  Speaker 2: some of the percentages were really really like wow, look
• 30:36
  Speaker 2: at that. Tell us a little bit about the response
• 30:39
  Speaker 2: you get to that survey question.
• 30:40
  Speaker 5: Yeah, so well, first I would say, this is our
• 30:42
  Speaker 5: inaugural survey, So this is the first time that we're
• 30:45
  Speaker 5: actually surveying a broad universe.
• 30:47
  Speaker 3: Put me on that list.
• 30:48
  Speaker 2: I want to see that data every year. I'm a
• 30:50
  Speaker 2: junkie for that sort of stuff, and I think.
• 30:52
  Speaker 5: Part of the impetus for that too is just what
• 30:54
  Speaker 5: we've talked about, sort of the incredible interest by individual
• 30:57
  Speaker 5: investors and figuring out should they invest in alternative how
• 31:00
  Speaker 5: do they invest in alternatives? And so that was sort
• 31:02
  Speaker 5: of the impetus to this, you know, opening the door
• 31:05
  Speaker 5: to alternatives survey that we just did. I think the
• 31:08
  Speaker 5: data that you mentioned is not surprising, obviously from my seat,
• 31:11
  Speaker 5: starting with ultra high net worth clients.
• 31:13
  Speaker 4: Sure, it's been.
• 31:14
  Speaker 5: Investing alternatives for you know, twenty five plus years. I
• 31:18
  Speaker 5: was surprised by down the well spectrum, the fact that
• 31:21
  Speaker 5: there's a fair amount of participation all the way down
• 31:24
  Speaker 5: to the you know, one to five million dollar clients, right,
• 31:27
  Speaker 5: And I think as it becomes easier for these individuals
• 31:30
  Speaker 5: to invest in alternatives, and as there's more education around it,
• 31:34
  Speaker 5: those numbers are going to continue to go up.
• 31:36
  Speaker 2: So I'll tell you what surprised me at first, blush,
• 31:40
  Speaker 2: and then as I thought about it, made a lot
• 31:42
  Speaker 2: of sense. Millennials are at the forefront of a significant
• 31:46
  Speaker 2: shift in investment behavior towards ALTZ. And as I began
• 31:50
  Speaker 2: to think about it, hey, these are the kids who
• 31:53
  Speaker 2: more or less came of age right into the Great
• 31:55
  Speaker 2: Financial Crisis. They're like, wait, stocks can go down also,
• 32:00
  Speaker 2: So I'm not terribly surprised by that once I thought
• 32:03
  Speaker 2: about it. But still, how significant of a shift is this?
• 32:07
  Speaker 5: Look, I think we're it's fun to watch. Obviously we're
• 32:08
  Speaker 5: just starting to see it and you know, digesting the
• 32:11
  Speaker 5: survey results. But you know what I one part I
• 32:13
  Speaker 5: think about as millennials is their interest in accessing innovation, right,
• 32:17
  Speaker 5: Like this is a digital first generation, no doubt. And
• 32:21
  Speaker 5: so when you think again to our earlier comments, how
• 32:24
  Speaker 5: do you access innovation in healthcare in tech? A lot
• 32:28
  Speaker 5: of that is in the private markets, right, And so
• 32:30
  Speaker 5: I think part of that also might be the reason
• 32:32
  Speaker 5: why you see millennials, you know, being more inclined to
• 32:36
  Speaker 5: alternatives and being sort of kind of this shift in behavior.
• 32:41
  Speaker 2: So let's talk about the percentage of people whose wealth
• 32:45
  Speaker 2: is professionally managed. And obviously the data set that this
• 32:49
  Speaker 2: question goes to is pretty significant. But fifty nine percent
• 32:53
  Speaker 2: of wealth amongst a thousand individual surveyed were professionally managed.
• 32:58
  Speaker 2: And I kind of scratched my head that because my
• 33:01
  Speaker 2: assumption has been amongst the ultra wealthy, it's even higher
• 33:06
  Speaker 2: just as a matter of a and I have time
• 33:08
  Speaker 2: or interest in this. Amongst most people, they're running their business,
• 33:11
  Speaker 2: they're continuing to accumulate more wealth. But I'm curious about
• 33:16
  Speaker 2: who was the data set this one went to, and
• 33:18
  Speaker 2: what do you think of that fifty nine percent number?
• 33:21
  Speaker 3: High, low, somewhere in between.
• 33:22
  Speaker 5: Well, so it went to one thousand investors million dollars
• 33:26
  Speaker 5: of investable assets plus and twenty five years old or older.
• 33:31
  Speaker 3: So not necessarily Goldman Sachs call.
• 33:33
  Speaker 4: Not necessarily the ultra high networth.
• 33:34
  Speaker 5: And frankly, part of the intention was to try to
• 33:36
  Speaker 5: get a better sense for the broader individual market, not
• 33:39
  Speaker 5: just the ultra high networth market. I think, you know,
• 33:42
  Speaker 5: we have a long history in our wealth business. We
• 33:44
  Speaker 5: know the ultra high network space very very well. And
• 33:46
  Speaker 5: I think in that space, if we were to run
• 33:48
  Speaker 5: the survey, I mean very high percent ninety exactly right.
• 33:52
  Speaker 5: So my guess is that not professionally managed peace are
• 33:56
  Speaker 5: more self directed at the lower end of the well
• 33:58
  Speaker 5: spectrum would be my gaes and maybe younger.
• 34:01
  Speaker 2: Right when you see black Rocket twelve trillion and Vanguard
• 34:04
  Speaker 2: at eleven trillion, Hey, someone's running their own portfolio. So
• 34:07
  Speaker 2: what would make sense forty one percent or so of people,
• 34:11
  Speaker 2: if not more doing it. It's really interesting to think
• 34:15
  Speaker 2: about what is the mass affluent doing, what is the
• 34:18
  Speaker 2: high net worth doing, what is the ultra high net
• 34:20
  Speaker 2: worth and multi family office doing. I think as you
• 34:23
  Speaker 2: go up that scale, is it's safe to say most
• 34:26
  Speaker 2: of them are working with professional advisors? Is that that
• 34:29
  Speaker 2: would be?
• 34:29
  Speaker 5: That would be my guess for sure. The other part
• 34:32
  Speaker 5: is if they're self directed. And there's some of the
• 34:34
  Speaker 5: other survey data that also shows that, I think something
• 34:38
  Speaker 5: less than fifty percent of advisors have even brought up
• 34:41
  Speaker 5: alternatives with some of that's really interesting, right, And so
• 34:43
  Speaker 5: you have the self directed that probably are not accessing alternatives,
• 34:46
  Speaker 5: could very hard to do that without an advisor. And
• 34:49
  Speaker 5: then you only have something less than fifty percent of
• 34:51
  Speaker 5: advisors bring up alternatives like this is where the opportunity
• 34:55
  Speaker 5: is right on educating the advisors to feel more comfortable
• 34:58
  Speaker 5: talking to investors about altern internatives, and obviously the educating
• 35:02
  Speaker 5: the investor and investors.
• 35:03
  Speaker 2: So one of the questions you ask led to an
• 35:06
  Speaker 2: answer that I adore because I'm constantly saying to not
• 35:12
  Speaker 2: only the.
• 35:12
  Speaker 3: People I work with, other people.
• 35:15
  Speaker 2: Your clients aren't telling you the truth. They have money
• 35:17
  Speaker 2: away from you. Your wild share is much lower than
• 35:20
  Speaker 2: you realize until you're with the same advisor for five
• 35:23
  Speaker 2: or ten years and the client is comfortable in shares.
• 35:27
  Speaker 2: But I love this data point. Households with ten million
• 35:31
  Speaker 2: dollars and up in investable assets typically engage two different
• 35:36
  Speaker 2: advisors compared with one advisor at the mass affluent and
• 35:40
  Speaker 2: high net worth groups. Tell us a little bit about
• 35:43
  Speaker 2: that dual advisor approach. These are We're not saying two
• 35:47
  Speaker 2: people at the same firm. These could be two completely
• 35:49
  Speaker 2: different firms.
• 35:51
  Speaker 5: You know, I think as people go up the well spectrum,
• 35:52
  Speaker 5: they want to have different options, different viewpoints. You know,
• 35:56
  Speaker 5: have some capital at different organized, different.
• 35:58
  Speaker 2: Firms, a little diverse internally exactly.
• 36:02
  Speaker 5: I do think though from my experience on the well
• 36:05
  Speaker 5: side Altra Hinder recite at Goldman, it does tend to
• 36:08
  Speaker 5: be that over time though, there is a lead relationship, right,
• 36:11
  Speaker 5: And I think as you get higher up the well
• 36:13
  Speaker 5: spectrum and you have more complexity in your portfolio, a
• 36:17
  Speaker 5: lot of that, namely coming from alternatives, it becomes more
• 36:20
  Speaker 5: and more imperative to have somebody that's the quarterback or
• 36:24
  Speaker 5: the driver, you know, in the pole position, as opposed to,
• 36:28
  Speaker 5: you know, as opposed to two people both managing parts
• 36:31
  Speaker 5: of the portfolio.
• 36:32
  Speaker 3: No one overlap.
• 36:33
  Speaker 2: You don't want, you know, one overlap.
• 36:35
  Speaker 5: And you also want you know, we talked about how
• 36:37
  Speaker 5: hard it is to build these alternative portfolios, you know,
• 36:40
  Speaker 5: doing that in two places, and how are you managing
• 36:42
  Speaker 5: the liquidity and how are you knowing how you're actually allocated? Overall,
• 36:45
  Speaker 5: I think you start to see this shift to one
• 36:48
  Speaker 5: advisor really being the lead advisor and the other advisor
• 36:51
  Speaker 5: maybe being a secondary advisor.
• 36:53
  Speaker 2: So as much as I thought that was a fascinating
• 36:55
  Speaker 2: data point, this one kind of terrifies me. Millennials site
• 37:00
  Speaker 2: social media more often, while boomers rely on traditional media
• 37:05
  Speaker 2: outlets for their investing and financial planning information. Social media
• 37:12
  Speaker 2: really well.
• 37:13
  Speaker 5: You know one of the things that I say, and
• 37:15
  Speaker 5: I'm not definitely not a millennial, but you know, if
• 37:17
  Speaker 5: you going on your LinkedIn feed, you see videos or
• 37:21
  Speaker 5: you know, on Instagram from major alternativesting firms, right, and
• 37:24
  Speaker 5: so you can see why. I don't know what percent
• 37:27
  Speaker 5: of their time they're spending on social media, but naturally
• 37:30
  Speaker 5: these ads and these videos are getting served up to
• 37:33
  Speaker 5: them there, so it seems logical to me then that
• 37:36
  Speaker 5: that's where they're going to.
• 37:37
  Speaker 2: Well. LinkedIn is probably the most credible of all the
• 37:41
  Speaker 2: social media outlets, but I think of TikTok and Instagram
• 37:45
  Speaker 2: and Twitter. A couple of years ago, the IRS put
• 37:49
  Speaker 2: out a list of forty tax statements that they had
• 37:53
  Speaker 2: culled from various social media that were wrong, some of
• 37:58
  Speaker 2: which would lead to penalties, interest or jail time if
• 38:02
  Speaker 2: you followed them. And they literally forty here are forty
• 38:05
  Speaker 2: one things that we got from social media. Do not
• 38:08
  Speaker 2: do any of these things. So that's why I say,
• 38:10
  Speaker 2: I get a little nervous when I see millennials with
• 38:12
  Speaker 2: citing social media. LinkedIn, of all the places, seem to
• 38:17
  Speaker 2: be the most credible because it's business oriented, not some
• 38:21
  Speaker 2: wacky guy telling you that if you're on a boat
• 38:24
  Speaker 2: offshore on April fifteenth, you don't know any taxes. That
• 38:28
  Speaker 2: was the one that really stayed out with me, right,
• 38:31
  Speaker 2: all right, So that's all I have to do is
• 38:32
  Speaker 2: just be out on the water at fifteenth could save
• 38:35
  Speaker 2: myself a lot of money.
• 38:35
  Speaker 5: I mean, look, I think it all goes back to
• 38:37
  Speaker 5: the number one thing that I think we're focused on
• 38:40
  Speaker 5: with respect alternatives and individual investors, which is education, right absolutely,
• 38:45
  Speaker 5: and so you know, hopefully they're not getting their education
• 38:48
  Speaker 5: off of TikTok, but you know, all of all of
• 38:51
  Speaker 5: us need to think about how do we better educate
• 38:54
  Speaker 5: around the role of alternatives, the risk of alternatives, how
• 38:58
  Speaker 5: you invest in alternatives. And so I think we're spending
• 38:59
  Speaker 5: a lot of time thinking about advisor education and client
• 39:03
  Speaker 5: education and by the way, education that we roll out
• 39:06
  Speaker 5: on social media, right because if that's where they are.
• 39:08
  Speaker 3: Right, you got to meet them where they are.
• 39:10
  Speaker 4: That's where we're going to have to put the education.
• 39:12
  Speaker 2: So let's bring this back around to alts today. Let's
• 39:15
  Speaker 2: talk about themes. What are you most excited about in
• 39:17
  Speaker 2: private markets? What's new? Interesting and you know thrilling. Can
• 39:22
  Speaker 2: I use the word thrilling about alts?
• 39:24
  Speaker 5: Well, look, I think when you say thrilling, I think
• 39:27
  Speaker 5: about all what are you enthusiasts innovation that's happening right
• 39:30
  Speaker 5: now in technology? Obviously, how can we have a podcast
• 39:33
  Speaker 5: and not mention AI on any topic.
• 39:37
  Speaker 3: I'm not familiar with it. Tell me a little bit.
• 39:39
  Speaker 3: I haven't heard enough about that.
• 39:40
  Speaker 5: But look, I think that what we're seeing in terms
• 39:42
  Speaker 5: of the incredible advances in AI is bringing back a
• 39:45
  Speaker 5: lot of risk appetite to invest in venture and in
• 39:49
  Speaker 5: growth and to participate in what they think is going
• 39:51
  Speaker 5: to be you know, transformational technology advancements you know around AI,
• 39:56
  Speaker 5: and that permeates not just the venture tech and growth space,
• 39:58
  Speaker 5: but how AI is going to transform additional businesses. Right,
• 40:03
  Speaker 5: So I think that segment is quite interesting. And then
• 40:08
  Speaker 5: a lot of the other things that we think are
• 40:09
  Speaker 5: interesting are a little more not thrilling, which was the
• 40:12
  Speaker 5: word you use.
• 40:13
  Speaker 2: Maybe that's the wrong word, but what's really interesting with
• 40:16
  Speaker 2: great growth potential? Well, look that's thrilling too.
• 40:19
  Speaker 5: So look, I would say we talked a little about secondaries.
• 40:22
  Speaker 5: We really like secondaries because again, if you think about
• 40:25
  Speaker 5: the primary alter markets growing right, more money is going
• 40:29
  Speaker 5: to alternatives. That naturally means the secondary market's going to
• 40:32
  Speaker 5: grow right to spill over. It's correlated to the growth
• 40:35
  Speaker 5: of the primary markets and alternatives. So there's me more
• 40:37
  Speaker 5: opportunity there, and we really like the risk return for
• 40:40
  Speaker 5: clients there in that segment. So I think that's one
• 40:43
  Speaker 5: space that we very much like. What else would I say?
• 40:48
  Speaker 2: You mentioned real assets, and very often when you talk
• 40:52
  Speaker 2: about real assets I think that has morphed over the
• 40:56
  Speaker 2: past decade and evolved. I used to think of real
• 40:59
  Speaker 2: ass that says timber or coal or whatever, but now
• 41:05
  Speaker 2: it's things like infrastructure and data centers, laboratories and healthcare.
• 41:10
  Speaker 2: Tell us a little bit about what the real assets loft.
• 41:13
  Speaker 4: Yeah, that's where I was going to go.
• 41:13
  Speaker 5: I would say for our clients, I think for a
• 41:15
  Speaker 5: long time, real assets was real estate, right. I think today,
• 41:19
  Speaker 5: if you wanted to talk about some of the more
• 41:20
  Speaker 5: interesting parts, it's the things you alluded to, which is
• 41:22
  Speaker 5: what's happening in infrastructure. Infrastructure is one we're spending a
• 41:25
  Speaker 5: lot of time with our clients on. Because institutions have
• 41:28
  Speaker 5: invested for a long time in infrastructure assets. Individuals less
• 41:32
  Speaker 5: so and so trying to understand the rule of infrastructure
• 41:35
  Speaker 5: and a portfolio which has a lot of unique benefits.
• 41:37
  Speaker 4: Right.
• 41:37
  Speaker 5: A lot of times it's not correlated to GDP growth. Right,
• 41:40
  Speaker 5: This is a lot of times critical infrastructure things that
• 41:42
  Speaker 5: we need to do. It has inflation protection benefits, right,
• 41:46
  Speaker 5: something we didn't need to talk about inflation ten years ago,
• 41:48
  Speaker 5: but now, you know, how do we think about things
• 41:50
  Speaker 5: that are inflation protected with long term contracts with built
• 41:53
  Speaker 5: in escalators. And then the other part is educating around
• 41:57
  Speaker 5: It's not your grandfather's infrastruct sure, right, people tend to
• 42:01
  Speaker 5: think right about bridges and toll roads, right, exactly Today
• 42:04
  Speaker 5: it's the things you talked about. It's digital infrastructure, it's
• 42:07
  Speaker 5: data centers to support AI, you know, right, it's energy transition, right,
• 42:12
  Speaker 5: It's a lot of the very I guess maybe the
• 42:14
  Speaker 5: more thrilling parts of investing are actually in the infrastructure
• 42:18
  Speaker 5: asset class, and so that is part of the real
• 42:20
  Speaker 5: assets that's grown a lot and where there's a lot
• 42:22
  Speaker 5: of interest.
• 42:23
  Speaker 2: I wish I can remember where I read this somewhat
• 42:26
  Speaker 2: technical piece because we always talk about AI, but you
• 42:29
  Speaker 2: alluded to AI plus another sector of all the different
• 42:33
  Speaker 2: parts of the economy that AI is going to have
• 42:37
  Speaker 2: a big impact. This author had made the claim. I
• 42:41
  Speaker 2: read it like two weeks ago. So it's gone that
• 42:44
  Speaker 2: AI and genomics, oncology and healthcare are going to be
• 42:49
  Speaker 2: amazing because what you can do with AI in terms
• 42:54
  Speaker 2: of testing new molecules and new treatment regimes is just
• 42:59
  Speaker 2: a whole other less Are you looking at AI plus
• 43:03
  Speaker 2: another sector or is it just all AI all the time?
• 43:06
  Speaker 5: No? Definitely plus other sectors. And you're completely on point
• 43:09
  Speaker 5: that life sciences hows that can be impacted by AI
• 43:13
  Speaker 5: healthcare right and by the way, every sector in the
• 43:16
  Speaker 5: economy is likely going to be impacted. So you know,
• 43:18
  Speaker 5: how do when you look at this best your diligence question,
• 43:21
  Speaker 5: you look at private equity firms that you're diligencing today,
• 43:24
  Speaker 5: how what kind of value creation playbook do they have
• 43:27
  Speaker 5: for their portfolio companies and how are they thinking about
• 43:30
  Speaker 5: the AI opportunity or threat for their portfolio companies?
• 43:34
  Speaker 4: Right?
• 43:34
  Speaker 5: So it's going to infuse really all the different sectors
• 43:38
  Speaker 5: of investing within alternatives.
• 43:40
  Speaker 2: So what other alternative strategies are you seeing the most
• 43:43
  Speaker 2: demand for clients? Like I'm enthusiastic about AI and life sciences.
• 43:49
  Speaker 2: Are people asking for real assets or for infrastructure or
• 43:53
  Speaker 2: for sec Like, what are you hearing from the bottom up?
• 43:56
  Speaker 4: Well, that would be private credit.
• 43:58
  Speaker 2: Really yeah, response to a relatively low rate and correct.
• 44:02
  Speaker 5: What I would say, what we're hearing from clients for
• 44:05
  Speaker 5: the last few years has been a search for yield.
• 44:08
  Speaker 5: It desire for yield, and that's led to a lot
• 44:10
  Speaker 5: of interest from the bottom up in private credit. Right
• 44:13
  Speaker 5: a place where you can be top of the capital structure,
• 44:16
  Speaker 5: so a lot of protection below you and get yields
• 44:19
  Speaker 5: that are high single digits with quarterly cash flow. That's
• 44:23
  Speaker 5: been an area of pretty broad interest across the well
• 44:27
  Speaker 5: spectrum in alternatives.
• 44:29
  Speaker 3: Huh really really interesting.
• 44:30
  Speaker 2: So last question before I get to my favorite questions
• 44:33
  Speaker 2: that I ask all my guests when it comes to alternatives.
• 44:37
  Speaker 2: What are investors not talking about or thinking about, but
• 44:42
  Speaker 2: perhaps should be. What sort of it could be asset
• 44:45
  Speaker 2: data point policy, what's important that they might be overlooking?
• 44:51
  Speaker 5: I guess the thing that comes to mind for me
• 44:53
  Speaker 5: right now and we think about the advent of all
• 44:55
  Speaker 5: these evergreen, open ended perpetual perpetual f funds, and there's
• 45:02
  Speaker 5: been a lot of enthusiasm a lot of growth in
• 45:04
  Speaker 5: some of the sectors. Our investors spending a lot enough
• 45:07
  Speaker 5: time thinking about how big some of these vehicles are getting,
• 45:10
  Speaker 5: and then what does that actually mean in terms of
• 45:12
  Speaker 5: how much origination that they need to have to be
• 45:15
  Speaker 5: able to deploy the capital? Right, because in these evergreens,
• 45:18
  Speaker 5: if you don't actually have if you have more capital
• 45:20
  Speaker 5: coming in then you can actually invest, You're going to
• 45:22
  Speaker 5: start diluting your returns, right, You're going to have cash drag.
• 45:25
  Speaker 5: And so you know, our investors spending time and thinking
• 45:27
  Speaker 5: about who they're investing with and do they have enough
• 45:29
  Speaker 5: origination capabilities to be fully invested in high quality investments.
• 45:35
  Speaker 5: So I think that'd be one thing that I would
• 45:36
  Speaker 5: think about. The other thing that I'm interested to see
• 45:39
  Speaker 5: how it evolves is, you know, we're new in this
• 45:42
  Speaker 5: perpetual evergreen alt space, you know, last five years. You know,
• 45:46
  Speaker 5: how do we start to see performance divergence over the
• 45:50
  Speaker 5: next five years?
• 45:50
  Speaker 1: Right?
• 45:51
  Speaker 5: I don't think we've seen a lot yet because we're
• 45:53
  Speaker 5: still in the early innings, and so I'll be curious
• 45:56
  Speaker 5: to see how investors react to performance divers or negative
• 46:00
  Speaker 5: performance on some of these and what happens do we
• 46:03
  Speaker 5: see redemptions or are investors long term minded? And do
• 46:07
  Speaker 5: they stay the course?
• 46:08
  Speaker 3: Huh? Really really interesting.
• 46:10
  Speaker 2: Let me jump to my favorite questions that I ask
• 46:13
  Speaker 2: all of my guests, starting with something that you hinted
• 46:17
  Speaker 2: at but didn't expand on. Tell us about your mentors
• 46:20
  Speaker 2: who helped shape your career.
• 46:23
  Speaker 5: So I have to mention Eric Lane. So he was
• 46:26
  Speaker 5: the one who won me in the Analyst draft and
• 46:30
  Speaker 5: I then worked with him for decades and I owe,
• 46:34
  Speaker 5: you know a lot of my success to Eric, and
• 46:39
  Speaker 5: part of it is we sat in like a trading
• 46:41
  Speaker 5: desk type of format when I started, and the benefit
• 46:45
  Speaker 5: of that was just getting to hear him on the
• 46:47
  Speaker 5: phone every day with clients and see how he managed
• 46:51
  Speaker 5: difficult situations, how he explained things. You know, there's an
• 46:54
  Speaker 5: ability to sort of really apprenticeship right next to him.
• 46:57
  Speaker 5: And the other thing that I just really loved about
• 46:59
  Speaker 5: working with Aaron, and maybe maybe I hate it at
• 47:01
  Speaker 5: the time, was he would throw you into situations that
• 47:05
  Speaker 5: you felt ill prepared for, but he knew you could.
• 47:07
  Speaker 4: Handle deep into the pool exactly.
• 47:10
  Speaker 5: And sort of just forced you to go into the
• 47:13
  Speaker 5: situations that you may have not thought you're ready for.
• 47:15
  Speaker 5: And that really allowed you to sort of step function
• 47:17
  Speaker 5: I think, improve in your job and really learn, and
• 47:20
  Speaker 5: then he was always there to support you if it
• 47:22
  Speaker 5: didn't go as well.
• 47:23
  Speaker 3: As you really really super interesting. Let's talk about books.
• 47:27
  Speaker 3: What are some of your favorites? What are you reading
• 47:28
  Speaker 3: right now?
• 47:29
  Speaker 5: So I've really been enjoying the Walter Isaacson biographies, and
• 47:34
  Speaker 5: we talked a little about life sciences.
• 47:35
  Speaker 3: And one that I I was going to say, which
• 47:38
  Speaker 3: one of you?
• 47:38
  Speaker 2: So I have Leonardo sitting on a night table out
• 47:45
  Speaker 2: east waiting for me to have gotten to that one.
• 47:47
  Speaker 3: What it's like, it's a giant.
• 47:48
  Speaker 4: Yeah. So I actually just finished the one on Elon Musk.
• 47:51
  Speaker 3: Huh.
• 47:52
  Speaker 5: But the one that I really liked was Codebreaker about
• 47:56
  Speaker 5: Jennifer DOWDNA discovered Crisper.
• 47:58
  Speaker 2: All right, next question, what are you streaming these days?
• 48:02
  Speaker 2: Give us your favorite podcast? Netflix, Amazon Prime? What's keeping
• 48:05
  Speaker 2: you entertained?
• 48:07
  Speaker 5: I just started watching an old series I'm only two
• 48:09
  Speaker 5: episodes in, which is Scandal. So that's what I'm watching
• 48:12
  Speaker 5: right now, Little Washington, d C Intrigue. In terms of podcasts,
• 48:19
  Speaker 5: of course, all the Bloomberg podcasts, and you don't have.
• 48:22
  Speaker 2: You don't have to do that.
• 48:23
  Speaker 5: That's if I were to say one that I listened
• 48:27
  Speaker 5: to from time to time just for some comedy, SmartLess.
• 48:30
  Speaker 3: I love that.
• 48:30
  Speaker 2: I'm a big fan of just Justin Batement, Jason Bateman,
• 48:34
  Speaker 2: you his sister Justine.
• 48:35
  Speaker 4: It was a great guest and they're so funny.
• 48:37
  Speaker 2: So I've interviewed Michael Lewis a million times, and after
• 48:41
  Speaker 2: his daughter was killed in a car accident, they had
• 48:44
  Speaker 2: him on and it was a few months later and
• 48:48
  Speaker 2: he describes the grief process. He's just such an extraordinary
• 48:52
  Speaker 2: human being. To listen to someone share that it was,
• 48:56
  Speaker 2: it was both amazing and terrible the same time. But
• 49:01
  Speaker 2: they're always fun and they all seem to torment each other.
• 49:05
  Speaker 2: They're very amusing. Final two questions, what sort of advice
• 49:09
  Speaker 2: would you give to a recent college grad interested in
• 49:13
  Speaker 2: a career in either alternatives or wealth management.
• 49:16
  Speaker 5: Well, I think that the benefit that a recent college
• 49:19
  Speaker 5: grad has is there's so much information at their fingertips
• 49:22
  Speaker 5: to get smart and to get be interested, and to
• 49:25
  Speaker 5: learn about the industry before they come into it, and
• 49:27
  Speaker 5: to be really well educated. You know, it was a
• 49:29
  Speaker 5: lot harder twenty seven years ago. Right now, everything's at
• 49:32
  Speaker 5: their fingertips. So I think be prepared and then don't
• 49:35
  Speaker 5: be scared to network right, user relationships, meet people, reach out.
• 49:40
  Speaker 4: I think that would be the best advice.
• 49:41
  Speaker 3: Really really good.
• 49:43
  Speaker 2: Final question, what do you know about the world of
• 49:46
  Speaker 2: alternative investing today would have been helpful back in two
• 49:49
  Speaker 2: thousand when you were moving into this space.
• 49:51
  Speaker 5: Well, I think about it a little bit personally, which
• 49:54
  Speaker 5: is you know, we have evolved a lot in how
• 49:56
  Speaker 5: we advise clients to INVESTMENTULTI where we talked about the process,
• 49:59
  Speaker 5: how do you think about sizing and building it out
• 50:01
  Speaker 5: year and year out? And if I look back to
• 50:03
  Speaker 5: what I started, I definitely didn't have that rigor in
• 50:05
  Speaker 5: my own personal investing in alts and definitely undersized, was
• 50:08
  Speaker 5: not diversified enough. And so I think I wish all
• 50:11
  Speaker 5: of the rigor we've put into it I had known
• 50:13
  Speaker 5: back then in terms of how we were building portfolios
• 50:16
  Speaker 5: personally and for our clients.
• 50:18
  Speaker 2: Really super interesting, Kristin, Thank you for being so generous
• 50:21
  Speaker 2: with your time. We have been speaking with Kristin Olsen.
• 50:25
  Speaker 2: She's Goldman Sachs's global head of Alternatives for Wealth. If
• 50:30
  Speaker 2: you enjoy this conversation, well, be sure to check out
• 50:32
  Speaker 2: any of the five hundred and sixty eight we've done
• 50:35
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• 50:40
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• 50:45
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• 50:48
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• 50:52
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• 50:55
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• 50:59
  Speaker 3: I would be.
• 50:59
  Speaker 2: Remember if I do not thank the Crack team that
• 51:01
  Speaker 2: helps with these conversations together each week. Alexis Noriega is
• 51:06
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• 51:11
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• 51:14
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• 51:16
  Speaker 3: I'm Barry Ridholts.
• 51:18
  Speaker 2: You've been listening to Masters in Business on Bloomberg Radio.